VonderAhe v. Howland
| Decision Date | 07 November 1974 |
| Docket Number | No. 71-1982,71-1982 |
| Citation | 508 F.2d 364 |
| Parties | 73-1 USTC P 9333, 74-2 USTC P 9825 Donn VonderAHE and Barbara VonderAhe, Plaintiffs-Appellants, v. Roy H. HOWLAND et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Neil F. Horton (argued) of Johnston, Klein & Horton, Oakland, Cal., for plaintiffs-appellants.
Crombie J. D. Garrett (argued), Atty., Appellate Section, Dept. of Justice, Washington, D.C., for defendants-appellees.
Before MOORE, 1 BARNES and ELY, Circuit Judges.
Just after 8:00 A.M., on the morning of June 16, 1970, a group of four Special Agents of the Internal Revenue Service (IRS) arrived at the office of Dr. Donn VonderAhe, a dentist practicing in Fremont, California. Simultaneously, a second group of three agents arrived at the home of the doctor and his wife, Barbara, in Newark, California. Each group was armed with a search warrant issued by a United States Commissioner. The Agents then proceeded to search or, more accurately, to ransack both office and home and to asport practically every piece of paper they could lay their hands on.
The background to this rather extraordinary procedure is best portrayed somewhat chronologically.
Dr. VonderAhe (usually referred to herein as the 'doctor') apparently has a successful dental practice. On June 16th his office consisted of eight rooms and a hallway. He had one or more employees who kept his patients' records and recorded bills and payments.
The doctor and his wife, Barbara, filed joint income tax returns. In the early part of 1969, i.e., between early January and late March, an IRS Agent (Holmes) made an audit of their 1966 and 1967 income tax returns. There were made available to him six sets of records for the years in question: (1) combined cash-receipts-cash-disbursements journal; (2) bank statements and cancelled checks; (3) savings account passbooks; (4) daily patient appointments book with amounts charged and amounts collected; (5) patient cards containing dental information together with charges and collections; and (6) cash receipts books. Agent Holmes found that the books and records examined accurately reflected the income reported and recommended acceptance of the taxpayers' returns as filed.
This recommendation was not long to endure because a telephone call from a former employee, Lynette Bush, to IRS revealed that the doctor during her period of employment had maintained two sets of records. This former employee was most specific concerning the records and the location thereof. She stated that the records of 'regular' patients were recorded on white 'Banco' cards; those of 'emergency' patients on yellow sheets-- subsequently green cards. She further disclosed that checks received for services from patients listed on the yellow sheets or green cards were hand endorsed by the doctor and cashed by another employee.
In the office, according to Mrs. Bush and Mrs. Van Order, another former employee of Dr. VonderAhe, the 'emergency' cards were kept in a portable file cabinet maintained in the 'opratory' room, separate and apart from the other file cabinets (Bush, Aff., June 14, 1970) or, during Van Order's regime, in the third drawer of the cabinets on the right side of the office.
There were four 'emergency receipt books' during the period of employee Bush's employment, and three during employee Van Order's tenure, which were relevant to VonderAhe's allegedly unreported income. The books in question were described as 'approximatly one inch thick with six receipts per page.' When filled, they were taken to the doctor's home.
Agent Romano was assigned to investigate further. To him it was obvious that if only the white card income had been disclosed to Agent Holmes, the doctor's income would have been understated by the amount of the yellow sheet/green card 'emergency' income. At least an investigation was in order to ascertain whether it had been reported. This suspicion was strengthened by remarks made by another employee, a Mrs. Comegys, who told the Agent that she and the doctor had removed the yellow sheets and green cards from the files when the 1969 audit was pending; that the doctor had taken these records to his home so that they would not be available to the Examining Agent; and that the doctor had instructed her to remain at home on the day of the audit so that she would not give any 'wrong' answers. In addition to information about the cards and books, Mrs. Comegys stated that she had, in 1968, arranged the opening of a Swiss bank account for her employer and had deposited a check for $6,050 therein.
