Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-14-04465/USCOURTS-ca3-14-04465-0/pdf.json

Parties Involved:
Eli Chabot
Appellant
Renee Chabot
Appellant
United States of America
Appellee

Document Text:

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________________

No. 14-4465

________________

UNITED STATES OF AMERICA 

v.

ELI CHABOT; 

RENEE CHABOT,

Appellants

________________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 3-14-cv-03055)

District Judge: Honorable Freda L. Wolfson

________________

Argued June 8, 2015

Before: AMBRO and COWEN, Circuit Judges, 

and RESTANI,*Judge.

(Opinion filed: July 17, 2015)

 

* Honorable Jane A. Restani, Judge for the United States 

Court of International Trade, sitting by designation.

Case: 14-4465 Document: 003112020527 Page: 1 Date Filed: 07/17/2015
2

Vivek Chandrasekhar, Esq.

Richard A. Levine, Esq. (Argued)

Roberts & Holland LLP

825 8th Avenue, 37th Floor

New York, NY 10019

Counsel for Appellants

Robert J. Branman, I, Esq. (Argued)

Robert W. Metzler, Esq.

United States Department of Justice, Tax Division

950 Pennsylvania Avenue, N.W.

Room 4635

P.O. Box 502

Washington, DC 20044

Counsel for Appellee

________________

OPINION OF THE COURT

________________

RESTANI, Judge

Eli and Renee Chabot (“the Chabots”) appeal the 

District Court’s grant of the Internal Revenue Service’s 

(“IRS”) petition to enforce summonses for foreign bank 

account records that 31 C.F.R. § 1010.420 requires the 

Chabots to keep. Today we join six other circuits in holding 

that these records fall within the required records exception to 

the Fifth Amendment privilege. Accordingly, we will affirm 

the District Court’s grant of the IRS’s petition.

Case: 14-4465 Document: 003112020527 Page: 2 Date Filed: 07/17/2015
3

I. Background

In April 2010, the IRS received information from 

French authorities concerning United States persons1 with 

undisclosed bank accounts at HSBC Bank. The IRS alleges 

that it has information regarding accounts held by Pelsa 

Business Inc. (“Pelsa”) for the years 2005 through 2007. 

According to the information provided to the IRS, Eli Chabot 

is the beneficial owner of Pelsa.

On June 20, 2012, the IRS issued summonses to Eli 

and Renee Chabot requesting that they appear on July 13, 

2012, to give testimony and produce documents about their 

foreign bank accounts for the period from January 1, 2006, to 

December 31, 2009.2 The Chabots’ attorney notified the IRS 

that the Chabots would not appear, were asserting their Fifth 

Amendment privilege against self-incrimination, and would 

not produce the requested documents. The IRS amended the 

two summonses on November 16, 2012, limiting their scope 

to only those documents required to be maintained under 31 

C.F.R. § 1010.420. The Chabots continued to claim the Fifth 

Amendment privilege, and the IRS filed a petition to enforce 

the amended summonses on May 14, 2014.

 

1

“United States person” is defined in 31 C.F.R. 

§ 1010.350(b). The parties do not dispute that the Chabots or 

their business are United States persons.

2 The IRS had issued an earlier summons on March 12, 2012, 

requesting that the Chabots appear to testify. The Chabots 

appeared on May 12, 2012, but asserted their Fifth 

Amendment privilege and refused to answer any of the IRS’s 

questions about their foreign bank accounts.

Case: 14-4465 Document: 003112020527 Page: 3 Date Filed: 07/17/2015
4

Before the District Court, the Chabots claimed that, 

although the contents of the records sought might not be 

protected by the Fifth Amendment, their act of producing the 

documents was protected. The Chabots specifically claimed 

that responding to the summonses might subject them to 

prosecution for their failure to file the same information in an 

annual Report of Foreign Bank and Financial Accounts. The 

Chabots also claimed that any exception to the Fifth 

Amendment privilege based on the required records exception 

should not apply in this case. The District Court held that the 

required records exception applied and thus the Fifth 

Amendment did not prohibit production of the documents 

sought. The District Court therefore granted the petition to 

enforce the summonses.

