* Senior Circuit Judge for the Second Circuit, sitting by designation. United States Court of Appeals,

Fifth Circuit.

No. 91-7006.

BURLINGTON NORTHERN RAILROAD CO., Plaintiff-Appellee,

v.

OFFICE OF INSPECTOR GENERAL, RAILROAD RETIREMENT BOARD, Attorney General

of the United States, and the United States of America, Defendants-Appellants.

Feb. 16, 1993.

Appeal from the United States District Court for the Northern District of Texas.

Before VAN GRAAFEILAND, * * KING, and EMIO M. GARZA, Circuit Judges.

KING, Circuit Judge:

This appeal concerns the enforceability of a subpoena duces tecum issued by the Inspector

General of the Railroad Retirement Board to Burlington Northern Railroad Company. The district

court refused to summarily enforce the subpoena, concluding that the Inspector General issued it in

aid of an ultra vires regulatory compliance audit. Because (i) the district court did not clearly err in

determining that the Inspector General in fact issued the subpoena in aid of a regularly scheduled, tax

compliance audit, and (i i) the Inspector General lacks statutory authority to conduct such tax

compliance audits, we affirm the district court's deci sio n denying summary enforcement of the

subpoena.

I. BACKGROUND

A. The Administrative Structure: The Functions of the Railroad Retirement Board and the Office of

Inspector General

Before describing the events surrounding the Inspector General's decision to issue a subpoena

to Burlington Northern, we outline the administrativ e functions of the Railroad Retirement Board

(RRB) and the Office of Inspector General (OIG). An understanding of their administrative functions

is important to the disposition of this appeal because of the potential for their functions to overlap.

That is, under the existing administrative structure, the Inspector General, in attempting to performhis statutory oversight duties, could effectively assume the RRB's tax enforcement duties.

1. The Railroad Retirement Board's Mission

The RRB is responsible, under separate federal statutes, for distributing two types of benefits.

First, the RRB administers retirement and survivor ben efit s t o railroad workers and their families

pursuant to the Railroad Retirement Act, 45 U.S.C. § 231, et seq. These retirement-survivor benefits

are paid from the Railroad Retirement Account, which is in turn funded by taxes paid by railroad

employers under the Railroad Retirement Tax Act, 26 U .S.C. § 3201, et seq. Second, the RRB

administers unemployment and sickness benefits to railroad wo rkers under the Rai l road

Unemployment Insurance Act, 45 U.S.C. § 351, et seq. The unemployment-sickness benefits are paid

from the Railroad Unemployment Insurance Account, an account which, again, is funded by taxes

collected from railroad employers. The taxes that railroad employers must pay under the Railroad

Retirement Tax Act and the Railroad Unemploy ment Insurance Act are calculated, in part, on the

basis of creditable compensation the railroad pays to its employees.

The RRB is also responsible, to some extent, for ensuring that railroad employers are properly

paying the taxes that fund the retirement-survivor and unemplo yment -sickness benefit programs.

With respect to the retirement-survivor benefit program, the Internal Revenue Service (IRS) is the

agency assigned the responsi bilit y o f collecting revenues under the Railroad Retirement Tax Act;

however, the RRB, under the Railroad Retirement Act, has the "power to require all employers

...

to furnish such information and reco rds as shall be necessary for the administration of this [Act]."

45 U.S.C. § 231f(b)(6). In addition, the RRB may require employers to file compensation reports

under the Railroad Retirement Act. S ee 45 U.S.C. § 231h. With respect to the

unemployment-sickness benefit program, the RRB is more directly responsible for enforcing railroad

employer tax contributions. Specifically, under the Railroad Unemployment Insurance Act, it is the

RRB, not the IRS, which has the responsibility for collecting railroad employer contributions to the

Railroad Unemployment Insurance Account. Among other things, the RRB may assess deficiencies

with respect to employer contributions, may assess interest and penalties for deficiencies, and may

impose liens for unpaid amounts. S ee 45 U.S.C. §§ 358, 359; s ee also 20 C.F.R. §§ 345.14-345.191 To accomplish its purpose of making the OIG an independent and objective office, Congress

provided that Inspectors General "shall be appointed by the President, by and with the advice and

consent of the Senate, without regard to political affiliation and solely on the basis of integrity and

demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public

administration, or investigations." 5 U.S.C.App. 3 § 3(a). To further ensure the independence of

Inspectors General, Congress provided that "[e]ach Inspector General shall report to and be under

the general supervision of the head of the [department or agency] involved...." Id. (1992).

Thus, it is undisputed that, at least under the Railroad Unemployment Insurance Act, the RRB

has the power to investigate or audit railroad employers to determine if they are accurately reporting

creditable compensation and properly paying taxes. S ee 45 U.S.C. § 362. The problem, at least as

far as the Office of Inspector General is concerned, is that the RRB has never exercised this power.

