788 F.2d 164 (3rd Cir. 1986), 11710, United States v. Westinghouse Elec. Corp.

Docket Nº:Misc. No. 11710.
Citation:788 F.2d 164
Party Name:UNITED STATES of America, Appellee, v. WESTINGHOUSE ELECTRIC CORPORATION, Appellant. No. 85-3456.
Case Date:April 14, 1986
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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788 F.2d 164 (3rd Cir. 1986)

UNITED STATES of America, Appellee,



No. 85-3456.

Misc. No. 11710.

United States Court of Appeals, Third Circuit

April 14, 1986

Argued March 4, 1986.

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Herbert L. Fenster (argued), Thomas C. Papson, McKenna, Connor & Cuneo, Washington, D.C., for appellant.

Richard K. Willard, Asst. Atty. Gen., J. Alan Johnson, U.S. Atty., John Cordes, Robert L. Ashbaugh (argued), U.S. Dept. of Justice, Washington, D.C., for appellee.

Before ALDISERT, Chief Judge, SEITZ and ADAMS, Circuit Judges.


ADAMS, Circuit Judge.

Under a 1982 statute, the Inspector General of the Department of Defense (Inspector General) is charged with combating fraud, waste, and abuse. To discharge that duty, Congress gave the Inspector General broad subpoena power. This appeal, presenting an issue of first impression in the appellate courts, requires us to consider the contours of that power.

At the request of a separate auditing agency within the Department of Defense, the Inspector General issued a subpoena for internal audit reports of Westinghouse Electric Corporation (Westinghouse). Westinghouse contends that the Inspector General impermissibly used his subpoena power on behalf of another agency, and that the subpoena was unreasonably broad. The district court, 615 F.Supp. 1163, held the subpoena enforceable. Because we agree that the subpoena was authorized by the statute creating the Inspector General's office and not unduly broad, we affirm.


The Inspector General Act of 1978 established an office of inspector general in 15 federal departments and agencies. 5 U.S.C. app. Sec. 1 et seq. (1982). The enactment reflected congressional concern that fraud, waste and abuse in United States agencies and federally funded programs were "reaching epidemic proportions." S.Rep. No. 1071, 95th Cong., 2d Sess., reprinted in 1978 U.S.Code Cong. & Ad.News 2676, 2679. To attack the problem, audit and investigative functions within each of the departments were centralized under one high-level official, an Inspector General, who was given broad powers to seek out fraud and waste in agency operations and programs. 5 U.S.C.App. Secs. 2, 4. In agencies with existing auditing or investigative units, the functions of these units were transferred to an Inspector General, 5 U.S.C.App. Secs. 2, 4. To carry out the statutory mandate, each Inspector General was entrusted with the power to subpoena all information "necessary in the performance of the functions assigned by this Act." 5 U.S.C. app. Sec. 6(a)(4).

One department excluded from the reach of the 1978 Act was the Department of Defense, which, unlike some of the other federal agencies, had long maintained a large audit and investigative staff assigned to various units within the Department. By 1982, however, Congress had come to believe that centralization of audit and investigative efforts within Defense was also necessary. As a result, the Defense Authorization Act of 1982 contained a provision amending the Inspector General Act of 1978 to create an Inspector General within the Department of Defense.

The provisions of the 1982 Act, however, varied somewhat from the 1978 model. Under the 1982 Act, Congress did not consolidate all existing audit and investigative units under an Inspector General. 5 U.S.C. app. Secs. 8(c), 9(c). It did, though, make clear that the Inspector General was to play the central role. Thus, it stipulated that he would be the principal adviser to the Secretary of Defense for "matters relating

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to the prevention and detection of fraud, waste and abuse" in the department, 5 U.S.C.app. Sec. 8(c)(1), would "provide policy direction for audits and investigations," id. at Sec. 8(c)(3), and would "monitor and evaluate the adherence of Department auditors" to audit policies, id. at Sec. 8(c)(6). More specifically, the 1982 Act authorized the Inspector General to "investigate fraud, waste and abuse uncovered as a result of other contract and internal audits, as the Inspector General considers appropriate," id. at Sec. 8(c)(4), and to "request assistance as needed from other audit, inspection, and investigative units of the Department of Defense," id. at Sec. 8(c)(8).