II. Jurisdiction and Standard of Review

The District Court had jurisdiction pursuant to 26 

U.S.C. § 7402(b) and 26 U.S.C. § 7604(a) (2012). We 

exercise jurisdiction pursuant to 28 U.S.C. § 1291. Whether 

enforcement of a summons violates the Fifth Amendment 

privilege is a mixed question of law and fact. United States v. 

Ins. Consultants of Knox, Inc., 187 F.3d 755, 759 (7th Cir. 

1999). Here, the question before us is purely one of law, and 

we review de novo the District Court’s application of the 

Fifth Amendment privilege and the required records 

exception to the present facts. In re Grand Jury Proceedings, 

707 F.3d 1262, 1266 n.4 (11th Cir. 2013).

III. Discussion

On appeal, the Chabots’ arguments can be summarized 

as follows: (1) allowing the government to rely on the 

required records exception to enforce the summonses in this 

case will lead to general governmental abrogation of the Fifth 

Amendment privilege for any “failure to report” crime; 

Case: 14-4465 Document: 003112020527 Page: 4 Date Filed: 07/17/2015
5

(2) the information that would be gleaned from compliance 

with the summonses is almost identical to what the 

government needs to charge the Chabots with the felony of 

willful failure to report an overseas account in the Report of 

Foreign Bank and Financial Accounts, thus requiring the 

Chabots to incriminate themselves; and (3) the records that 31 

C.F.R. § 1010.420 requires accountholders to keep do not 

satisfy the three-pronged test for applying the required 

records exception to the Fifth Amendment privilege. The 

government’s response to these arguments is simple. It 

argues that the Chabots’ records fall within the required 

records exception to the Fifth Amendment privilege. 

Therefore, the questions before the panel are whether the 

Chabots’ account records fall within the required records 

exception to the Fifth Amendment privilege and, if so, 

whether the Chabots’ policy concerns are insurmountable 

barriers to our application of this exception. Unpersuaded by 

the overriding effect of the stated concerns, we conclude that 

the Chabots’ account records fall squarely within the required 

records exception to the Fifth Amendment privilege. 

Therefore, we will affirm the District Court’s grant of the 

IRS’s petition.

A. The Development of the Required Records 

Exception to the Fifth Amendment Privilege

The Fifth Amendment states that “[n]o person . . . shall 

be compelled in any criminal case to be a witness against 

himself.” U.S. Const. amend. V. An individual may claim 

this privilege if compelled to produce self-incriminating, 

“testimonial communication[s].” Fisher v. United States, 425 

U.S. 391, 408 (1976). The act of producing documents may 

trigger the Fifth Amendment privilege. See id. at 410. This 

is because, by producing documents, one acknowledges that 

the documents exist, admits that the documents are in one’s 

custody, and concedes that the documents are those that the 

Case: 14-4465 Document: 003112020527 Page: 5 Date Filed: 07/17/2015
6

subpoena requests. Id. When these “testimonial” aspects of 

compelled production are self-incriminating, the Fifth 

Amendment privilege applies. See id. at 410–12.

In Shapiro v. United States, the Supreme Court first 

articulated the required records exception to the Fifth 

Amendment privilege. 335 U.S. 1, 32–33 (1948); In re Grand 

Jury Subpoena Dated Feb. 2, 2012, 741 F.3d 339, 344 (2d 

Cir. 2013) (hereinafter “Doe”). When Shapiro was decided, 

private papers were entitled to Fifth Amendment protection 

based on their private status. See 335 U.S. at 33–34. Public 

papers, however, did not have Fifth Amendment protection. 

See id. at 5. In Shapiro, the Supreme Court qualified this 

distinction when it held that the Fifth Amendment privilege 

did not apply to certain private papers that the law required a 

person to keep. Id. at 33. The Supreme Court subsequently 

fleshed out Shapiro’s holding in Grosso v. United States, 

wherein it explained that the following three prongs must be 

met in order for records to fall within the “required records” 

exception: (1) the reporting or recordkeeping scheme must 

have an essentially regulatory purpose; (2) a person must 

customarily keep the records that the scheme requires him to 

keep; and (3) the records must have “public aspects.” 390 

U.S. 62, 67–68 (1968).