Instead, the RRB has historically relied on the IRS's auditing of railroad employers' reports under the

Railroad Retirement Tax Act. In other words, the RRB, rather than independently inspecting railroad

employers' payroll and accounting records to ascertain whether they are filing accurate compensation

reports and paying the correct amount of t axes under the Railroad Unemployment Insurance Act,

uses a summary reconcili at ion procedure. Under this procedure, the RRB compares the

compensation reported to it with the compensation reported to the IRS under the Railroad Retirement

Tax Act.

2. The Office of Inspector General's Mission

Acco rding to legislative history, the Inspector General Act of 1978, 5 U.S.C.App. 3, was

enacted "to consolidate existing auditing and investigative resources to more e ffectively combat fraud,

abuse, waste and mismanagement in the programs and operations of [various executive] departments

and agencies." S.R E P

. No. 1071, 95th Cong., 2d Sess. 1 (1978), reprinted in 1978 U.S.C.C.A.N.

2676, 2676. Congress was particularly concerned, it seems, with evidence indicating that fraud,

waste, and abuse in federal departments and agencies were "reaching epidemic proporti ons." S.R E P

.

No. 1071 at 4. Acco rdingly, Congress established fifteen "independent and objective" 1 Offices of

Inspector General:

(1) to conduct and supervise audits and investigations relating to the programs and operations of the

[specified departments and agencies];(2) to provide leadership and coordination and recommend pol icies fo r activities designed (A) to

promote economy, efficiency, and effectiveness in the administration of, and (B) to prevent and detect fraud and abuse in, such programs and operations; and

(3) to provide a means for keeping the head of the establishment and the Congress fully and currently

informed about problems and deficiencies relating to the administration of such programs and

operations and the necessity for and progress of corrective action.

5 U.S.C.App. 3 § 2.

In order that the Inspectors General could carry out their oversight mission, Congress gave

them audit and investigative authority. Under the terms of the Act, Inspectors General are specifically

authorized, among other things,

(2) to make such investiga t io ns and reports relating to the administration of the programs and

operations of the applicable [department or agency] as are, in the judgment of the Inspector

General, necessary or desirable; [and]

(4) to require by subpena the producti on of all information, documents, reports, answers, records,

accounts, papers, and other data and documentary evidence necessary in the performance of

the functions assigned by this Act, which subpena, in the case of contumacy or refusal to obey, shall be enforceable by order of any appropriate United States district court: P rovided,

That procedures other than subpenas shall be used by t he Inspector General to obtain

documents from Federal agencies.

5 U.S.C.App. 3 § 6(a). The Act also authorizes the head of the federal department or agency t o

transfer to its Inspector General other powers or duties that the department or agen cy head

determines "are properly related to the functions of the Office and would, if so transferred, further

the purposes of this Act." 5 U.S.C.App. 3 § 9(a)(2). The only limit in this regard is the command

that no "program operating responsibilities" of the department or agency shall be transferred to an

Inspector General. Id.

Although the Inspector General Act o f 1978 did not create a separate OIG for the RRB,

Congress created such an office in 1983. S ee Pub.L. No. 98-76, Title IV, § 418, 9 7 Stat. 437

(codified at 45 U.S.C. § 231v). And, the Inspector General for the RRB has all the investigatory and

auditing powers originally provided for in the Inspector General Act of 1978. See 5 U.S.C.App. 3

§ 9(a)(1)(S). Thus, the Inspector General of the RRB has the authority (a) "to make such

investigations and reports relating to the administration of the programs and operations of the [RRB]

as are, in the judgment of the Inspector General, necessary or desirable," and (b) "to requi re by

subpena the producti on of all information, documents, reports, answers, records, accounts, papers,and other data and documentary evidence necessary in the performance of the functions assigned by

[the Inspector General] Act." 5 U.S.C.App. 3 § 6(a)(2), 6(a)(4).

B. The Inspector General's Railroad Audit Program

Sometime in 1988 or 1989, the Inspector General of the RRB became concerned about the

RRB's procedures for determining the accuracy of railroad employers' contributions to the Railroad

Retirement Account and the Railroad Unemployment Insurance Account. The Inspector General

apparently believed that the IRS's periodic audits of railroad employers—which checked the accuracy

o f t heir repo rting under the Railroad Retirement Tax Act—even when coupled with the RRB's

summary reconciliation procedures, were n o t adequate for detecting the underpayment of taxes.

Accordingly, in September 1988, the Inspector General began auditing the railroa d companies

himself.

The results of the Inspector General's init ial audits disclosed that each of the railroads audited

"had incorrectly reported compensation and had und erpaid their taxes and contributions for the

covered period." The Inspector General understandably became more concerned. Thus, he decided

to conduct additional railroad audits.

