Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_14-cr-00114/USCOURTS-caed-1_14-cr-00114-11/pdf.json

Parties Involved:
Michael Galloway
Defendant
USA
Plaintiff

Document Text:

1

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

Pending before the Court is Defendant Galloway’s motion to return documents. Defendant 

moves to this court for an order to return documents improperly seized and bar their use at trial, 

specifically including but not limited to the taxes and records for Catholic Online. The motion came 

on for hearing on June 24, 2106. Defense counsel Ann McGlenon appeared for defendant, and AUSA 

Megan Richards appeared for the government. The Court heard oral argument and requested 

supplemental briefing. The government filed its supplemental brief on July 5, 2016. Defendant filed 

his supplemental brief on July 20, 2016. Having considered the moving, opposition, and reply papers,

and the supplemental briefs, the argument of counsel and the entire file, the Court rules as follows.

Background and Parties’ Positions

As is relevant to the motion before the Court, Defendant Michael Galloway was indicted in a 

four count Indictment on May 29, 2014 for attempt to evade and defeat a payment of a tax in violation 

of 26 U.S.C. §7201. (Doc. 1.) Defendant Galloway operated a business called Catholic Online, as a 

sole proprietorship. Defendant Galloway used a certified public accountant (CPA) to complete his tax 

returns, CPA Carl Livsey. During the course of the investigation, the agent investigating the charges, 

UNITED STATES OF AMERICA,

 Plaintiff,

v.

MICHAEL GALLOWAY,

Defendant.

/

Case No. 1:14-CR-00114-DAD-BAM

ORDER RE MOTION TO RETURN 

DOCUMENTS

(Doc. 45)

Case 1:14-cr-00114-ADA-BAM Document 64 Filed 07/22/16 Page 1 of 5
2

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Agent Applegate, contacted CPA Livsey and obtained copies of Catholic Online’s QuickBooks 

records. How Agent Applegate obtained the Quickbook records is the bone of contention in this 

motion. 

Defendant Galloway contends that the documents were seized without compulsory process and 

should returned. Defendant argues that Agent Applegate neither obtained the records by an 

administrative summons nor by a subpoena. In the course of discovery, other documents were 

produced to Defendant and each packet of documents contained a summons or subpoena as the means 

by which the government came into possession of the documents. For the Quickbook records obtained 

from CPA Livsey, neither a summons nor a subpoena was attached to the documents. Defendant 

reasons that these Quickbook documents therefore were not lawfully seized. No summons has been 

produced and no one has a copy. It is disputed that CPA Carl Livsey was served with process before 

seizing books and records belonging to Galloway without his permission.

The government contends that during the course of the investigation in 2009, Agent Applegate 

contacted CPA Livsey and served him with a handwritten administrative summons for records relating 

to Michael Galloway. He inadvertently did not retain a copy of the summons. In March 2016, Agent 

Applegate again contacted CPA Livsey about a copy of the summons. CPA Livsey sent an email back 

to the Agent and stated that he does not have records from 2009. In response to this motion, the 

government submits evidence of these contacts and facts. In addition, the government submits a 

handwritten Affidavit signed by CPA Livsey stating that CPA Livsey was served with a summons for 

records of Defendant Galloway and that he recalls Agent Applegate picking up the records. (Doc. 51-

5.) The government also argued at the hearing that it was not required to obtain the documents by 

summons or subpoena if the producing person would voluntarily turn over the documents. Thus, 

voluntary cooperation by the person in possession of the documents does not create unlawfully seized 

documents.

///

///

///

///

Case 1:14-cr-00114-ADA-BAM Document 64 Filed 07/22/16 Page 2 of 5
3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Analysis and Discussion

Federal Rule of Criminal Procedure 41(g) provides that a person “aggrieved by an unlawful 

search and seizure of property or by the deprivation of property may move for the property's return.” 

A motion for return of property pursuant to Rule 41(g) may be granted if: (a) the defendant is entitled 

to lawful possession of the seized property; (b) the property is not contraband; (c) the property is not 

subject to forfeiture; and (d) the government no longer needs the property as evidence. United States v. 

Fitzen, 80 F.3d 387, 388 (9th Cir.1996). If a motion for return of property is made while a criminal 

proceeding is pending, the burden is on the movant to show that he is entitled to the property. U.S. v. 

Van Cauwenberghe, 934 F.2d 1048, 1061 (9th Cir.1991).

