691 F.3d 903 (7th Cir. 2012), 11-3799, In re Special February 2011-1 Grand Jury Subpoena Dated September 12, 2011

Docket Nº:11-3799.
Citation:691 F.3d 903
Opinion Judge:BAUER, Circuit Judge.
Party Name:In re SPECIAL FEBRUARY 2011-1 GRAND JURY SUBPOENA DATED SEPTEMBER 12, 2011.
Attorney:Frank P. Cihlar, Gregory V. Davis, Samuel R. Lyons, Alexander P. Robbins, Attorneys, Dept. of Justice, Tax Div., CATEPS, Washington, DC, James M. Conway, Attorney, Office of the United States Attorney, Chicago, IL, for Appellant. Michael J. Garcia, Kirkland & Ellis LLP, New York City, Mark E. Mat...
Judge Panel:Before BAUER, KANNE and SYKES, Circuit Judges.
Case Date:August 27, 2012
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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691 F.3d 903 (7th Cir. 2012)

In re SPECIAL FEBRUARY 2011-1 GRAND JURY SUBPOENA DATED SEPTEMBER 12, 2011.

No. 11-3799.

United States Court of Appeals, Seventh Circuit.

August 27, 2012

Argued April 17, 2012.

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Frank P. Cihlar, Gregory V. Davis, Samuel R. Lyons, Alexander P. Robbins, Attorneys, Dept. of Justice, Tax Div., CATEPS, Washington, DC, James M. Conway, Attorney, Office of the United States Attorney, Chicago, IL, for Appellant.

Michael J. Garcia, Kirkland & Ellis LLP, New York City, Mark E. Matthews, Caplin & Drysdale, Washington, DC, Gregory J. Scandaglia (argued), Attorney, Chicago, IL, for Appellee.

Before BAUER, KANNE and SYKES, Circuit Judges.

BAUER, Circuit Judge.

In this appeal, we are asked to decide whether compulsory production of foreign bank account records required to be maintained under the Bank Secrecy Act would violate appellee T.W.'s Fifth Amendment privilege against self-incrimination. Because we find that the Required Records Doctrine applicable to this case, we hold that T.W. must produce the subpoenaed records.

I. BACKGROUND

Appellee T.W. (T.W. stands for target witness) learned in October 2009 that the IRS had opened a " file" on him, and that two investigators— an IRS special agent and DOJ tax division prosecutor— were assigned to investigate whether he used secret offshore bank accounts to evade his federal income taxes. About two years

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into the investigation, a grand jury issued T.W. a subpoena requiring that he produce, for the time period of October, 2006 until present,

Any and all records required to be maintained pursuant to 31 C.F.R. § 103.32 [subsequently relocated to 31 C.F.R. § 1010.420] relating to foreign financial accounts that you had/have a financial interest in, or signature authority over, including records reflecting the name in which each such account is maintained, the number or other designation of such account, the name and address of the foreign bank or other person with whom such account is maintained, the type of such account, and the maximum value of each such account during each specified year.

(brackets in original).

The records that the Government demands T.W. to produce are records that he is required to keep under the Bank Secrecy Act of 1970. T.W. filed a motion to quash the subpoena on the grounds that producing the demanded records would violate his Fifth Amendment privilege against self-incrimination; complying with the subpoena may, for instance, reveal that T.W. has not reported bank accounts that should have been reported or that he has reported inaccurate information. On the other hand, if T.W. denies having the requested records, he still risks incriminating himself because failure to keep those records is a felony under the Act.

The Government argued that the Required Records Doctrine overrides T.W.'s Fifth Amendment privilege. Under that doctrine, records required to be kept pursuant to a valid regulatory program fall outside the scope of the Fifth Amendment privilege if certain conditions are met. The district court quashed the Grand Jury's subpoena, concluding that the required records doctrine did not apply because the act of producing the required records was testimonial and would compel T.W. to incriminate himself. The Government appeals that order.

II. DISCUSSION

The district court found that, beyond dispute, T.W.'s compliance with the subpoena, that is, the act of producing the requested records, is incriminating. The dispute in this case, instead, concerns whether, under those circumstances, the Required Records Doctrine is still applicable— T.W. contends that it is not, and the district court agreed. He also argues, alternatively, that even if it were applicable, the contents of the requested records do not satisfy the criteria of the Required Records Doctrine.

Because this case concerns the combined effect of the Required Records Doctrine and the act of production privilege, a discussion of both is warranted.

The Required Records Doctrine's origin can be traced to Shapiro v. United States, 335 U.S. 1, 68 S.Ct. 1375, 92 L.Ed. 1787 (1948). In Shapiro, a fruit wholesaler invoked his Fifth Amendment privilege in response to an administrative subpoena that sought various business records. Id. at 4-11, 68 S.Ct. 1375. The records in question were required to be maintained under the Emergency Price Control Act (EPCA), which was passed immediately following the outbreak of World War II to prevent inflation and price gouging. See id.

The Supreme Court determined that the EPCA represented a valid exercise of Congress' regulatory authority and that the record-keeping provisions of the EPCA were essential to the administration of the statute's objectives. Id. at 32, 68 S.Ct. 1375. The Court reasoned that " the...

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