Source: http://federaltaxcrimes.blogspot.com/2015/05/seventh-circuit-ducks-on-use-of-irs.html
Timestamp: 2018-04-21 13:38:34
Document Index: 424710051

Matched Legal Cases: ['§ 7602', '§ 7602', '§ 7602', '§ 7602', '§ 7602', '§ 7602', '§ 7602', '§ 7602']

Federal Tax Crimes: Seventh Circuit Ducks On Use of IRS Summons for Criminal Investigation (5/11/15)
a grand jury in the Western District of Wisconsin issued a subpoena to Procknow's bank requesting all account information for Procknow; n3 Kuntsman retracted the administrative summonses, returned all documents he had received pursuant to the summonses, and destroyed all copies made of that evidence; and the U.S. Attorney's Office for the Western District of Wisconsin sent a letter to the IRS informing the agency that the office was conducting an investigation against Procknow and requesting that an IRS agent be assigned to the investigation. On July 23, 2012, the IRS agreed to the request, and on February 1, 2013, the IRS sent a letter to the U.S. Attorney's Office, transmitting the case and officially recommending prosecution.
The Seventh Circuit then ducked the issue it had left open in Michaud as follows:
In 1978, the Supreme Court decided that the IRS may not validly issue an administrative summons (also known as a "civil summons") for the sole purpose of a criminal investigation, even if the criminal investigation had not yet been referred to the Department of Justice for prosecution. United States v. LaSalle Nat'l Bank, 437 U.S. 298, 317, 98 S. Ct. 2357, 57 L. Ed. 2d 221 (1978). In 1982, Congress amended the statute governing administrative summonses in two ways. First, Congress added a section providing that the IRS may issue summonses for "the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws." 26 U.S.C. § 7602(b). Second, Congress dictated when the IRS's administrative-summons authority ends: "No summons may be issued under this title ... with respect to any person if a Justice Department referral is in effect with respect to such person." Id. § 7602(d)(1).
A majority of circuits have held "that the IRS may validly issue a summons pursuant to 26 U.S.C. § 7602, as amended in 1982, for the sole purpose of a criminal investigation," and the 1982 amendment to § 7602 established a bright-line rule that "the IRS's authority to issue summonses for the purpose of investigating any offense relating to the tax code is extinguished only when the investigation is referred to the Department of Justice." Scotty's Contracting & Stone, Inc. v. United States, 326 F.3d 785, 788-89 (6th Cir. 2003) (collecting cases). In 1990, prior to consideration of the issue by many other circuits, we noted: "There is some debate as to whether this 'solely criminal purpose' ground discussed in LaSalle survived the 1982 amendments to § 7602, and specifically the addition of § 7602(b). ... [W]e need not, and do not, resolve this debate here." United States v. Michaud, 907 F.2d 750, 752 n.2 (7th Cir. 1990) (en banc); compare id. at 754 n.1 (Coffey, J., concurring) (stating that the holding in LaSalle was [20] unaffected by the 1982 amendment to § 7602), with id. at 757 (Posner, J., dissenting, joined by three other judges) (stating that the court should find that the 1982 amendment to § 7602 established a bright-line rule that "[b]efore referral, the IRS is free to use the summons procedure to investigate potential criminal liability"). Later, we cited Michaud in support of the statement that the IRS "cannot use its summons authority if its only purpose is to gather evidence for a criminal investigation." United States v. Berg, 20 F.3d 304, 309 n.6 (7th Cir. 1994).
Procknow relies upon Michaud and Berg to argue that "whether or not the civil summonses were issued prior to the DOJ referral is not the only relevant inquiry—a more important inquiry is whether the civil summonses were issued for the sole purpose of a criminal investigation or prosecution." Meanwhile, the government contends that "[t]he best reading of Section 7602 is the one adopted by the majority of circuits and urged by the dissenters in Michaud," which is to say, "[a]s long as no Justice Department referral is in effect, the use of administrative summons power for criminal investigation is proper." But before we wade further into this murky issue, we pause to consider what might await us on the other side—i.e., what remedy is [21] available to Procknow if we were to find that the administrative summonses were improperly issued.
So, it appears that LaSalle may have some continuing force in the Seventh Circuit.
I won't address this important issue further, but I do provide here the parties' briefs:
Procknow appellant brief, here.
United States Appellee brief, here:
Posted by Jack Townsend at 11:37 AM