Court Opinion

ID: 170383
Source: CourtListenerOpinion
Date Created: 2010-08-14 18:07:05+00
Date Added: 2024-06-11T17:25:07.072054
License: Public Domain

FILED
                                                               United States Court of Appeals
                                                                       Tenth Circuit

                     UNITED STATES COURT OF APPEALS                   March 4, 2008
                                                                  Elisabeth A. Shumaker
                            FOR THE TENTH CIRCUIT                     Clerk of Court

    DARRELL GRANT STOFFELS,

                Petitioner-Appellant,
                                                          No. 07-1225
    v.                                             (D.C. No. 07-cv-167-DME)
                                                           (D. Colo.)
    PATRICK HEGARTY, Internal
    Revenue Special Agent, United States;
    INTERNAL REVENUE
    COMMISSIONER, United States;
    WELLS FARGO BANK, Custodian
    of Records,

                Respondents-Appellees.

                             ORDER AND JUDGMENT *

Before TACHA, Circuit Judge, BRORBY, Senior Circuit Judge, and MURPHY,
Circuit Judge.

         Darrell Grant Stoffels appeals from a district court order dismissing with

prejudice his pro se petition to quash a summons issued by the Internal Revenue

*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Service (IRS) to a third-party record keeper, Wells Fargo Bank. We have

jurisdiction under 28 U.S.C. § 1291 and affirm. See 26 U.S.C. § 7609(h)(1) (“An

order denying the petition [to quash] shall be deemed a final order which may be

appealed.”).

      IRS Agent Patrick Hegarty issued the challenged summons in the course of

investigating the federal income tax liabilities of Mr. Stoffels and his business,

Life Enhancement Resources Health Ministry, for the taxable years 2002 through

2005. The summons required Mr. Stoffels’ bank to provide specified records

relating to his accounts.

      To obtain judicial enforcement of an IRS administrative summons,

      the government must first show that the IRS has not made a referral
      of the taxpayer’s case to the Justice Department for criminal
      prosecution. The government then must show that the IRS is
      proceeding in good faith by demonstrating: (1) that the investigation
      will be conducted pursuant to a legitimate purpose; (2) that the
      inquiry will be relevant to that purpose; (3) that the information
      sought is not already in the possession of the IRS; and (4) that the
      summons was issued in compliance with the administrative steps
      required by the Internal Revenue Code.

Anaya v. United States, 815 F.2d 1373, 1377 (10th Cir. 1987) (internal citation

omitted); United States v. Powell, 379 U.S. 48, 57-58 (1964). Agent Hegarty’s

declaration in support of the summons was sufficient to establish a prima facie

case for its enforcement. See Codner v. United States, 17 F.3d 1331, 1332-33

(10th Cir. 1994); United States v. Balanced Fin. Mgmt., 769 F.2d 1440, 1443 &

n.1 (10th Cir. 1985).

                                         -2-
      The burden then shifted to Mr. Stoffels to prove that enforcement of the

summons would “constitute an abuse of the court’s process, or that in issuing the

summons the IRS lack[ed] institutional good faith.” Anaya, 815 F.2d at 1377

(citation and internal quotation marks omitted). The district court held that

Mr. Stoffels failed to carry his “heavy” burden and therefore dismissed with

prejudice the petition to quash. Balanced Fin. Mgmt., 769 F.2d at 1444.

      On appeal, Mr. Stoffels, whose pro se appellate filings we liberally

construe, Cummings v. Evans, 161 F.3d 610, 613 (10th Cir. 1998), renews his

argument that the summons should be quashed because the IRS had referred his

case to the Justice Department for criminal prosecution. See 26 U.S.C. § 7602(d)

(“No summons may be issued under this title, and the Secretary may not begin

any action under section 7604 to enforce any summons, with respect to any

person if a Justice Department referral is in effect with respect to such person.”).

The referral, he argues, is evidenced by a search and seizure warrant for his

residence that pre-dates the summons. But, as the district court noted,

      Mr. Stoffels contradicts his own assertion that a referral to the
      Justice Department ha[d] occurred; in . . . his Petition [to quash], he
      alleges that the IRS “is delaying in submitting a formal
      recommendation to the Department of Justice in order to gather
      additional evidence . . . ,” thus acknowledging that the IRS has not
      yet made such a recommendation.

Stoffels v. Hegarty, 2007 WL 1059037, at *3 (D. Colo. Apr. 5, 2007)

(unpublished) (emphasis added). Indeed, Agent Hegarty specifically states in his

                                         -3-
declaration supporting the summons that “[n]o Justice Department referral . . . is

in effect . . . for the years being examined.” R., Vol. I, Doc. 4, Attach. 1 at 3.

We therefore hold that Mr. Stoffels has not produced evidence adequate to rebut

the government’s prima facie showing that the IRS had not referred his case to the

Justice Department before issuing the summons.

      Mr. Stoffels next argues that if the summons or “one or more parts of the

summons . . . was issued for a criminal investigation, then the summons or

relevant parts should be quashed.” Aplt. Opening Br. at 2-3. We reject this

argument because the IRS has the authority, in this setting, to issue a summons

even when it is conducting a solely criminal investigation, so long as no referral

has been made to the Justice Department for criminal prosecution. United States

v. Schmidt, 816 F.2d 1477, 1481 & n.4 (10th Cir. 1987); Anaya v. United States,

815 F.2d at 1377.

      Mr. Stoffels also takes issue with Agent Hegarty’s declaration that the

materials sought may be relevant to his investigation, arguing that Agent

Hegarty’s lack of certainty is grounds for quashing the summons. On the

contrary, the best that Agent Hegarty could say was he reasonably believed that

the information sought may be relevant to his investigation. Such an assertion is

sufficient to demonstrate relevance, see Codner, 17 F.3d at 1332-33; Balanced

Fin. Mgmt., 769 F.2d at 1443 & n.1, and Mr. Stoffels has failed to overcome this

showing.

                                          -4-
      Finally, he contends that he “needs discovery of IRS files and testimony by

IRS agents to establish” that the IRS issued the summons as part of a criminal

investigation. Aplt Br. at 3. “[A]s a general rule, discovery is available in

summons enforcement proceedings only in extraordinary situations.”

Balanced Fin. Mgmt., 769 F.2d at 1445 (internal quotation marks omitted). Since

issuing a summons as part of a criminal investigation is wholly permissible,

Schmidt, 816 F.2d at 1481 & n.4, this is not an extraordinary situation meriting

discovery.

      We are not persuaded by any of Mr. Stoffels’ arguments. We thus conclude

that he has failed to refute the government’s prima facie showing that the IRS has

not referred his case to the Justice Department for a criminal prosecution and that

the IRS is proceeding in good faith. The judgment of the district court is

AFFIRMED.

                                                     Entered for the Court

                                                     Michael R. Murphy
                                                     Circuit Judge

                                         -5-