In late 1989, after several railroad audits had already taken place, the Inspector General of

the RRB entered into a memorandum of understanding w i th the IRS. The stated purpose of the

memorandum was "to establish policy for the IRS and the OIG [of the] RRB, with regard to referral

and audit of matters of mutual interest." The memorandum specifically reco gnized that "the

cooperative efforts of both the IRS and the OIG will be directed at examining/reviewing employment

taxes of railroad employers." Further, under the terms of the memorandum o f understanding, the

Inspector General of the RRB agreed to conduct reviews relating to railroad employers' compensation

reports, to furnish the IRS with copies of each fina l repo rt resulting from such reviews, and to

"annually" provide the IRS with a copy of its "work plan including the name and addresses of the

railroad employers to be rev iewed." Finally, in this memorandum of understanding, the IRS and

Inspector General of the RRB agreed that the two agencies co uld "enter into joint

examination/reviews in appropriate circumstances."Soon after entering the memorandum of understand ing with the IRS, in March 1990, the

Inspector General of the RRB notified Burlington Northern of its intent to audit the company. The

audit, according to the Inspector Ge neral's not ification letter, was part of "a program to audit tax

contributions and compensation reported under the Railroad Unemployment Insurance and Railroad

Retirement Acts." The letter to Burlington Northern further stated that "[i]t is important that each

railroad know the others are properly paying their share."

After having an entry conference with the Insp ect or General concerning the nature and

purpose of the audit, Burlington Northern sought clarification "as to the authority, scope, objectives

and procedures in regard to the current Inspector General audit." In response to Burlington

Northern's request, the Inspector General explained that (1) it had entered into an agreement with the

IRS to conduct reviews relating to railroad employers' compensation reports and tax returns; (2) its

primary o bjectives were to determine proper and timely payment of tax contributions and the

accuracy of compensation and service reports; and (3) it s final report would be distributed to the

RRB and the IRS for tax assessments or adjustments.

C. The Subpoena Duces Tecum Issued to Burlington Northern

Burlington Northern was not satisfied with the Inspector General's response to its request for

clarification. In June 1990, Burlington Northern sent a letter to the Inspector General disputing his

authority to conduct the audit. Specifically, Burlington Northern expressed its concern that the audit

program being conducted by the Inspe ct o r General was "a classic exercise of regulatory authority

rather than oversight authority" and was "not within the statutory authority of the Office of Inspector

General." Burlington Northern therefore declined "to entertain the proposed audit."

In an effort to proceed with the proposed audit of Burlington Northern, the Inspector General

issued a subpoena duces tecum to the railroad company. The subpoena directed t he "Keeper of

Records" of Burlington Northern to appear before the Inspector General on August 14, 1990 and

bring with him numerous records—including various payroll records. The face of the subpoena

indicates that it was issued in aid of an audit "[t]o determine t he accuracy of compensation and

creditable service reports for coverage under t he Railroad Retirement Tax Act and the RailroadUnemployment Insurance Act."

D. The Subpoena Enforcement Proceeding

Still disputing t he Inspector General's authority to conduct the proposed audit, Burlington

Northern filed an action in federal district court in September 1990, seeking declaratory and injunctive

relief against the enforcement of the subpoena duces tecum. In response to Burlington Northern's

suit, the Inspector General filed a petition fo r summary enforcement of its subpoena. The district

court thereafter consolidated the two cases, and both sides filed motions for summary judgment with

respect to the Inspector General's action to enforce the subpoena.

While the moti o ns for summary judgment were pending, Burlington Northern served

interrogatories, requests for producti on of documents, and notices of deposition on the Inspector

General's office. The Inspector General, in turn, filed a motion for a protective order prohibiting all

discovery in the action, arguing that Burlington Northern had not made the required showing for such

discovery. The Inspector General specifically contended that Burlington Northern had not made a

substantial showing—as required for obtaining discovery from the agency in a subpoena enforcement

proceeding—t hat t he co urt's process would be abused by the enforcement of the subpoena. The

d istrict court disagreed and, on April 2, 1991, directed the Inspector General to comply w ith

Burlington Northern's broad discovery requests.

The Inspector General sought and obtained a writ of mandamus from this court directing the

district court to vacate the discovery order and promptly address the enforceability of the subpoena.

See In re Office of Inspector General, 933 F.2d 276 (5th Cir.1991). In granting the Inspecto r

General's petition for writ of mandamus, we stated:

In the case at bar Burlington Northern asserts that the administrative subpoena should

not be enforced because the Inspector General lacks the statutory authority to conduct the

planned audit of the railroad. Such a defense to the enforcement action requires that the court

interpret the relevant statutes; little if any discovery should be required in that endeavor.

Id. at 278. We recognized the possibility, however, that o n ret urn to the district court a "limited,

measured amount of discovery" might be appropriate.

Instead of allowing any measure of d i scovery on our return of the case, the district court

promptly addressed the enforceability of the Inspector General's subpoena. S ee Burlington Northern2 The Supreme Court has set forth various tests for determining the enforceability of

administrative subpoenas. In Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 209, 66

S.Ct. 494, 505, 90 L.Ed. 614 (1946), the Court indicated that an administrative subpoena issued

in aid of an investigation would be enforced if (1) the investigation is authorized by Congress and

(2) the documents sought are relevant to the inquiry. In United States v. Pow ell, 379 U.S. 48, 85

S.Ct. 248, 13 L.Ed.2d 112 (1964), however, the Court phrased the enforceability test in a slightly

different way. There, the Court held that, to obtain enforcement of a subpoena, the administrative

agency must show that: (1) the investigation is being conducted pursuant to a legitimate purpose;

(2) the information sought is relevant to the inquiry; (3) the information sought is not already

within the agency's possession; and (4) the required administrative steps have been followed. Id.

at 57-58, 85 S.Ct. at 255. The Court further recognized in Powell that an administrative agency

cannot, in seeking enforcement of a subpoena, abuse the court's process by issuing the subpoena

for an improper purpose like harassment. Id. at 58, 85 S.Ct. at 255. Finally, in United States v.