Fisher, which found no Fifth Amendment privilege 

because the involved taxpayers were not the persons 

compelled to produce, appeared to shift the focus away from 

the private/public distinction in determining whether 

compelled production of records violates the Fifth 

Amendment privilege.3 See 425 U.S. at 397, 400–01. 

 

3 The degree to which Fisher represents a complete 

repudiation of the private/public distinction remains unsettled. 

It has been stated that the general consensus is that Fisher was 

Case: 14-4465 Document: 003112020527 Page: 6 Date Filed: 07/17/2015
7

Despite this somewhat altered view of how the Fifth 

Amendment relates to the production of documents, courts 

have continued to rely on the required records exception. 

See, e.g., Balt. City Dep’t of Soc. Servs. v. Bouknight, 493 

U.S. 549, 555–56 (1990) (recognizing the principle behind 

the required records exception abrogated respondent’s act-ofproduction privilege even though her compliance with a court 

order to produce her child would have aided in her 

prosecution); Doe, 741 F.3d at 342–43, 346 (applying the 

required records exception to the respondent’s act-ofproduction privilege where his compliance with a grand 

jury’s subpoena for account records would have aided in 

criminal proceedings against him).

Courts have offered several reasons for continuing to 

apply the required records exception to the Fifth Amendment 

privilege, even though the threshold framework for applying 

the privilege to documents appears to have changed to a 

degree. The first is, engaging in an activity for which 

Congress conditions participation upon recordkeeping 

effectively waives the right to invoke the Fifth Amendment 

privilege to prevent compelled disclosure of such records. In 

re Two Grand Jury Subpoenae Duces Tecum Dated Aug. 21, 

1985, 793 F.2d 69, 73 (2d Cir. 1986). The next, and perhaps 

weaker, is, because “the records must be kept by law, the 

record-holder ‘admits’ little in the way of control or 

authentication by producing them.” Id. And the last is, 

continued application of the required records exception is 

vital in order to protect the government’s legitimate interest in 

using the records that it requires individuals to keep. See, 

e.g., Bouknight, 493 U.S. at 556 (“The Court has on several 

 

an attempt to find Fifth Amendment protections applicable to 

compelled production of documents without relying on the 

private/public distinction. Doe, 741 F.3d at 343 n.2.

Case: 14-4465 Document: 003112020527 Page: 7 Date Filed: 07/17/2015
8

occasions recognized that the Fifth Amendment privilege may 

not be invoked to resist compliance with a regulatory regime 

constructed to effect the State’s public purposes unrelated to 

the enforcement of its criminal laws.”); In re Grand Jury 

Proceedings, 707 F.3d at 1274 (citing In re Special Feb. 2011-

1 Grand Jury Subpoena Dated Sept. 12, 2011, 691 F.3d 903, 

908–09 (7th Cir. 2012)). These reasons support application 

of the exception under either the private/public framework or 

the act-of-production framework. Thus, the required records 

exception has retained its vitality as an exception to the Fifth 

Amendment privilege against self-incrimination. See

Bouknight, 493 U.S. at 554–62.

B. The Government’s Ability to Use the 

Required Records Exception to Abrogate the 

Fifth Amendment Privilege

The Chabots predict that inclusion of their account 

records in the required records exception will encourage the 

government to make excessive use of the exception in order 

to abrogate the Fifth Amendment privilege for any “failure to 

report” crime. The Chabots also suggest that this would 

allow the government to abrogate the Fifth Amendment more 

generally by creating a host of record-retention or reporting 

requirements. Because there is significant overlap between 

this argument and the first prong of the required records 

exception, we address only briefly the Chabots’ argument 

here.