Having received this information, IRS was alerted to the fact that there existed previously unexamined yellow sheets and green cards and books in which entries therefrom had been made. There were various ways by which these records could have been obtained. The doctor had voluntarily made available to Agent Holmes all records of income received from his 'regular' patients. Confronted with the knowledge that IRS knew of the withheld records, the doctor was scarcely in a position to place the undisclosed records in a different category from the disclosed. The Agents could have asked for them; they could have subpoenaed them; or, if they thought that there was danger of destruction, they could have sought a warrant. The service chose this last course of action.
In spite of the fact that the 'things' to be seized and the places to be searched were known to the Service with a high degree of specificity, the warrants as they were requested and issued were, for all practical purposes, 'general warrants.' The property allegedly concealed was described as: 'Fiscal records relating to the income and expenses of Dr. Donn VonderAhe from his dental practice and other sources since January 1, 1966, to date, including, but not limited to dental patient cards, appointment books, combined appointment-cash receipts books, combined cash receipts and cash disbursements journals, business ledgers, expense records, bank ledger sheets and statements, cancelled checks, bank savings account pass books, records and correspondence relating to the opening of and deposits and withdrawals from a bank account maintained by said Doctor at the Banaue Romande in Geneva, Switzerland, plus copies of invoices and bills sent to patients of the aforesaid Doctor.'
The grounds for search and seizure were stated as: 'now and have been used as a means of committing and constitute evidence of offenses in violation of the provisions of the Internal Revenue laws; particularly Sections 7201 and 7206(1) of Title 26 United States Code; and which further comprise and constitute evidence of offenses committed in violation of the laws of the United States within the meaning of Section 1001 of Title 18, United States Code.'
There was no allegation in the supporting affidavit of Agent Holmes that he sought to re-audit the material listed by him as already audited and reconciled. In the principal affidavit of Agent Romano, he states that he has 'reason to believe that the amount of fees collected from patients during the years 1966 and 1967 whose names appeared on yellow information sheets were intentionally segregated by Dr. VonderAhe and Mrs. Comegys and not made available to Revenue Agent Holmes for the audit examination of early 1969.' Thus, what had been revealed and what had been concealed had already been made abundantly clear.
According to Dr. VonderAhe, at about 8:15 A.M., on June 16, 1970, three (elsewhere stated as four or five) Treasury Agents forced their way into his inner office. They apparently took over the premises, and continued their search until 1:15 P.M. The search necessitated cancellations of patient appointments because the Agents seized patient cards and records and virtually were in charge of the office. The doctor alleges that he was unable to resume his practice for approximately two weeks when most of the original records were returned.
The extent of the seizure may be judged by the list ('Document Receipt') made by the Agents, which consisted of thirty-two pages of papers and records which were carted away in cartons in a small truck. By way of brief illustration, the Agents took the contents of the drawers of the doctor's desk in his private office, including correspondence relating to the purchase of property in Bull River, Montana, a U-Haul rental contract, an application for insurance, personal letters, notes relating to the VonderAhe's planned new home, and correspondence with an investment advisory service. Hundreds of patient record cards were taken. The receptionist's desk was also searched.
The warrant enforcement technique employed by the Agents at the home was quite similar to that used at the office. They forced their way in, made a room by room search of the premises, searched the contents of Mrs. Vonder-Ahe's purse and even that of a Mrs. Perez, a visiting friend. Items were seized in an unused bedroom involving the VonderAhe's real estate and records labeled 'New House.' Again, over objection, an IRS Agent forced his way into the VonderAhe's car which was parked in their garage and searched it. Papers taken from the garage included many folders of patients' records, 'lab slips,' etc. Several cartons of seized material were loaded into a truck and taken away.
The oral protests of the VonderAhes were quickly followed by legal protests. From a procedural point of view, Rule 41(e) of the Federal Rules of Criminal Procedure was unavailable to the doctor because neither he nor his wife had been indicted and there was no criminal case in being against them. However, they were well aware of potential civil and criminal consequences of the alleged concealment of records. They quite naturally desired to cause these records to be unavailable for use by the Commissioner...
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