La Salle, 437 U.S. 298, 307, 98 S.Ct. 2357, 2362, 57 L.Ed.2d 221 (1978), the Court stated that

as long as an administrative subpoena or summons is "issued in good-faith pursuit of [a]

congressionally authorized purpose[ ]," it is enforceable.

The Courts of Appeals have also phrased the requirements for enforcing an

administrative subpoena in varying ways. The Ninth Circuit, for example, has indicated

that, in an administrative subpoena enforcement proceeding, the agency must first show

that (1) Congress has granted the authority to investigate; (2) procedural requirements

have been followed; and (3) the evidence sought is relevant and material to the

investigation. "If these factors are shown by the agency, the subpoena should be enforced

unless the party being investigated proves the inquiry is unreasonable because it is

overbroad or unduly burdensome." E.E.O.C. v. Children's Hosp. Medical Center, 719

F.2d 1426, 1428 (9th Cir.1983) (en banc); accord E.E.O.C. v. Maryland Cup Corp., 785

F.2d 471, 475-76 (4th Cir.), cert. denied, 479 U.S. 815, 107 S.Ct. 68, 93 L.Ed.2d 26 Railroad Co. v. Office of Inspector General, 767 F.Supp. 1379 (N.D.Tex.1991). After reviewing

the events leading up to the Inspector General's decision to issue the subpoena to Bu rlington

Northern, the stated reasons for the audit, and other statements made by the Inspect or General

himself, the district court found that the proposed audit of Burlington Northern was of a regulatory,

rather than an oversight, nature. S ee id. at 1381-87. And, further concluding that the Inspector

General lacks the statutory authority to conduct a regulatory tax compliance audit, the district court

denied enforcement of the subpoena. S ee id. at 1387-91. The Inspector General now appeals the

decision denying enforcement of its subpoena.

II. ANALYSIS

This co urt has consistently recognized the summary nature of administrative subpoena

enforcement proceedin gs. See, e.g., In re Office of Inspector General, 933 F.2d at 277; I n re

E.E.O.C

., 709 F.2d 392, 397-400 (5th Cir.1983). Although the test for enforcement has been

phrased in various ways, 2 it is settled that the requirements for judicial enforcement o f an(1986). The Eighth Circuit, by contrast, has determined that an administrative subpoena

will be enforced if: (1) the subpoena was issued pursuant to lawful authority; (2) the

subpoena was issued for a lawful purpose; (3) the subpoena requests information which is

relevant to the lawful purpose; and (4) the disclosure sought is not unreasonable. Finally,

this court has stated that the inquiry regarding the enforceability of a subpoena "is limited

to two questions: (1) whether the investigation is for a proper statutory purpose and (2)

whether the documents the agency seeks are relevant to the investigation." Sandsend Fin.

Consultants, Ltd., v. Federal Home Loan Bank Bd., 878 F.2d 875, 879 (5th Cir.1989). administrative subpoena are minimal. S ee, e.g., Oklahoma Press Publishing Co. v. Walling, 327 U.S.

186, 216, 66 S.Ct. 494, 509, 90 L.Ed. 614 (1945) (when administrator of agency issues subpoena

in connection with his investigative function, the only limit s "are that he shall not act arbitrarily or in

excess of his statutory authority"); U nited States v. Security State Bank & Trust, 473 F.2d 638, 641

(5th Cir.1973) (holding that administrative subpoena is enforceable if issue d in aid of a lawful

investigation and if the materials sought are relevant to that investigation). As a general rule, courts

will enforce an administrative subpoena if: (1) the subpoena is within the statutory authority of the

agency; (2) the information sought is reasonably relevant to the inquiry; and (3) the demand is not

unreasonably broad or burdensome. S ee United States v. Morton Salt Co., 338 U.S. 632, 652, 70

S.Ct. 357, 368, 94 L.Ed. 401 (1950); U nited States v. Westinghouse Elec. Corp., 788 F.2d 164, 166

(3d Cir.1986); F

ederal Election Comm'n v. Florida for Kennedy Comm., 681 F.2d 1281, 1284 (11th

Cir.1982). Courts will not enforce an administrative subpoena, however, if the above requirements

are not met or if the subpoena was issued for an improper purpose, such as harassment. S ee United

States v. Powell, 379 U.S. 48, 58, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964); Westinghouse, 788

F.2d at 166-67.

