United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
W. DARRAH United States District Court Judge.
25, 2015, Defendant was charged with willful failure to make
and file tax returns for the years 2009, 2010, 2011, and 2012
in violation of 26 U.S.C. § 7203. Defendant subpoenaed
tax returns, communications, and cancelled checks from Wilcar
LLC, Burling Builders, East Lake Management, Eileen Rhodes,
LCL Higginbottom, ELH Partners, LLC, and Eileen Rhodes. The
Motion to Quash  was denied, and the Motions to Compel
[98, 99] were granted. Third-Party Elzie Higginbottom filed a
Motion to Reconsider  the ruling on the Motion to Quash.
The Motion to Reconsider  was granted in that the
request for cancelled checks was limited. Defendant filed a
“Motion to Compel Third-Party Production on a Date
Certain” , asking for a specific date by which
Higginbottom must produce subpoenaed documents. Defendant was
instructed to specify what, if any, subpoenaed documents were
missing. Higginbottom was instructed to respond within two
weeks from the date of the entry of this order to any
assertion of missing documents and to provide a sworn
statement that he has produced all relevant documents in his
possession that are responsive to the subpoenas.
Higginbottom's response was also a “Motion to
Revisit Motion to Quash Subpoenas” . A hearing was
held on February 15, 2017 to determine what subpoenaed
materials had been produced. For the reasons discussed more
fully below, Higginbottom's “Motion to Revisit
Motion to Quash Subpoenas”  is denied.
25, 2015, Defendant was charged with willful failure to make
and file income tax returns from 2009 to 2012, in violation
of 26 U.S.C. § 7203. Defendant issued several subpoenas,
seeking tax returns and cancelled checks from several
individuals and companies, as well as any and all
correspondence, memoranda and emails between those
individuals and companies and Defendant.
Federal Rules of Criminal Procedure do not authorize motions
to reconsider. However, the United States Supreme Court has
held that motions to reconsider may be filed in criminal
cases as “ordinary elements of federal practice that
exist in criminal prosecutions despite their omission from
the Rules of Criminal Procedure.” United States v.
Rollins, 607 F.3d 500, 502 (7th Cir.2010) (citing
United States v. Healy, 376 U.S. 75, 77 (1964)).
Motions to reconsider in criminal cases are treated like
motions in civil cases. Id. “Motions for
reconsideration serve a limited function: to correct manifest
errors of law or fact or to present newly discovered
evidence.” Caisse Nationale de Credit Agricole v.
CBI Indus., Inc., 90 F.3d 1264, 1269 (7th Cir. 1996). A
manifest error “is not demonstrated by the
disappointment of the losing party”; it is the
“wholesale disregard, misapplication, or failure to
recognize controlling precedent.” Oto v.
Metropolitan Life Ins., 224 F.3d 601, 606 (7th Cir.
2000) (internal quotation marks omitted).
Rule of Criminal Procedure 17(c) allows for subpoenas for
papers, documents, data, or other objects, which the court
may direct be produced before trial. Fed. R. Crim. P.
17(c)(1). Under Rule 17(c), “the court may quash or
modify the subpoena if compliance would be unreasonable or
oppressive.” Id. at (c)(2). As previously
discussed, the party seeking documents pursuant to Rule 17(c)
(1) that the documents are evidentiary and relevant; (2) that
they are not otherwise procurable reasonably in advance of
trial by exercise of due diligence; (3) that the party cannot
properly prepare for trial without such production and
inspection in advance of trial and that the failure to obtain
such inspection may tend unreasonably to delay the trial; and
(4) that the application is made in good faith and is not
intended as a general ‘fishing expedition.'
United States v. Nixon, 418 U.S. 683, 699-700
(1974). As previously held, the documents requested are
largely in the possession of the third parties and not
otherwise procurable reasonably in advance of trial by
exercise of due diligence. Defendant would be prevented from
properly preparing for trial without the production and
inspection in advance of trial, and the failure to obtain
such would unreasonably delay the trial.
claims that all materials relevant to Defendant have been
produced to the Government. (Dkt. 144, p. 5.) At the February
15, 2017 hearing, the Government stated that it had received
certain materials from Higginbottom or other entities
regarding Sub Sahara LLC, Burling Builders, and ELH Partners.
The Government also produced two reports listing tax-related
and other financial records the Government gave to Defendant
related to Higginbottom and his businesses. The reports state
that the Government produced documents relating to ELH
Partners, LLC, East Lake Management, Burling Builders, Sub
Sahara LLC, and Wilcar LLC. At the hearing, Defendant argued
that checks from the subpoenaed entities were presented to
the grand jury.
failure to make and file income tax returns requires proof of
an “intentional violation of a known legal duty.”
United States v. Birkenstock, 823 F.2d 1026, 1028
(7th Cir. 1987) (citing United States v. Pompanio,
429 U.S. 10, 12 (1976)). Inadvertent failures to file and
bona fide misunderstandings as to a defendant's
duty to make a return are justifiable excuses. United
States v. McCorkle, 511 F.2d 482, 486 (7th Cir. 1975).
If the requested material shows monies paid to Defendant were
business expense advances and not income, then it is more
likely that Defendant's failure to file income tax
returns was not willful. “The evidence is relevant to
his actual subjective intent and his understanding of his
income tax obligations to file and to pay tax on earnings
from employment.” United States v. Hauert, 40
F.3d 197, 199 (7th Cir. 1994). As previously held, the
requested materials are relevant.
also argues that the tax returns are private and personal tax
documents. (Dkt. 144, pps. 5-6.) Defendant requested tax
documents from various companies related to Higginbottom. By
statute, “[i]n ruling upon the admissibility of returns
or return information, . . . the court shall give due
consideration to congressional policy favoring the
confidentiality of returns and return information as set
forth in this title.” 26 U.S.C. § 6103 (i)(4)(D).
However, “the statute does not block access, through
pretrial discovery or otherwise, to copies of tax returns in
the possession of litigants.” Commodity Futures
Trading Comm'n v. Collins, 997 F.2d 1230, 1233 (7th
Cir. 1993) (citing St. Regis Paper Co. v. United
States, 368 U.S. 208, 218-19 (1961); Poulos v. Naas
Foods, Inc., 959 F.2d 69, 74-75 (7th Cir. 1992)). Tax
returns in the hands of the government are confidential but
“copies in the hands of the taxpayer are held subject
to discovery.” St. Regis Paper Co., 368 U.S.
at 218-19. Other courts have held that there is no individual
tax-return privilege and ordered turnover of third-party tax
returns in a criminal case. See United States v.
Rajaratnam, 753 F.Supp.2d 317, 325 (S.D.N.Y. 2011)
(“ . . . there is no basis to conclude that [the third
party's] tax returns are privileged under either the
federal law of privilege or state law. Since those returns
meet the requirements of the Nixon test, the returns
have been properly subpoenaed.”) Because the returns
are requested from a taxpayer, and the returns meet the
requirement of the Nixon test, the subpoenas are
Higginbottom's “Motion to Revisit Motion to Quash
Subpoenas”  is denied. To the extent that any
documents responsive to the subpoenas are in their
possession, those ...