The central issue in the return of the documents is whether they were unlawfully seized. At 

oral argument, the Court asked whether the documents could have been voluntarily turned over by 

CPA Livsday, as in any other criminal investigation, or was the IRS regulatory constrained to obtain 

documents only in a formal manner. In the government’s supplemental briefing, the government cites 

United States v. Speck which held that the IRS may use informal, noncompulsory means of 

investigation. 59 F.3d 106, 108 (9th Cir. 1995). In Speck, the Ninth Circuit rejected an argument that 

the IRS may only obtain information by an administrative summons. The Court specifically noted that 

informal or noncoercive attempts to obtain information about failures to report income are permitted. 

Defendant Galloway’s attempt to distinguish Speck is not persuasive. As the Ninth Circuit has stated, 

“the mere fact that the IRS has the power under § 7602(2) to obtain information by issuing summonses 

does not require it to do so.” Speck, 59 F.3d at 108 (citing United States v. Barksdale, 499 F.Supp. 

624, 628 (M.D.Fla.1980)). Thus, the IRS could have obtained the documents by voluntary compliance

by CPA Livsey.

The evidence presented to the court, however, is that an administrative summons was issued to 

CPA Livsey. Agent Applegate presents evidence that he sent CPA Livsey an administrative 

summons. CPA Livsey submitted evidence that he recalls being served with a summons before 

turning over the documents to the IRS. Accordingly, the sole evidence before the court is that an 

Case 1:14-cr-00114-ADA-BAM Document 64 Filed 07/22/16 Page 3 of 5
4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

administrative summons was issued for the documents and the documents were turned over pursuant 

to the summons.1

In his supplemental brief, defendant argues that Speck is inapplicable because the government 

claims Agent Applegate served a summons. Because the Agent served a summons, voluntary 

cooperation by CPA Livsey is not at issue. Rather, since compulsory process, via a summons, is at 

issue, Agent Applegate was required to comply with IRS regulations. In his supplemental brief, 

Defendant argues that the summons and service violated the IRS enabling statutes. Defendant cites 

several statutory provisions and IRS policy manual provisions to substantiate the deficiencies in the 

summons and service of the summons. See Doc. 63, citing 26 U.S.C. §§7603, 7609; Internal Revenue 

Manual 25.5.1.3.3; 25.6.6.1; 25.5.3.2. Defendant argues that he did not receive notice of the 

summons.

As to Defendant’s receipt of notice, the Court does not have before it any evidence of whether, 

or not, service of the summons was effectuated on defendant. The technical deficiencies which are 

raised might be persuasive in a motion to quash the summons, but not in a motion to return the 

documents pursuant to Rule 41. This is not a summons enforcement proceeding where technicalities

are at issue. 2 CPA Livsey complied with the summons. The “statute must be read broadly in order to 

ensure that the enforcement powers of the IRS are not unduly restricted.” Liberty Fin. Servs. v. United 

States, 778 F.2d 1390, 1392 (9th Cir.1985). The taxpayer carries a “heavy” burden of showing either 

abuse of process or lack of institutional good faith. United States v. Dynavac, Inc., 6 F.3d 1407, 1414 

(9th Cir.1993). Here, the government is properly in possession of the documents, either by summons 

or by request. The documents could have been voluntarily produced yet were produced pursuant to a 

summons. The subject of the summons complied with the summons. The Court will not order return 

of the documents, which the IRS had the right to obtain with the consent of CPA Livsey, based on 

 

1

The Court cannot locate the citation relied upon by defendant of Linn v. Chivatero, 714 F.2d

1278 (5th Cir. 1983). Defendant cites this authority for the proposition that an IRS summons is not 

self-enforcing. Regardless, voluntary compliance with a summons does not make the documents 

released by CPA Livsey as “unlawfully obtained.”

2

For enforcement of an IRS summons, the IRS only has to make a “minimal showing” that the 

administrative steps. Scharringhausen v. United States, 686 F. Supp. 2d 1069, 1077 (S.D. Cal. 2009), 

on reconsideration in part, No. 06 CV 2167 JLS (CAB), 2010 WL 2735750 (S.D. Cal. July 12, 2010).

Case 1:14-cr-00114-ADA-BAM Document 64 Filed 07/22/16 Page 4 of 5
5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

speculation of the summons’ technical deficiencies. Therefore, as there is no evidence that the 

documents were unlawfully seized, the motion to return the documents turned over by CPA Livsey is 

denied.

Conclusion

Defendant Michael Galloway’s motion to return documents is DENIED.

IT IS SO ORDERED.

Dated: July 22, 2016 /s/ Barbara A. McAuliffe _

UNITED STATES MAGISTRATE JUDGE

Case 1:14-cr-00114-ADA-BAM Document 64 Filed 07/22/16 Page 5 of 5