This appeal concerns only the first requirement for enforcement—namely, whether the

subpoena issued to Burlington Northern is within the statutory authority of the Inspector General of

the RRB. The district court concluded that the subpoena in question was not within the Inspector

General's power. In reaching this conclusion however, the district court made certain fact findings

about the natu re of the audit for which the subpoena was issued. Thus, in reviewing the district

court's ultimate det ermination that the Inspector General lacked statutory authority to issue the

subpoena to Burlington Northern, we must review: (a) the district court's factual findings concerning3 The district court apparently made the challenged fact findings concerning the nature of the

proposed audit while cross-motions for summary judgment were still pending. Thus, it is at least the nature of the proposed audit of Burlington Northern and (b) the district court's legal conclusion

which was based on those findings.

A. The District Court's Fact Findings Concerning the Nature of the Inspector General's Proposed

Audit

As noted above, before the district court concluded that the Inspector General was without

authority to issue the subpoena to Burlington Northern, it made certain fact findings concerning the

nature of the proposed audit. The district court first found that, at its inception, the proposed audit

of Burlington Northern was regulatory in nature. The di stri ct court stated that the Inspector

General's init

ial explanations for the audit "did not include any oversight element but, rather, made

quite clear that t he audit was a regulatory audit that had as its goal the carrying out of program

responsibilities of the [RRB] and IRS." 767 F.Supp. at 1383. The district court then found that the

Inspector General's oversight justifications for the audit, which were offered only after the dispute

with Burlington Northern arose, were "not credible" based on the entire evidentiary record. Id. at

1385. The district court further determined that the detection of fraud and abuse in the RRB's

programs wou ld have o nly been a by-product of the proposed regulatory audit. S ee id. at 1386.

Ultimately, the district court determined that the proposed audit of Burlington Northern was in the

nature of a regulatory tax compliance audit.

On appeal, the Inspector General challenges the district court's findings about the nature of

the proposed audit of Burlington Nor t hern. The Inspector General argues specifically that the

proposed audit was part of a plan to evaluate the effectiveness of the RRB's summary reconciliation

procedures. The Inspector General also contends that the proposed audit would have furthered the

goal of detecting fraud and abuse in the RRB's programs. For the following reasons, we reject the

In spect or General's challenges to the district courts fact findings concerning the nature of the

proposed audit.

We review the district court's fact findings concerning the nature of the proposed audit under

the clearly erron eous standard of revi ew. 3 Under this standard, we will not set aside the districtarguable that the district court's decision denying summary enforcement of the subpoena

amounted to an entry of summary judgment in favor of Burlington Northern. If the district court's

decision is viewed as a summary judgment, then it is clear that, in order to make its decision, the

district court resolved what were disputed fact issues concerning the nature of the audit.

However, on appeal, the Inspector General—for reasons best known to him—has

not chosen to attack the district court's decision as an improperly-granted summary

judgment. At no point in his brief does the Inspector General cite the summary judgment

standard set forth in Federal Rule of Civil Procedure 56(c). Nor does the Inspector

General argue that the district court improperly resolved disputed fact issues. Rather, the

Inspector General expressly attacks the district court's findings regarding the nature of the

proposed audit under the clearly erroneous standard of review. Accordingly, we review

the district court's fact findings on this issue under the clearly erroneous standard. See

Matter of HECI Exploration Co., 862 F.2d 513, 518-20 (5th Cir.1988) (recognizing, in

context of preemption case, that standard of review may be waived); Atw ood v. Union

Carbide Corp., 847 F.2d 278, 280 (5th Cir.1988) ("[I]ssues not briefed, or set forth in the

issues presented, are waived."), cert. denied, 489 U.S. 1079, 109 S.Ct. 1531, 103 L.Ed.2d

836 (1989). court's fact findings unless, based upon t he entire record, we are "left with the definite and firm

conviction that a mistake has been committed." Anderson v. City of Bessemer City, 470 U.S. 564,

573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting United States v. Gypsum Co., 333 U.S.

364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)). "If the district court's account of the evidence

is plausible in light of the record viewed in its entirety," we will not set it aside as clearly

erroneous—even if convinced that, had we "been sitting as trier of fact, [we] would have weighed

the evidence differently." Anderson, 470 U.S. at 573-74, 105 S.Ct. at 1511.

We first review the district court's finding that, at its inc e ption, the proposed audit of

Burlington Northern was in the nature of a tax compliance audit. This finding is amply supported by

the record. The Inspector General initially informed Burlington Northern that (1) the audit was being

conducted as part of "a program to aud it t ax cont ributions and compensation reported under the

Railroad Unemployment Insurance and Railroad Retirement Acts"; (2) the primary objectives of the

audit were the "proper and t imely payment of tax contributions" and "the accuracy of compensation

and service reports"; and (3) the goal of the audit was to identify "tax non-compliance as it relates

t o t he RRTA and the RUIA." Moreover, when the Inspector General testified at a congressional

hearing that was held only two weeks after Burlington Northern was n o t ified about the proposed

audit, he made the following statements:[O]ur audit plan includes continuing review s of the nation's 18 largest railroads.... To date,

we have reported on widespread non-compliance of payroll taxes....

