Court Opinion

ID: 9480535
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:50:49.180885+00
Date Added: 2024-06-11T17:47:44.916454
License: Public Domain

COFFEY, Circuit Judge,
concurring.
I write separately to explain why I have changed my vote from the original panel decision. At the en banc hearing, it became evident through our exhaustive questioning that the sole purpose of the summonses at issue here was to gather information, pursuant to a criminal investigation, prior to referring the case to the Justice Department for prosecution.
In United States v. LaSalle Nat’l Bank, 437 U.S. 298, 98 S.Ct. 2357, 57 L.Ed.2d 221 (1978), the Supreme Court agreed that an administrative summons could not be used solely for the purposes of a criminal investigation.1 In order to show that “an investigation has solely criminal purposes[,] ... those opposing enforcement of a summons *755... bear the burden to disprove the actual existence of a valid civil tax determination or collection purpose by the Service.” Id. at 316, 98 S.Ct. at 2367. Because all civil liability for Superior Engineering, Inc. had been determined for the years in question prior to the summonses, there could be no “valid civil tax determination or collection purpose” in summoning the Michauds in their capacity as corporate officers. This application of LaSalle is not a “fuzzy standard” as suggested by the dissent, but a clear, bright-line rule: When the Service makes a final determination of civil liability, its administrative investigation powers end.
I find a further reason for remand in the revelation that Robert W. Pasternak, the president of Superior Engineering, Inc., pled guilty to criminal charges related to his activities as a corporate officer ten weeks after the district court quashed the summonses.2 The proximity of the two events makes it obvious that the investigation by the Department of Justice began before the summonses were quashed. This raises the issue of whether a Justice Department referral was or is in effect regarding Superior Engineering, Inc., as argued by the Michauds in their Petition for Rehearing. The stated purpose of the summonses (somewhat questionable) is “to determine the correctness of the federal employment and unemployment tax returns and liabilities of Superior Engineering, Inc.” Petition to Enforce Internal Revenue Service Summonses fl 6. Thus, if a referral in regard to Superior Engineering, Inc. is in effect, the summoning of corporate officers to investigate the corporation is beyond the Service’s statutory authority, and the summonses must be quashed.
Special Agent Hill testified, and Ms. Shirley Peterson, Assistant Attorney General for the Tax Division of the Justice Department, affirmed, that the Internal Revenue Service had not recommended that any criminal prosecution be instituted against Superior Engineering, Inc. Those statements of themselves fall far short of meaning that no referral is in effect. 26 U.S.C. § 7602(c)(2)(A)(ii) states that a “referral is in effect with respect to any person” not only when a recommendation has been made, but also when “any request is made ... for the disclosure of any return or return information ... relating to such person.” During the Department of Justice’s investigation of Mr. Pasternak, therefore, if the Department of Justice requested income tax return information on Superior Engineering, Inc., a referral was in effect. In light of the fact that the criminal information against Mr. Pasternak related to his activities as a corporate officer mishandling the corporate taxes, I know of no way for the Department of Justice to have determined Mr. Pasternak’s liability without any examination of the corporate tax return information.
On remand, therefore, the court should allow defendants to determine whether the Department of Justice had indeed requested the returns from, or return information regarding, Superior Engineering, Inc.’s taxes for the years 1983 through 1986. If so, that is the end of the matter, and the summonses purportedly investigating Superior Engineering, Inc. must be quashed.

. If, as the dissent asserts, section 7602(b) overturns LaSalle and allows for the use of administrative summonses solely for the purpose of criminal investigation, the section’s constitutionality is suspect — would this not legislate away the due process guaranteed by the fifth amendment? It is clear, however, that Congress did not intend section 7602(b) to apply to criminal discovery: ”[T]he provision is in no way intended to broaden the Justice Department’s right of criminal discovery or to infringe on the role of the grand jury as a principal tool of criminal prosecution.” Report of the Senate Finance Committee, S.Rep. No. 97-494, vol. 1, p. 286 (1982), U.S.Code Cong. & Admin.News 1982, 781, 1031, quoted in U.S. v. Stuart, 489 U.S. 353, 109 S.Ct. 1183, 1189, 103 L.Ed.2d 388 (1989).

. Mr. Pasternak waived his right to the prosecution of the matter by indictment and pled guilty to charges contained in the Information filed by U.S. Attorney John E. Fryatt.