In Shapiro, the Supreme Court explained that there 

was little danger of Congress completely abrogating the Fifth 

Amendment privilege as long as the records that Congress 

required individuals to keep closely served the purpose of a 

valid, civil regulation. Shapiro, 335 U.S. at 32–33. In that 

case, the Emergency Price Control Act was a valid exercise of 

Congress’s power to set commodity prices during wartime 

Case: 14-4465 Document: 003112020527 Page: 8 Date Filed: 07/17/2015
9

that required vendors to keep records of their sales. Id. at 5 

n.3, 32–33. Because these sale records closely served the 

Act’s legitimate regulatory purpose, the Court concluded that 

inclusion of the petitioner’s sales records in the required 

records exception was a far cry from Congress’s total 

abrogation of the Fifth Amendment privilege for any and all 

crimes. See id. at 4–5, 32–33. In short, because of the 

required records exception’s exclusive application to valid, 

regulatory recordkeeping schemes, the government cannot 

simply create a recordkeeping requirement in order to 

prosecute crimes, such as a willful failure to report offense. 

See In re Grand Jury Investigation M.H., 648 F.3d 1067, 

1075, 1078 (9th Cir. 2011) (hereinafter “M.H.”).

In the present case, the government conditions 

voluntary participation in foreign banking on maintaining 

records and reporting information regarding foreign bank 

accounts. See id. at 1078. As explained in greater detail 

regarding the first prong of the Grosso test, the recordkeeping 

requirement is part of a valid, essentially regulatory scheme. 

These records serve legitimate noncriminal purposes, because 

government agencies use this data for tax collection, 

development of monetary policy, and conducting intelligence 

activities. See United States v. Under Seal, 737 F.3d 330, 

335, 337 (4th Cir. 2013) (listing the noncriminal purposes for 

which government agencies, including the Treasury 

Department, use account record data); In re Grand Jury 

Subpoena, 696 F.3d 428, 436 (5th Cir. 2012) (employing 

similar reasoning). Therefore, it is unlikely that the 

government will be able to use the required records exception 

to abrogate the Fifth Amendment privilege for any and all 

“failure to report” crimes.

Case: 14-4465 Document: 003112020527 Page: 9 Date Filed: 07/17/2015
10

C. Compliance with the Summonses Will Result 

in Criminal Liability

The Chabots contend that compliance with the IRS’s 

summonses for their account records will provide a 

“significant link in the chain of evidence” that the 

government needs to prosecute them for willful failure to 

report overseas account(s) to the IRS. Appellant’s Br. 12. 

Unfortunately for the Chabots, this argument echoes the 

familiar yet unsuccessful arguments of other holders of 

foreign bank accounts who have invoked the Fifth 

Amendment privilege to prevent compliance with summonses 

for required records. See, e.g., Doe, 741 F.3d at 342–43, 353 

(rejecting same argument).

Courts use prong one of the required records exception 

to evaluate whether compliance with a recordkeeping scheme 

is likely to lead to criminal charges as a general matter. Doe, 

741 F.3d at 349; M.H., 648 F.3d at 1074–75. If the scheme’s 

main purpose is to force individuals to turn over potentially 

incriminating evidence to be used in criminal prosecutions, 

the scheme is not essentially regulatory. See M.H., 648 F.3d 

at 1075 (concluding that § 1010.420 is essentially regulatory, 

in part, because the records that it requires accountholders to 

keep are not inherently incriminating and therefore not 

significant links in the chain of evidence necessary to bring 

criminal charges against accountholders). As discussed in 

further detail infra, production of the records that the IRS 

seeks is unlikely to lead to criminal proceedings as a general 

matter, because owning a bank account overseas is not an 

inherently criminal activity. Id. at 1074.

To the extent that the Chabots argue that production of 

the requested account records will establish a significant link 

in the chain of evidence in their particular case, we are not 

persuaded that this precludes application of the required 

Case: 14-4465 Document: 003112020527 Page: 10 Date Filed: 07/17/2015
11

records exception. The Fifth Amendment applies only if the 

compelled production is potentially self-incriminating. If 

producing the documents were not potentially incriminating, 

the Chabots would have no Fifth Amendment concerns. It is 

the potentially incriminating nature of production that allows 

the Chabots to invoke an otherwise valid Fifth Amendment 

privilege. It is this same potentially incriminating nature that 

makes the required records exception relevant to the Chabots’ 

account records. See Doe, 741 F.3d at 344. The Chabots’ 

argument appears to boil down to this: the exception to the 

Fifth Amendment is inapplicable if the Fifth Amendment 

otherwise would apply. Such an argument is nothing more 

than a request that the exception be abolished altogether—a 

request we must reject.