With the resources we have right now in the last year, ut ilizing all of the auditors we have on

the auditing of railroads, we have audited 13 railroads out of that universe. We would hope

that we would be able to get—especially the Class I railroads down to a cycle of six years, best guess, five years on a routine basis, we would be able to do that....

One o f t he t hings that we are recommending that would maybe give the record [sic] more

control over taxes and not losing money is that we collect taxes ourselves. We already do it.

We have some experience.

Office of Inspector General efforts will be heightened in the [are a of].... [r]ailroad tax

compliance audits.

Appropriations for 1991 (Part 7): Hearings Before the Subcomm. on Labor, Health, and Human

Services, House Comm. on Appropriations, 101st Cong., 1st Sess. 1242, 1249, 1263, 1268 (1990)

(testimony of Will

iam J. Do yle III) (emphasis added). This testimony indicates that the Inspector

General's plan was not to conduct "spot checks" of railroads like Burlington Northern, but rather, to

assume a regular auditing function to detect tax non-comp liance and to perhaps assume a tax

collecting function. Based on this testimony and the explanatio ns initially given to Burlington

Northern by the Inspector General , we conclude that the district court did not clearly err in

determining that t h e proposed audit of Burlington Northern was, as originally conceived, a tax

compliance audit.

We next review the district court's finding that the "oversight justifications" proffered by the

Inspector General were not credible. Again, this finding is plausible in light of the record. The record

reveals that the Inspector General did not attempt to justify the audit as being a "spot check"

necessary to evaluate the RRB's summary reconciliation procedures until being prompted to do so

by the Department of Justice. In particular, the record reveals that: (1) when Burlington Northern

first questioned the Inspector General's authority to conduct the proposed audit, the Inspector

Genera l so ught advice from the Department of Justice; (2) the Department of Justice advised the

Inspector General that the proposed audit would be authorized "as an oversight audit of the [RRB's]

operations and as an evaluation of specific instances in which the efficacy of those operations is being

assessed"; and (3) although the Inspector General began arguing—in letters to Burlington Northern

and in cou rt do cuments—that the proposed audit was only a "spot check" of the RRB's summary4 By determining that the detection of fraud and abuse would only be a by-product of the

proposed audit and that the only credible explanations for the audit were those initially given by

the Inspector General, the district court effectively determined that the sole purpose of the audit

was to ensure tax compliance. Because we have concluded that these findings are not clearly

erroneous, we reject the Inspector General's argument that, under Lynn v. Biderman, 536 F.2d

820 (9th Cir.), cert. denied, 429 U.S. 920, 97 S.Ct. 316, 50 L.Ed.2d 287 (1976), the subpoena is

enforceable. This is not a case in which the district court found that there were two purposes for

the proposed audit—one statutorily authorized and one not. Thus, Biderman has no application

to this case. reconciliation procedures, the Inspector General also continued to maintain that "the purpose of the

audit is to determine if compensation reports are accurate and determine if taxes have been properly

paid." Based on the evidence in the record, then, there is so me quest ion regarding the Inspector

General's sudden adopti on of the suggested oversight justification. Accordingly, we will not set aside

the di st rict co urt's finding that the oversight justification was a post-hoc rationalization as clearly

erroneous.

We also conclude, based on our review of the record, that the district court did not clearly

err in finding that the detection o f fraud and abuse would have only been a by-product of the

proposed tax compliance audit. The Inspector General never suggested that he had any reason to

suspect that Burlington Northern was engaged in fraudulent or abusive reporting. Moreover, the only

evidence even mentioning the detection of fraud and abuse is the Inspector General's Audit Guide,

which states:

Although the primary purpose of this audit is not the detection of fraud and abuse, the auditor

should constantly be on the alert for indications of fraud and abuse and should undertake tests

of transactions with this in mind. Any instances of potential fraud should be brought to the

attenti on of the Assistant Inspector General for Audit and no further work should be initiated

until so instructed.

Ba sed o n t his statement, the district court could reasonably determine that the proposed audit of

Burlington Northern was not designed to detect fraud and abuse, but rather, was designed to ensure

tax compliance, with the detection of fraud and abuse being only a by-product. In any event, we are

not left with a definite and firm conviction that the district court was mistaken in this finding. 4

Finally, we review the district court's ultimate finding regarding the regulatory nature of the

proposed audit of Burlington Norther n. T his finding, in our view, is also plausible in light of the

record. There is evidence that, at its inception, the audit was designed to detect tax non-compliance.There is also evidence that the proffered oversight justifications were merely post-hoc rationalizations

designed to save the proposed audit. And, there is little, if any, evidence suggesting that the audit

was designed to detect fraud or abuse by Burlington Northern. Accordingly, we hold that the district

court did not clearly err in finding that the proposed audit of Burlington Northern was essentially a

tax compliance audit to be conducted pursuant to a long-term, regulatory plan.

