Opinion ID: 2994836
Heading Depth: 2
Heading Rank: 1

Heading: LaSalle Motion

Text: Utecht argues that the indictment should have been dismissed or evidence suppressed because the IRS abused its civil summons power. In the alternative, he claims that he should have been permitted to conduct discovery into this issue. Utecht principally relies on two cases, LaSalle, 437 U.S. at 316-17 & n.18, which held that under the Internal Revenue Code then in effect the IRS lacked the statutory power to issue civil subpoenas for the sole purpose of investigating criminal activity, and United States v. Peters, 153 F.3d 445 (7th Cir. 1998), which involves when evidence obtained through a consensual search should be suppressed. However, Utecht’s precise claim, while closely related to these two lines of authority, appears not to be covered by either of these two cases. Utecht apparently argues that the IRS circumvented his constitutional rights by using civil summonses, and thus the evidence should be suppressed under the exclusionary rule. In theory, Utecht might have a valid argument for suppression. Subject to certain exceptions and qualifications, materials involuntarily seized from a defendant without probable cause (and a warrant unless an exception to the warrant requirement applies) will be excluded from the defendant’s trial. See, e.g., Soldal v. Cook County, Ill., 506 U.S. 56, 66 (1992); United States v. Place, 462 U.S. 696, 701 (1983). However, the IRS need not show probable cause in order to enforce a subpoena demanding that the defendant produce documents for a civil investigation. See United States v. Powell, 379 U.S. 48, 57 (1964); United States v. Kis, 658 F.2d 526, 536 (7th Cir. 1981). Thus, the government’s use of civil subpoenas (or other kinds of administrative measures that do not require probable cause) principally to further a criminal investigation could undermine the Fourth Amendment’s probable cause requirement. These constitutional concerns were recognized in Abel v. United States, 362 U.S. 217 (1960), the most relevant precedent for Utecht’s argument. Abel explicitly contemplates applying the exclusionary rule to evidence obtained through the bad faith use of administrative warrants (which includes the IRS’s civil summonses). Id. at 226, 230, 240. Bad faith is present if the decision to proceed administratively . . . was influenced by, and was carried out for, a purpose of amassing evidence in the prosecution for crime. Id. at 230; see also Michigan v. Tyler, 436 U.S. 499, 508 (1978) (holding that, while administrative search warrants issued without probable cause can be used to investigate the cause of a fire, search warrants based on probable cause must be used where authorities are seeking evidence that will be used in a criminal investigation). Therefore, if the IRS uses civil subpoenas without establishing the probable cause necessary for criminal cases after having made an institutional commitment to recommend prosecution of the defendant, evidence obtained through these subpoenas possibly could be suppressed at a criminal trial. Factors used to determine when the IRS is conducting a criminal investigation rather than a civil audit are described in Peters, 153 F.3d at 452-56. As in all requests for dismissal of the indictment or suppression of the evidence, the defendant must first allege facts demonstrating that a hearing on the suppression issue is warranted and then at the hearing must produce evidence that he or she is entitled to the relief sought. Utecht bears the burden of making a prima facie showing before the district court must hold a hearing to investigate whether the IRS abused its civil summons power. See United States v. Rodriguez, 69 F.3d 136, 141 (7th Cir. 1995); United States v. Randle, 966 F.2d 1209, 1212 (7th Cir. 1992). A defendant must present specific, detailed, and material facts in order to carry this burden. See Rodriguez, 69 F.3d at 141; Randle, 966 F.2d at 1212. Utecht fails to satisfy this standard. The only fact on which he relies is that his civil audit has not yet resulted in a tax bill or arrears notice, which he claims suggests that the IRS abandoned its civil tax collection purpose. However, a tax fraud defendant’s failure to receive a tax bill tends to suggest that the IRS maintained a proper separation of its civil and criminal functions, undermining Utecht’s claim rather than supporting it. Civil matters should be suspended once a criminal investigation begins, see Peters, 153 F.3d at 454, and this would preclude the IRS from sending a tax bill until after the criminal proceeding was completed. Thus, the lack of a civil tax notice is not material to the question of whether the IRS improperly used its civil summons power to gather evidence for a criminal prosecution. Therefore, Utecht has not established a prima facie case and the district court did not err in denying Utecht’s motion or refusing to hold a hearing. Moving on to discovery, what standard a defendant must satisfy to engage in discovery to gather evidence that a potential violation based on Abel may have occurred appears to be a question of first impression. In the areas of vindictive prosecution and selective prosecution, a defendant must show a colorable basis for his or her claim before discovery against the government is permitted, see United States v. Goulding, 26 F.3d 656, 662 (7th Cir. 1994); United States v. Heidecke, 900 F.2d 1155, 1159 (7th Cir. 1990), and we adopt that requirement for cases where a defendant claims that the IRS misused its civil summons power in a criminal investigation. This standard prevents defendants from unnecessarily imposing enormous administrative costs and delays in tax evasion prosecutions by engaging in extended fishing expeditions to support frivolous challenges. Cf. Heidecke, 900 F.2d at 1158-59 (justifying the colorable basis requirement by discussing the need to guard against allowing claims of vindictive prosecution to mask abusive discovery tactics by defendants and to free[ ] the judicial system of criminal trials with irrelevant massive discovery). However, this relatively low burden on defendants recognizes that, as with vindictive or selective prosecutions, the government holds most of the relevant evidence. Id. at 1158. Utecht again bases his claim only on his failure to receive a tax bill. As explained above, this lack of action by the IRS is consistent with a proper separation between its civil and criminal functions, and thus is not a colorable basis on which to conclude that the IRS engaged in wrongdoing. Therefore, the district court did not err in refusing to grant discovery against the government. Moreover, the prosecutor in Utecht’s case professed that he was under an obligation to provide the defense with any evidence that might tend to show that the IRS had used its civil summons power improperly. The prosecutor consulted with IRS agents before informing the court and Utecht that he was unaware of any such evidence. Thus, Utecht benefitted from the added protection of a search of the evidence by the government to ensure that Utecht had not been deprived of any of his constitutional rights.