United States v. Shaheen

• Citation: 445 F.2d 6
• Decision Date: 12 June 1971
• Docket Number: No. 71-1273.,71-1273.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Thomas A. SHAHEEN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

445 F.2d 6 (1971)

UNITED STATES of America, Plaintiff-Appellee, v. Thomas A. SHAHEEN, Defendant-Appellant.

No. 71-1273.

United States Court of Appeals, Seventh Circuit.

June 12, 1971.

F. Lee Bailey, Boston, Mass., John Powers Crowley, Chicago, Ill., Bailey, Alch & Gillis, Boston, Mass., Crowley & Nash, Chicago, Ill., Ralph A. Muoio, Walter B. Slocombe, Caplin & Drysdale, Washington, D. C., for defendant-appellant.

William J. Bauer, U. S. Atty., Chicago, Ill., Johnnie M. Walters, Asst. Atty. Gen., Janet R. Spragens, Atty., Tax Div., U. S. Dept. of Justice, Washington, D. C., for plaintiff-appellee.

Before KILEY, PELL and STEVENS, Circuit Judges.

STEVENS, Circuit Judge.

This is an appeal from an order denying a motion to quash a writ ne exeat republica. The writ issued pursuant to 26 U.S.C. § 7402(a)¹ in an action filed by the United States to collect alleged income tax deficiencies of $452,534.89. As the principal action is still pending in the district court, the appeal is from an interlocutory order. The Government does not question our appellate jurisdiction. Since the extraordinary writ entered by the district court is in the nature of an injunction, we are satisfied that we have jurisdiction of the appeal pursuant to 28 U.S.C. § 1292(a).²

By its terms the writ restrains appellant "from departing out of the jurisdiction of this Court until further order of this Court, and requiring him to give security in the amount of $450,000." The writ was originally construed by the Government and by the district court to require imprisonment of appellant since he was unable to post a $450,000 bond. On emergency application, we found that the record did not warrant the confinement of appellant either in prison or within the Northern District of Illinois, and ordered his release from custody without prejudice to the continuing restraint of the writ against his departure from the United States. We now conclude that the writ must be vacated.

I.

The writ was entered on the ex parte application of the Government. The supporting affidavits established the following facts.

Appellant is an American citizen who formerly resided in Chevy Chase, Maryland. For several months prior to August 1970, the Internal Revenue Service had been investigating the accuracy of his tax returns for the years 1966 and 1967; appellant had commenced litigation tending to impede that investigation, and certain negotiations between his counsel and the Service had taken place.

On August 3, 1970, appellant sold his residence for a price of $190,000. About two weeks later his household goods were shipped, in the name of a third party, to a destination in London, England. The furnishings belonging to his daughter and her husband were also shipped to London in late August. On August 28, 1970, appellant borrowed $80,000 secured by a conveyance of his interest in real estate adjacent to his former residence.

On September 4, 1970, appellant, accompanied by his wife and daughter, traveled by air from Boston to London. On September 8, 1970, appellant's counsel conferred with the District Director of Internal Revenue in Boston. Apparently the Government then learned of appellant's departure.

On September 14, 1970, the Government made a jeopardy assessment against appellant in the amount of $151,104.40. On March 19, 1971, an additional jeopardy assessment of $301,430.49 was made. All administrative methods of collecting the asserted tax liability of appellant were exhausted with the result that only $4,139.28 had been collected. Credit for this amount had been allowed in making the jeopardy assessments which, therefore, aggregated $452,534.89, plus interest, when this action was commenced on April 1, 1971.

Certain assets of appellant were held in trust by his attorneys, but they failed and refused to surrender such property in response to notices of levy and a final demand on behalf of the Treasury. Apart from the trust, the Government was unaware of any assets belonging to the taxpayer located in the United States. It levied on appellant's household goods while they were on the high seas, but appellant's son-in-law recovered the goods in an action brought in the English courts.

On April 1, 1971, appellant was present within the Northern District of Illinois for the purpose of attending a bail hearing in connection with a criminal charge pending against him in that court. The District Director of Internal Revenue for Baltimore, Maryland, based on the facts set forth above, concluded that appellant would depart quickly from the United States if not restrained, and that if appellant were allowed to depart, the tax claims against him would be wholly lost.