D. Applying the Required Records Exception to 

Section 1010.420

As indicated, in Grosso, the Supreme Court set forth 

the following three-part test for when the required records 

exception should be applied to the Fifth Amendment 

privilege:

[F]irst, the purposes of the United States’ 

inquiry must be essentially regulatory; second, 

information is to be obtained by requiring the 

preservation of records of a kind which the 

regulated party has customarily kept; and third, 

the records themselves must have assumed 

‘public aspects’ which render them at least 

analogous to public documents.

390 U.S. at 67–68. Although this is an issue of first 

impression for this Circuit, the Second, Fourth, Fifth, 

Seventh, Ninth, and Eleventh Circuits previously have 

applied the required records exception to enforce summonses 

Case: 14-4465 Document: 003112020527 Page: 11 Date Filed: 07/17/2015
12

for the records that 31 C.F.R. § 1010.420 requires 

accountholders to keep.4 Today we join these circuits in 

applying the required records exception to this “subset of . . . 

documents that must be maintained by law.” Doe, 741 F.3d 

at 344.

1. Essentially Regulatory Purpose

The Chabots contend that § 1010.420 is a 

recordkeeping scheme with an essentially criminal purpose. 

The first prong of the required records exception asks whether 

a recordkeeping scheme targets an inherently criminal activity 

and/or an inherently suspicious class of persons. See Doe, 

741 F.3d at 347–48; M.H., 648 F.3d at 1075–76. Therefore, 

we begin our inquiry by determining what and whom 

§ 1010.420 targets. Section 1010.420 regulates foreign bank 

account ownership, an activity in which people participate for 

a myriad of legitimate and legal reasons. As the Chabots’ 

counsel recognized at oral argument, someone might own an 

overseas account to ensure convenient access to money when 

living, working, or even vacationing abroad. Oral Argument 

at 13:19, 13:48, United States v. Chabot, (No. 14-4465), 

available at http://www2.ca3.uscourts.gov/oralargument/

audio/14-4465USAv.Chabot,etal.mp3.

 

4 See In re Grand Jury Subpoena Dated Feb. 2, 2012, 741 

F.3d 339 (2d Cir. 2013); United States v. Under Seal, 737 

F.3d 330 (4th Cir. 2013); In re Grand Jury Proceedings, 707 

F.3d 1262 (11th Cir. 2013); In re Grand Jury Subpoena, 696 

F.3d 428 (5th Cir. 2012); In re Special Feb. 2011-1 Grand 

Jury Subpoena Dated Sept. 12, 2011, 691 F.3d 903 (7th Cir. 

2012); In re Grand Jury Investigation M.H., 648 F.3d 1067 

(9th Cir. 2011).

Case: 14-4465 Document: 003112020527 Page: 12 Date Filed: 07/17/2015
13

In a similar vein, the class of persons who own foreign 

bank accounts is comprised of law-abiding citizens as well as 

miscreants. Doe, 741 F.3d at 350–51. On this point, we 

agree with the Fifth Circuit’s conclusion that “the [Bank 

Secrecy Act]’s record-keeping requirements do not apply 

exclusively to those engaged in criminal activity.” In re 

Grand Jury Subpoena, 696 F.3d at 435. 

Where a recordkeeping scheme exclusively targets 

those who engage in illegal activities, its purpose is 

essentially criminal. For example, the Supreme Court held 

that the statutes at issue in Grosso and Marchetti v. United 

States were essentially criminal because the regulations at 

issue exclusively targeted individuals who were engaged in 

an inherently illegal activity, namely gambling. Grosso, 390 

U.S. at 68; Marchetti, 390 U.S. 39, 46–48 (1968). See also

Leary v. United States, 395 U.S. 6, 18 (1969) (holding that 

petitioner’s Fifth Amendment privilege was violated when 

“compliance with the transfer tax provisions [of the 

Marihuana Tax Act] would have required petitioner 

unmistakably to identify himself as a member of this 

‘selective’ and ‘suspect’ group [of individuals who failed to 

comply with the Act’s order form requirement]”); Haynes v. 