One of the major existing audit agencies not transferred to the Inspector General's direct control was the Defense Contract Audit Agency (DCAA), which is charged both with auditing and assisting in the negotiation of defense contracts. In June and July, 1983, the Inspector General undertook a review of the DCAA that focused on the adequacy of the DCAA's audits of private defense contractors. Among other areas, the Inspector General inquired into whether DCAA had access to contractors' internal audit reports. Through this inquiry it was learned that internal audit reports were not made available at six of the twenty-three contractor locations where the DCAA maintained offices. Later, four contractors agreed to permit some access, leaving only Westinghouse and one other company refusing to provide the reports to DCAA.

Apparently prompted by the Inspector General's probing, the DCAA in February, 1984 for the first time asked Westinghouse for permission to inspect its internal audit records. Westinghouse refused, contending that the agency's requests were not authorized by the access provisions of the department's contract with the company. After an exchange of letters, the DCAA in August, 1984 requested the Inspector General to issue a subpoena for the disputed documents. On September 28, 1984, the Inspector General issued a subpoena for all Westinghouse internal audits where the auditing costs were allocated to Department of Defense contracts or subcontracts.

In issuing the subpoena, the Inspector General designated the investigation as an investigation by his office, pursuant to a policy memorandum he had distributed the previous year. The Inspector General assigned an aide to follow the subpoena and to receive reports on information produced by it. But he requested that DCAA auditors carry out the investigation.

Westinghouse refused to comply with the subpoena, and the Inspector General initiated an enforcement proceeding in the district court. Essentially, the company maintained that the Inspector General lacked statutory authority to issue the subpoena on behalf of the DCAA and that the subpoena was overly broad. After limited discovery and oral argument, the district court on August 4, 1985, ruled that the Inspector General acted within his statutory mandate in issuing the subpoena, that it was not overly broad, and that it would be enforced. The district court stayed its enforcement order to allow this appeal to be heard.


At the crux of the dispute is the extent of the subpoena power of the Inspector General. The DCAA's right of access to the internal audit reports is not at issue here. That issue is being litigated separately in administrative proceedings before the Armed Services Board of Contract Appeals, and it has no bearing on this case.

The general standards that determine the enforceability of an administrative subpoena are well established. Courts will enforce a subpoena if (1) the subpoena is within the statutory authority of the agency; (2) the information sought is reasonably relevant to the inquiry; and (3) the demand is not unreasonably broad or burdensome. See, e.g., United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-255, 13 L.Ed.2d 112 (1964); United States v. Morton Salt Co., 338 U.S. 632, 652, 70 S.Ct. 357, 368, 94 L.Ed. 401 (1950). In addition, if a subpoena is issued for an

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improper purpose, such as harassment, its enforcement constitutes an abuse of the court's process. See Pickel v. United States, 746 F.2d 176, 185 (3d Cir.1984). SEC v. Wheeling Pittsburgh Steel Corp., 648 F.2d 118, 125 (3d Cir.1981) (in banc).

Westinghouse's principal argument focuses on the Inspector General's statutory authority, which, it maintains, does not permit issuance of a subpoena to obtain documents for the DCAA. We conclude, however, that the subpoena was within the Inspector General's authority.

Under the statute, the Inspector General may require by subpoena all information "necessary in the performance of the functions assigned by this Act...." 5 U.S.C. app. Sec. 6(a). Thus, we must determine whether the subpoena for the internal audit documents falls within the statutory functions assigned to the Inspector General.

The statute stipulates that the Inspector General may investigate fraud, waste and abuse uncovered as a result of other audits, id. at Sec. 8(c)(2), and that he may request assistance from other audit, inspection and investigative units of the department, id. at Sec. 8(c)(8). On its face, then, the statute would appear to authorize the Inspector General both to follow leads from other units of the Department of Defense, and to employ other Defense auditors in carrying out an investigation, as the Inspector General has done here.

Westinghouse, however, relies on legislative history in urging a contrary interpretation. The linchpin of its argument is found in the history of the 1978 Act, the legislation that created various inspectors general but not the Inspector General for the Department of Defense. The Committee report for the 1978 Act stated:

The committee intends, of course, that the Inspector and auditor general will use this subpoena power in the performance of his statutory functions. The use of subpoena power to obtain information for another agency component which does not have such power would clearly be improper.

S.Rep. No. 1071, 95th Cong., 2d Sess. 34 (1978), reprinted in 1978 U.S.Code Cong. & Ad.News 2676, 2709.

This language, Westinghouse insists, shows that Congress intended that the Act "would not operate to alter existing access to records rights of other components of the affected...

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