B. The District Cour t 's Legal Conclusion Concerning the Inspector General's Lack of Statutory

Authority

Having accepted the distr i ct court finding concerning the nature of the proposed audit of

Burlington Northern, we must no w address the district court's legal conclusion. That is, we must

determine whether, as a matter o f law, the Inspector General is statutorily authorized to issue a

subpoena in aid of a regularly scheduled, tax compliance audit of a railroad company. S ee Peters v.

United States, 853 F.2d 692, 695 (9th Cir.1988) (scope of an agency's subpoena power is question

o f law which is reviewed de novo). We conclude, for the following reasons, that the Inspector

General is not authorized to conduct such an audit and that, therefore, the Inspector General lacked

statutory authority to issue the subpoena duces tecum to Burlington Northern.

Init ially, we note that, contrary to the district court's suggestions, the Inspector General Act

of 1978 gives Inspectors G eneral broad

— not limited—investigatory and subpoena powers. S ee

generally Kurt W. Muellenberg & Harvey J. Volzer, Inspector General Act of 1978, 53 T EMP .L.Q.

473 (1985); Herbert L. Fenster & Darryl J. Lee, T he Expanding Audit and Investigative Powers of

the Federal Government, 12 P UB .C ONT

. L.J. 193, 199 -200, 208-11 (1982). With respect to

investigatory powers, Congress specifically authorized Inspecto rs General "to m ake such

investigations and reports relating to the administration of the programs and operations of the

ap plicable [department or agency] as are, i n the judgment of the Inspector General, necessary or

desirable." 5 U.S.C.App. 3 § 6(a)(2) (emphasis added); s ee also United States v. Newport News

Shipbuilding & Dry Dock Co., 837 F.2d 162, 170 (4th Cir.1988) ("[W]here the interests of the

government require broad investigations into the efficiency and honesty of a defense contractor, the

Inspector General is equipped for this task.") (emphasis added); U nited States v. Blue Cross & Blue

Shield of Michigan, 726 F.Supp. 1523, 1525 (E.D.Mich.1989) (recognizing that Inspectors Generalare given broad statutory powers to conduct audits and investigations of the programs and operations

of their respective agencies). And, with respect to the authority to subpoena information, Congress

empowered Inspectors General "to require by subpena the producti on of all information, documents,

reports, answers, records, accounts, papers, and other data and documentary evidence necessary in

th e performance of the functions assigned by this Act

. ..." 5 U.S.C.App. 3 § 6(a)(4) (emphasis

added). Thus, we agree with Third Circuit's conclusion that "Congress gave the Inspector General

broad subpoena power." U nited States v. Westinghouse Electric Corp., 788 F.2d 164, 165 (3d

Cir.1986) (emphasis added); s ee also United States v. Medic House, Inc., 736 F.Supp. 1531, 1535

(W.D.Mo.1989) (recognizing Inspector General's power to issue subpoena to party suspected of

fraud in connection with criminal investigation).

The Inspector General's investigatory and subpoena powers are not, however, without limit s.

See S.R EP . No. 1071, supra, at 28, 1978 U.S.Code Cong. & Ad.News at 2703 ("Broad as it is, the

Inspector and Auditor General's mandate is not unlimited."). For example, an Inspector General's

subpoena powers do not encompass the authority to compel the attendance of a witness. S ee United

States v. Iannone, 610 F.2d 943, 946 (D.C.Cir.1979). Nor do an Inspector General's investigatory

powers generally extend to matters that do not concern fraud, inefficiency, or waste within a federal

agency. S ee United States v. Montgomery County Crisis Center, 676 F.Supp. 98, 99 (D.Md.1987)

(refusing to enforce subpoena issued by Inspector General where the underlying investigation

concerned a national security matter).

Today we recognize an additional, narrow limit on the I nspector General 's broad

investigatory and subpoena powers. In particular, we hold that an Inspector General lacks statutory

authority to conduct, as part of a long-term, continuing plan, regulatory compliance investigations

or audits. By "regulatory compliance investigations or audits," we mean those investigations or audits

which are most appropriately viewed as being within the authority of the agency itself. Thus, as a

general rule, when a regulatory statute makes a federal agency responsible for ensuring compliance

with its provisions, the Inspector General of that agency will lack the authority to make investigations

or conduct audits which are designed to carry out that function directly.Our holding recognizing this limit to the authority of Inspectors General is supported by the

language and purpose of the Inspector General Act of 1978. The purpose of the Act , as we have

already stated, see supra Part I.A.2., was to create independent and objective units that would be

responsible for combatting fraud, abuse, waste

, and mismanagement in federal agencies and

departments. If an Inspector General were to assume an agency's regulatory compliance function,

his independence and objectiveness—qualities that Congress has expressly recognized are essential

to the function of combatting fraud, abuse, waste, an d mismanagement—would, in our view, be

compromised. In addition, although Congress granted Inspectors General broad investigative and

subpoena authority, Congress also expressed its intent that Inspectors General should not be allowed

to conduct "program operating responsibilities" of an agency. See 5 U.S.C.App. 3 § 9(a)(2) (head

of an agency may transfer to an Inspector General other functions, powers, and duti es that he

determines "are properly related to the functions of the [OIG] and would, if so transferred, further

the purposes of this Act, e xcept that there shall not be transferred to an Inspector General

...

program operating responsibilities ") (emphasis added).