United States, 390 U.S. 85, 96, 100 (1968) (concluding that 

the registration requirement of the National Firearms Act 

violated petitioner’s Fifth Amendment privilege where the 

requirement mainly targeted individuals who possessed a 

firearm but had failed to comply with the Act’s other 

requirements, therefore targeting an inherently suspicious 

class of persons). Conversely, because § 1010.420 does not 

apply exclusively, or even largely, to criminals, it does not 

operate simply as a dragnet for criminals by forcing them to 

maintain self-incriminating records. Instead, § 1010.420 is an 

essentially regulatory scheme. See also In re Grand Jury 

Proceedings, 707 F.3d at 1272 (concluding that § 1010.420 

has an essentially regulatory purpose because it targets 

Case: 14-4465 Document: 003112020527 Page: 13 Date Filed: 07/17/2015
14

neither “inherently illegal activity” nor an “inherently 

suspect” group of individuals).

The Chabots contend that the Financial Crimes 

Enforcement Network’s administration of § 1010.420 

evidences the regulation’s essentially criminal purpose. The 

Chabots attempt to bolster their argument by highlighting the 

fact that the records that § 1010.420 requires accountholders 

to keep are also useful for potential criminal proceedings 

against these individuals. As the government asserted at oral 

argument, “bank records can be very important for . . . a lot of 

things [that] you might want to investigate about a person.” 

Oral Argument at 27:29. Just because some of these things 

have criminal aspects does not mean that § 1010.420’s 

purpose is essentially criminal. See, e.g., Under Seal, 737 

F.3d at 334–36 (explaining that, despite how useful records 

maintained under § 1010.420 are to criminal prosecutions, 

this utility does not negate § 1010.420’s other noncriminal 

purposes).

As the government acknowledged at oral argument, 

one of Congress’s goals in passing the Bank Secrecy Act of 

1970 was to reach accountholders who were avoiding U.S. 

criminal laws. Oral Argument at 27:19. Section 1010.420 

was promulgated pursuant to this Act and therefore shares 

this goal. An equally important objective of both the Act and 

§ 1010.420, however, is to monitor and facilitate compliance 

with currency regulation and tax laws. Id. at 27:20; see also

Under Seal, 737 F.3d at 335 (noting that the Bank Secrecy 

Act was enacted for “concomitant tax, regulatory, and 

counterterrorism purposes in addition to its [the Act’s] law 

enforcement goals”). Accordingly, like our sister circuits that 

have addressed these arguments, we find the Chabots’ 

Case: 14-4465 Document: 003112020527 Page: 14 Date Filed: 07/17/2015
15

arguments that § 1010.420 is an essentially criminal scheme 

to be unpersuasive.5

2. Customarily Kept 

The Chabots argue that holders of overseas accounts 

customarily would not keep the records that § 1010.420 

requires them to maintain. Though the courts have not settled 

on a formal definition of “customarily kept,” we find 

instructive the guideline from the Second Circuit that asks 

whether holders of foreign bank accounts as a general group 

are likely to keep the records that § 1010.420 requires them to 

keep, rather than only examining the practices of those 

individuals who engage in foreign banking solely to avoid 

U.S. laws. Doe, 741 F.3d at 350–51. As stated succinctly by 

the Ninth Circuit: “[R]ecords appear to be customarily kept if 

they would typically be kept in connection with the regulated 

activity.” M.H., 648 F.3d at 1076. Therefore, we begin our 

inquiry by examining what records those who lawfully 

engage in foreign banking ordinarily would retain. 

Section 1010.420 mandates that owners and 

beneficiaries of foreign accounts keep the following 

information accessible for five years: (1) the name on the 

account, (2) the account number, (3) the name and address of 

the bank or person with whom the account is maintained, 

(4) the account type, and (5) the maximum annual account 

value. 31 C.F.R. § 1010.420. Common sense tells us that 

this is all information that an accountholder needs in order to 

access funds located abroad or at home. See M.H., 648 F.3d 

at 1076 (concluding that the records that § 1010.420 requires 

individuals to keep contain essential information for 

accountholders and beneficiaries). Because reasonable 

 

5 See supra note 4.

Case: 14-4465 Document: 003112020527 Page: 15 Date Filed: 07/17/2015
16

accountholders would retain this information in order to 

readily access their foreign accounts, we conclude that these 

are records that accountholders customarily would keep.6 

Doe, 741 F.3d at 350; In re Grand Jury Subpoena, 696 F.3d at 

435.