Neither appellant nor his counsel was present in court, or had received prior notice of the proceeding, when the writ issued.

II.

On the day following the issuance of the writ, counsel for appellant presented an oral motion to quash the writ.³ Judge Hoffman, to whom the case had been assigned, interrupted a trial to hear the motion as an emergency matter. Because the writ had been entered by another judge, he required appellant to go forward with the presentation of evidence showing why the writ should be quashed. We believe appellant correctly contended that the burden of proof was on the Government to establish that the writ should remain in effect. United States v. Robbins, 235 F. Supp. 353, 357 (E.D.Ark.1964). However, we are not persuaded that the record before us demonstrates any prejudice to appellant because his evidence was heard first. The papers on file gave him fair notice of the substance of the Government's case.

Appellant's evidence supplemented and explained, but did not contradict, the facts as set forth above. He frankly confirmed his intention to depart the United States as soon as he could. He had been residing in Rome for about four months and expressed a desire to rejoin his wife and minor children promptly. Moreover, according to his testimony, adverse publicity related to financial difficulties of a business associate and to his own indictment on a charge unconnected with the tax matters has made it impossible for him to realize earnings in the United States as a financial consultant. He expressed optimism, however, with regard to his earnings potential in Europe.

He denied that he would never return to the United States if permitted to leave. His three oldest children reside in this country. He has voluntarily returned for court appearances in the criminal case. He testified that except for about $3,000 that he drew from a company in Italy, all of his assets are in the United States. Furthermore, he denies liability for the claimed tax deficiencies and has a substantial interest in defeating the Government's claim.

The amounts realized from the transactions described by the Government were used to discharge indebtednesses, reinvested, or placed in trust with his Boston counsel. He estimated that the trust assets had a value of "several hundred thousand dollars" and with proper financing could "be increased to well over a million." The trust was created on September 14, 1970, the date of the first jeopardy assessment. The documents were executed in London, England, and provide that the first $250,000 of trust assets shall be available for payment of fees of his attorneys, who apparently include the trustees of the fund as well as his son-in-law. The record does not disclose the extent to which trust assets may ultimately be subject to levy or collection by the Government.

Details of various financial matters are discussed in the evidence. The sums mentioned, plus appellant's apparent financial ability to live in Rome in a style appropriate to his intended business activities, suggest that he may have more property abroad than the record indicates. There is no direct proof, however, that his foreign assets are significant.

The district court made no findings of fact and expressed no conclusions of law. He simply denied the motion to quash the writ and refused an oral request to reduce the bond.

III.

The power of a district court to issue a writ ne exeat republica, though seldom exercised,⁴ is not questioned. Its common law antecedent, the writ ne exeat regnum, was a prerogative writ enabling the sovereign to compel a man to remain within the realm to help in the defense of his country.⁵ An equally proper office of the writ is to aid the sovereign to compel a citizen to pay his taxes. As at common law, however, it is an extraordinary writ which should issue only in exceptional cases.

When issued, the writ restrains the right possessed by "every man to go out of the realm for whatever cause he pleaseth." This right to travel is "a constitutional liberty closely related to rights of free speech and association, * * *." Aptheker v. Secretary of State, 378 U.S. 500, 517, 84 S.Ct. 1659, 1669, 12 L.Ed.2d 992. It cannot be abridged without due process of law. Kent v. Dulles, 357 U.S. 116, 125-126, 78 S.Ct. 1113, 2 L.Ed. 1204; United States v. Laub, 385 U.S. 475, 481, 87 S.Ct. 574, 17 L.Ed.2d 526.

A party seeking to support the issuance of an extraordinary writ has the burden of showing exceptional circumstances warranting the relief requested. See De Beers Consolidated Mines, Ltd. v. United States, 325 U.S. 212, 65 S.Ct. 1130, 89 L.Ed. 1566. When the relief impinges upon a constitutionally protected personal liberty, that burden must certainly be at least as great as that required to obtain more familiar forms of injunctive relief. In our opinion, the analogy to preliminary injunction actions reveals both procedural and substantive defects in the Government's case.

Rule 65(d) of the Federal Rules of Civil Procedure requires any order granting an injunction to set forth the reasons for its issuance and to be specific in its terms. Rule 52(a) requires every order granting an interlocutory injunction to set forth findings of fact and conclusions of law "which...