Our holding is also supported by the legislative history of the Inspector General Act of 1978.

It finds direct support in the House Report accompanying the Act, which states:

W hile Inspectors General would have direct responsibility for conducting audit s and

investigations relating to th e efficiency and economy of program operations and the

prevention and detection of fraud and abuse in such programs, they would not h ave such

responsibility f

or audits and investigations constituting an integral part of the programs

involved.

H .R.R EP

. No. 584, 95th Cong., 1st Sess. 12-13 (1978) (emphasis added). And, our holding finds

indirect support in certain statements made by Congressman Levitas, one of the co-sponsors of the

1978 Act. He explained:

The Inspectors General to be appointed by the President with the advice and consent of the

Senate will first of all b e independent and h ave no program responsibilities to divide

allegiances. The Inspectors General will be responsible for audits and investigations only....

More o ver, the offices of Inspector General would not be a new "layer of bureaucracy' to

plague the public. T

hey would d eal exclusively w ith the internal operations of the

departments and agencies. Their public contact would only be for the beneficial and needed

purpose of

receiving complaints about problems with agency administration and in the

investigation of fraud and abu se by t ho se persons who are misusing or stealing taxpayer

dollars.124 C ONG .R EC

. 10,405 (1978) (emphasis added); s ee also S.R EP

. No. 1071, supra, at 27-28

(discussing duties and responsibilities of Inspectors General in terms suggesting that they would have

only an "oversight" role).

Finally, our holding finds support in the March 9, 1989 memorandum prepared by the

Department of Justice's Office of Legal Counsel. In this memorandum, the Office of Legal Counsel

addressed the specific question of "whether the authority granted the Inspector General includes the

authority to conduct investigations pursuant to statutes that provide the Department [of Labor] with

regulatory jurisdiction over private individuals and entities that do not receive federal funds." Based

on its review of the language, structure, purpose, and legislative history of the Inspector General Act

of 1978, the Office of Legal Counsel concluded that the Act does not generally vest authority in the

Inspector General to conduct regulatory investigations, which it defined as investigations that "have

as their objective regulatory compliance by private parties." The Office o f Legal Counsel stated:

"Thus, the Inspector General has an oversight rather than a direct role in investigations conducted

pursuant to regulatory statutes: he may investigate the Department's conduct of regulatory

investigations but may not conduct such investigations himself." B ut see also 136 C ONG .R EC

. E2551-

01 (daily ed. July 30, 1990) (statement of Rep. Conte) (questioning the Office of Legal Counsel's

interpretation of Inspector General's investigative authority); James R. Richards & William S. Fields,

The Inspector General Act: Are Its Investigative Provisions Adequate to Meet Current Needs, 12

G EO

. M ASON U.L.R EV

. 227, 242-48 (whi l e recogni zing that Office of Legal Counsel's conclusion may

be "legally de fensible," nonetheless pointing out its potential for confusion and questioning the

premises on which the conclusion is based).

A ccordingly, we conclude that the Inspector General of the RRB is without statut ory

authority to conduct the proposed tax compliance audit of Burlington Northern. As we already

outlined, see supra Part I.A.1., under the terms of the Railroad Unemployment Insurance Act, the

RRB it self is charged with ensuring that railroad employers are accurately reporting taxable

compensation and properly paying taxes. And, under the Railroad Retirement Tax Act, it is the IRS

who has the responsibility for ensuring tax compliance. The Inspector General of the RRB, when itattempted to assume the regulatory compliance functions of the RRB and the IRS, exce eded i ts

st at ut ory "oversight" authority . If the Inspector General were allowed to conduct

regularly-scheduled, tax-compliance audits, there would be no one, so to speak, to "watch the

watchdog." The district court, therefore, correctly denied enforcement of the subpoena.

III. CONCLUSION

We emphasize the limit

ed nature of our decision in this case: We are n ot holding that, under

all circumstances, the Inspector General of the RRB lacks statutory authority to investigate or audit

railroad employers' compensation reporting. The Inspector General of the RRB may well be able to

do so as part of a plan to test the effectiveness of the RRB's summary reconciliation procedures or

where he suspects fraud and abuse on the part of such employers. We hold only that, based on the

district court's findings concerning the nature of this particular audit of Burlington Northern, the

Inspector General exceeded his statutory authority. Moreover, we again note that the RRB clearly

has the authority to conduct regularly scheduled, tax-compliance audits of railroad employers. Thus,

while Burlington Northern has prevailed in this skirmish, the Inspector General, the RRB, and the IRS

have a decided advantage in the war against tax non-compliance, waste, and fraud.

The district court's decision denying enforcement of the subpoena duces tecum is

AFFIRMED.