983 F.2d 631 (5th Cir. 1993), 91-7006, Burlington Northern R. Co. v. Office of Inspector General, R.R. Retirement Bd.

Docket Nº:91-7006.
Citation:983 F.2d 631
Party Name:BURLINGTON NORTHERN RAILROAD CO., Plaintiff-Appellee, v. OFFICE OF INSPECTOR GENERAL, RAILROAD RETIREMENT BOARD, Attorney General of the United States, and the United States of America, Defendants-Appellants.
Case Date:February 16, 1993
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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983 F.2d 631 (5th Cir. 1993)

BURLINGTON NORTHERN RAILROAD CO., Plaintiff-Appellee,

v.

OFFICE OF INSPECTOR GENERAL, RAILROAD RETIREMENT BOARD,

Attorney General of the United States, and the

United States of America, Defendants-Appellants.

No. 91-7006.

United States Court of Appeals, Fifth Circuit

February 16, 1993

Page 632

John C. Hoyle, Atty., Barbara C. Biddle, Asst. Director, Appellate Staff, U.S. Dept. of Justice, Washington, DC, Marvin Collins, U.S. Atty., Stuart M. Gerson, Asst. Atty. Gen., U.S. Dept. of Justice, Ft. Worth, TX, for defendants-appellants.

Thomas J. Knapp, Burlington Northern R. Co., Ft. Worth, TX, Richard K. Willard, David A. Price, Steptoe & Johnson, Washington, DC, for plaintiff-appellee.

William L. Latham, Robert L. Ginsburg, McDonald, Sanders, Ginsburg, Newkirk, Gibson & Webb, Ft. Worth, TX, for amicus-Association of American Railroads.

Appeal from the United States District Court for the Northern District of Texas.

Before VAN GRAAFEILAND, [*] KING, and EMILIO M. GARZA, Circuit Judges.

Page 633

KING, Circuit Judge:

This appeal concerns the enforceability of a subpoena duces tecum issued by the Inspector General of the Railroad Retirement Board to Burlington Northern Railroad Company. The district court refused to summarily enforce the subpoena, concluding that the Inspector General issued it in aid of an ultra vires regulatory compliance audit. Because (i) the district court did not clearly err in determining that the Inspector General in fact issued the subpoena in aid of a regularly scheduled, tax compliance audit, and (ii) the Inspector General lacks statutory authority to conduct such tax compliance audits, we affirm the district court's decision denying summary enforcement of the subpoena.

I. BACKGROUND

  1. The Administrative Structure: The Functions of the Railroad Retirement Board and the Office of Inspector General

    Before describing the events surrounding the Inspector General's decision to issue a subpoena to Burlington Northern, we outline the administrative functions of the Railroad Retirement Board (RRB) and the Office of Inspector General (OIG). An understanding of their administrative functions is important to the disposition of this appeal because of the potential for their functions to overlap. That is, under the existing administrative structure, the Inspector General, in attempting to perform his statutory oversight duties, could effectively assume the RRB's tax enforcement duties.

    1. The Railroad Retirement Board's Mission

    The RRB is responsible, under separate federal statutes, for distributing two types of benefits. First, the RRB administers retirement and survivor benefits to railroad workers and their families pursuant to the Railroad Retirement Act, 45 U.S.C. § 231, et seq. These retirement-survivor benefits are paid from the Railroad Retirement Account, which is in turn funded by taxes paid by railroad employers under the Railroad Retirement Tax Act, 26 U.S.C. § 3201, et seq. Second, the RRB administers unemployment and sickness benefits to railroad workers under the Railroad Unemployment Insurance Act, 45 U.S.C. § 351, et seq. The unemployment-sickness benefits are paid from the Railroad Unemployment Insurance Account, an account which, again, is funded by taxes collected from railroad employers. The taxes that railroad employers must pay under the Railroad Retirement Tax Act and the Railroad Unemployment Insurance Act are calculated, in part, on the basis of creditable compensation the railroad pays to its employees.

    The RRB is also responsible, to some extent, for ensuring that railroad employers are properly paying the taxes that fund the retirement-survivor and unemployment-sickness benefit programs. With respect to the retirement-survivor benefit program, the Internal Revenue Service (IRS) is the agency assigned the responsibility of collecting revenues under the Railroad Retirement Tax Act; however, the RRB, under the Railroad Retirement Act, has the "power to require all employers ... to furnish such information and records as shall be necessary for the administration of this [Act]." 45 U.S.C. § 231f(b)(6). In addition, the RRB may require employers to file compensation reports under the Railroad Retirement Act. See 45 U.S.C. § 231h. With respect to the unemployment-sickness benefit program, the RRB is more directly responsible for enforcing railroad employer tax contributions. Specifically, under the Railroad Unemployment Insurance Act, it is the RRB, not the IRS, which has the responsibility for collecting railroad employer contributions to the Railroad Unemployment Insurance Account. Among other things, the RRB may assess deficiencies with respect to employer contributions, may assess interest and penalties for deficiencies, and may impose liens for unpaid amounts. See 45 U.S.C. §§ 358, 359; see also 20 C.F.R. §§ 345.14-345.19 (1992).