The Chabots’ additional contention that no 

accountholder keeps records of the maximum annual values 

of his overseas accounts is unpersuasive. Maximum annual 

account values are simply account balances, and account 

owners typically keep these numbers on record. See Doe, 

741 F.3d at 350; M.H., 648 F.3d at 1076.

The Chabots further argue that even if there are some 

accountholders who maintain the records that § 1010.420 

requires them to keep, they do not retain these records for the 

five-year period that § 1010.420 mandates. The Chabots, 

however, misunderstand the inquiry that this prong of the 

required records exception entails. The “customarily kept” 

analysis simply asks whether individuals typically would 

maintain the information that the law requires them to keep, 

not the length of time for which they normally would do so 

 

6 Though some courts have found the similarity between the 

type of information contained in the records that § 1010.420 

requires accountholders to keep and the information that these 

individuals must report to the IRS pursuant to § 1010.350 to 

be additional proof that accountholders customarily keep this 

information, we find this reasoning to be circular. See, e.g., 

In re Grand Jury Proceedings, 707 F.3d at 1273; In re Grand 

Jury Subpoena, 696 F.3d at 435; M.H., 648 F.3d at 1076. On 

this point, the Chabots aptly note: “The government and the 

courts seem to say, well, if the government has a regulation 

that requires this information . . . it’s regularly kept because 

we require you to keep it.” Oral Argument at 28:59.

Case: 14-4465 Document: 003112020527 Page: 16 Date Filed: 07/17/2015
17

absent the requirement. The Chabots fail to cite any case in 

which the length of time for which someone usually kept a 

document affected the court’s holding on whether or not the 

document was customarily kept, and we have been unable to 

identify any such case. See, e.g., M.H., 648 F.3d at 1076 

(explaining that “records appear to be customarily kept if they 

would typically be kept in connection with the regulated 

activity”). Furthermore, here, we do not deal with an 

extraordinarily long time period, but rather one that seems 

appropriate for taxation and similar purposes.

We therefore conclude that prong two is met. 

3. Public Aspects 

The Chabots contend that their account records do not 

have public aspects because owning a foreign bank account is 

not a public activity. It is undeniable that an individual who 

holds an overseas account normally does not think of his 

account records as being equivalent to public records. 

Nevertheless, “[t]he fact that documents have privacy 

protections elsewhere does not transform those documents 

into private documents” for all purposes. M.H., 648 F.3d at 

1078. We note that several circuits have reasoned that 

records required to be kept under a valid, civil regulatory 

scheme (i.e., meet prong one of the Grosso test) automatically 

have “public aspects” sufficient to meet the third prong. See, 

e.g., Doe, 741 F.3d at 352; M.H., 648 F.3d at 1076–77. We 

need not adopt such a broad holding to conclude that the 

documents requested here have sufficient “public aspects” to 

meet the third prong of the Grosso test. 

As discussed earlier under the first prong of the Grosso

test, § 1010.420 is a valid, civil regulatory scheme, and the 

Chabots voluntarily participated in the regulated activity, 

namely foreign banking. When accountholders such as the 

Case: 14-4465 Document: 003112020527 Page: 17 Date Filed: 07/17/2015
18

Chabots voluntarily engage in foreign banking, they 

effectively waive their Fifth Amendment privilege to prevent 

the government’s compelled disclosure of their account 

records.7 See M.H., 648 F.3d at 1078 (relying on this consent 

theory in concluding that the appellant’s account records 

satisfied the public aspects prong of the Grosso test); In re 

Special Feb. 2011-1 Grand Jury Subpoena, 691 F.3d at 909 

(“The voluntary choice to engage in an activity that imposes 

record-keeping requirements under a valid civil regulatory 

scheme carries consequences, perhaps the most significant of 

which . . . is the possibility that those records might have to 

be turned over upon demand, notwithstanding any Fifth 

Amendment privilege.”); cf. Smith v. Richert, 35 F.3d 300, 

 

7 Following oral argument, the Chabots submitted a letter 

pursuant to Fed. R. App. P. 28(j), citing the Supreme Court’s 

recent decision in Horne v. Department of Agriculture, No. 

