Opinion ID: 369230
Heading Depth: 2
Heading Rank: 1

Heading: The Pre-indictment Investigation

Text: 5 Although the defendants contend that they need additional discovery in order fully to present their case respecting the alleged abuse of the IRS civil subpoena power, many of the facts respecting the pre-indictment investigation were developed in an evidentiary hearing and found by the trial court. That investigation can, for purposes of this appeal, be divided into two phases: (1) April 1974 to April 23, 1975; and (2) April 23, 1975 to January 22, 1976, the date when the last IRS summons was issued.
6 In April of 1974 Special Agent Richard T. Gilbert, assigned to the narcotics group of the Intelligence Division of the IRS in Philadelphia, received from the Federal Drug Enforcement Administration (DEA) and the Organized Crime Unit of the Philadelphia Police Department information suggesting that Serubo was involved in loansharking and in financing of narcotics transactions, and was linked with organized crime. About the same time Gilbert received from an unnamed confidential informant of the Federal Bureau of Investigation (FBI) similar allegations about Serubo. After evaluating the information, and without communicating with the United States Attorney, Gilbert sought authorization from the IRS National Office to conduct a joint civil and criminal investigation of Serubo, to determine if the allegations of loansharking and narcotics trafficking were true, and if so, whether the proceeds of these activities had been reported to the government for tax purposes. An IRS internal committee in Washington, D.C., concerned with expediting the investigation of income tax liability of narcotics traffickers, considered Gilbert's request, and on June 6, 1974, authorized a joint civil-criminal investigation of Serubo. 7 Revenue Agent Louis Berkowitz and Special Agent Gilbert were assigned to the case on June 19, 1974. Berkowitz was replaced, in September 1974, by Revenue Agent Edward Marsh. At least in Phase I, the investigation was conducted by Gilbert and the two revenue agents as a joint civil-criminal investigation, with equal participation by the revenue agents and the special agent. Between June 19, 1974 and April 23, 1975, Gilbert, pursuant to 26 U.S.C. § 7602, issued twenty-two administrative subpoenas to various third parties seeking information bearing upon Serubo's tax liability. During that period Gilbert had not formed a commitment to recommend prosecution under the internal revenue laws, and did not transmit any of the evidence obtained by use of the subpoenas to the DEA, the FBI, the United States Attorney, or the Philadelphia Police Department. No evidence was introduced with respect to Phase I suggesting an abandonment of a civil purpose, or an unexplained delay, after a decision to recommend prosecution, used as a subterfuge for a continued investigation. Later, evidence obtained by use of IRS subpoenas issued during the first phase of the investigation was presented to the grand jury, and was intended to be used by the government at defendants' trial.
8 In November of 1974 Joel M. Friedman, an attorney in charge of the Philadelphia Office of the Organized Crime and Racketeering Section of the Justice Department (Philadelphia Strike Force) learned, during a review of Strike Force files, of a 1973 FBI report suggesting that the Plachter-Serubo Cadillac dealership had been infiltrated by organized crime. The Strike Force was then unaware of the IRS investigation. Friedman requested further investigation by the FBI and also asked the Department of Justice to seek disclosure from the IRS of any information it might have pertinent to the infiltration allegations. On April 3, 1975 the Philadelphia Office of the IRS was authorized to disclose to the Strike Force information concerning its Serubo income tax investigation. Disclosure of information to the Strike Force began on April 23, 1975 at a conference between Friedman, representatives of the FBI, and representatives of the IRS. Thereafter the investigations of Serubo by the Department of Justice and the Treasury Department were coordinated under the leadership of a Strike Force attorney. FBI agents and IRS agents conducted joint interviews of Brown. IRS Special Agent Gilbert, in June of 1975, suggested the issuance of a grand jury subpoena to Brown for the contents of his briefcase, which was issued on June 9, 1975 and served by Gilbert. Shortly thereafter the district court granted the government's motion, pursuant to Fed.R.Crim.P. 6(e), for disclosure of grand jury matters to IRS personnel, who were assisting in the grand jury investigation. Between June 10, 1975, and January 22, 1976, Special Agent Gilbert and Special Agent Donald Watkins, who succeeded Gilbert in the Serubo investigation in July, 1975, issued thirteen administrative subpoenas to third parties. In October, 1975 Plachter became a target of the government's investigation, and in September, 1976, so did Brown. Although from April 23, 1975, the IRS Agents were participating in a Strike Force investigation, and from June 9, 1975, in a grand jury investigation, Agent Watkins did not recommend criminal prosecution until January 27, 1977, and the Regional Counsel of the IRS did not submit a formal recommendation of prosecution to the Department of Justice until November 9, 1977. Agent Watkins testified that none of the evidence obtained through the use of the thirteen administrative subpoenas used during the second phase was presented to the grand jury or would be used directly or indirectly to obtain evidence intended for use at trial.