    Thus, it is undisputed that, at least under the Railroad Unemployment Insurance Act, the RRB has the power to investigate or

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    audit railroad employers to determine if they are accurately reporting creditable compensation and properly paying taxes. See 45 U.S.C. § 362. The problem, at least as far as the Office of Inspector General is concerned, is that the RRB has never exercised this power. Instead, the RRB has historically relied on the IRS's auditing of railroad employers' reports under the Railroad Retirement Tax Act. In other words, the RRB, rather than independently inspecting railroad employers' payroll and accounting records to ascertain whether they are filing accurate compensation reports and paying the correct amount of taxes under the Railroad Unemployment Insurance Act, uses a summary reconciliation procedure. Under this procedure, the RRB compares the compensation reported to it with the compensation reported to the IRS under the Railroad Retirement Tax Act.

    2. The Office of Inspector General's Mission

    According to legislative history, the Inspector General Act of 1978, 5 U.S.C.App. 3, was enacted "to consolidate existing auditing and investigative resources to more effectively combat fraud, abuse, waste and mismanagement in the programs and operations of [various executive] departments and agencies." S.REP. No. 1071, 95th Cong., 2d Sess. 1 (1978), reprinted in 1978 U.S.C.C.A.N. 2676, 2676. Congress was particularly concerned, it seems, with evidence indicating that fraud, waste, and abuse in federal departments and agencies were "reaching epidemic proportions." S.REP. No. 1071 at 4. Accordingly, Congress established fifteen "independent and objective" 1 Offices of Inspector General:

    (1) to conduct and supervise audits and investigations relating to the programs and operations of the [specified departments and agencies];

    (2) to provide leadership and coordination and recommend policies for activities designed (A) to promote economy, efficiency, and effectiveness in the administration of, and (B) to prevent and detect fraud and abuse in, such programs and operations; and

    (3) to provide a means for keeping the head of the establishment and the Congress fully and currently informed about problems and deficiencies relating to the administration of such programs and operations and the necessity for and progress of corrective action.

    5 U.S.C.App. 3 § 2.

    In order that the Inspectors General could carry out their oversight mission, Congress gave them audit and investigative authority. Under the terms of the Act, Inspectors General are specifically authorized, among other things,

    (2) to make such investigations and reports relating to the administration of the programs and operations of the applicable [department or agency] as are, in the judgment of the Inspector General, necessary or desirable; [and]

    (4) to require by subpena the production of all information, documents, reports, answers, records, accounts, papers, and other data and documentary evidence necessary in the performance of the functions assigned by this Act, which subpena, in the case of contumacy or refusal to obey, shall be enforceable by order of any appropriate United States district court: Provided, That procedures other than subpenas shall be used by the Inspector General to obtain documents from Federal agencies.

    5 U.S.C.App. 3 § 6(a). The Act also authorizes the head of the federal department or

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    agency to transfer to its Inspector General other powers or duties that the department or agency head determines "are properly related to the functions of the Office and would, if so transferred, further the purposes of this Act." 5 U.S.C.App. 3 § 9(a)(2). The only limit in this regard is the command that no "program operating responsibilities" of the department or agency shall be transferred to an Inspector General. Id.

    Although the Inspector General Act of 1978 did not create a separate OIG for the RRB, Congress created such an office in 1983. See Pub.L. No. 98-76, Title IV, § 418, 97 Stat. 437 (codified at 45 U.S.C. § 231v). And, the Inspector General for the RRB has all the investigatory and auditing powers originally provided for in the Inspector General Act of 1978. See 5 U.S.C.App. 3 § 9(a)(1)(S). Thus, the Inspector General of the RRB has the authority (a) "to make such investigations and reports relating to the administration of the programs and operations of the [RRB] as are, in the judgment of the Inspector General, necessary or desirable," and (b) "to require by subpena the production of all information, documents, reports, answers, records, accounts, papers, and other data and documentary evidence necessary in the performance of the functions assigned by [the Inspector General] Act." 5 U.S.C.App. 3 § 6(a)(2), 6(a)(4).

  2. The Inspector General's Railroad Audit...

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