14-275 (June 22, 2015). The Chabots cite Horne for the 

proposition that “while the government may regulate an 

activity, it may not structure its regulation in a way that 

abrogates a Constitutional protection, and then point to 

engagement in such activity as voluntary waiver.” 

Appellants’ Rule 28(j) Letter 2 (July 14, 2015). The 

proposition put forward by the Chabots and the language 

cited for it, which is taken out of context, is far too broad. 

The Supreme Court clearly indicated that the specific issue 

addressed related to takings, not the privilege against selfincrimination (or any other constitutional right for that 

matter), and that the conclusion it was reaching was specific 

to the facts presented in that case. See Horne, Slip Op. at 12 

(“The third question presented asks ‘Whether a governmental 

mandate to relinquish specific, identifiable property as a 

“condition” on permission to engage in commerce effects a 

per se taking.’ The answer, at least in this case, is yes.”).

Case: 14-4465 Document: 003112020527 Page: 18 Date Filed: 07/17/2015
19

303 (7th Cir. 1994) (holding that production of certain 

documents necessary to determine personal income tax 

liability were not within required records exception, because 

“[t]he decision to become a taxpayer cannot be thought 

voluntary . . . [as] [a]lmost anyone who works is a taxpayer, 

along with many who do not”). The government circulates 

the data from these records to several government agencies, 

which use this information for a number of important noncriminal purposes. See Under Seal, 737 F.3d at 335, 337 

(concluding that the records kept pursuant to § 1010.420 

possess public aspects given the Treasury Department’s 

circulation of this data to other government agencies for the 

purpose of implementing economic, monetary, and regulatory 

public policies); In re Grand Jury Subpoena, 696 F.3d at 436 

(employing similar reasoning). Through these processes, the 

Chabots’ account records acquire public aspects.

The Chabots contend that the absence of a licensing 

requirement for foreign banking necessarily means that their 

account records do not have public aspects. This argument, 

however, does nothing to advance the Chabots’ case, because 

private activities that do not require licenses still may be 

subject to the required records exception. See Under Seal, 

737 F.3d at 337 (refusing to accept appellant’s argument that 

his foreign bank account records were not subject to the 

required records exception because banking is a private 

activity which does not require participants to obtain 

licenses); In re Grand Jury Proceedings, 707 F.3d at 1274 n.8 

(same); In re Grand Jury Subpoena, 696 F.3d at 435–36 

(same). We conclude that the records sought in this case are 

sufficiently imbued with “public aspects” to satisfy the third 

Case: 14-4465 Document: 003112020527 Page: 19 Date Filed: 07/17/2015
20

prong of the required records exception.8 Thus all three 

prongs are met.

IV.Conclusion

The Chabots have failed to raise valid policy or other 

reasons as to why their account records should not be 

included in the required records exception to the Fifth 

Amendment privilege. Because § 1010.420 is essentially 

regulatory, requires account owners to retain records that they 

customarily keep, and requires retention of records that have 

public aspects, we will affirm the District Court’s grant of the 

IRS’s petition.

 

8 As the interstate commerce power gives Congress the 

authority to prohibit foreign banking, Congress could impose 

the lesser restriction of a licensing requirement on foreign 

banking. See Cal. Bankers Ass’n v. Shultz, 416 U.S. 21, 46–

47 (1974) (noting that “[t]he plenary authority of Congress 

over both interstate and foreign commerce is not open to 

dispute, and that body was not limited to any one particular 

approach to effectuate its concern”); Doe, 741 F.3d at 351–

52. Obviously, this kind of scheme would be considerably 

more burdensome than § 1010.420’s current recordkeeping 

requirements.

Case: 14-4465 Document: 003112020527 Page: 20 Date Filed: 07/17/2015