In re Grand Jury Proceedings, No. 4-10, 12–13131.

• Decision Date: 07 February 2013
• Docket Number: No. 12–13131.,12–13131.
• Citation: 707 F.3d 1262
• Parties: In re GRAND JURY PROCEEDINGS, NO. 4–10.
• Court: U.S. Court of Appeals — Eleventh Circuit

707 F.3d 1262

In re GRAND JURY PROCEEDINGS, NO. 4–10.

No. 12–13131.

United States Court of Appeals, Eleventh Circuit.

Feb. 7, 2013.

Frank Phillip Cihlar, Gregory Victor Davis, Alexander Patrick Robbins, U.S. Dept. of Justice, Tax Div., App. Sec., Washington, DC, Steven D. Grimberg, Lawrence R. Sommerfeld, Sally Yates, U.S. Attys., Atlanta, GA, for Plaintiff–Appellee.

Jerome J. Froelich, McKenney & Froelich, Atlanta, GA, for Defendants–Appellants.

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

Before HULL, WILSON and HILL, Circuit Judges.

HULL, Circuit Judge:

This appeal concerns a grand jury investigation and the issuance of subpoenas duces tecum to a target (the “Target”) and his wife, which required the production of records concerning their foreign financial accounts. The Target and his wife refused to comply with the subpoenas by producing their records, asserting their Fifth Amendment privilege against self-incrimination. The government moved to compel, pointing out that the Supreme Court has recognized an exception (the “Required Records Exception”) to the self-incrimination privilege when certain records are kept pursuant to a valid regulatory scheme. See Shapiro v. United States, 335 U.S. 1, 32–33, 68 S.Ct. 1375, 1391–93, 92 L.Ed. 1787 (1948). The government contended that the foreign financial account records sought in this case fell within that Exception. The district court agreed, ruling that the Required Records Exception applied to the subpoenaed records, and therefore, the records were not subject to the Target and his wife's privilege against self-incrimination.

After review and oral argument, we join the three of our sister circuits that have considered the same issue here about foreign financial account records and conclude that the subpoenaed records fall within the Required Records Exception. We thus affirm the district court's grant of the government's motion to compel.

I. BACKGROUND

The relevant facts are both brief and undisputed. The present appeal arises out of a grand jury investigation in the Northern District of Georgia, jointly conducted by the Internal Revenue Service (“IRS”), the U.S. Department of Justice Tax Division, and the U.S. Attorney's Office (collectively, the “government”). The government suspected that the Target, along with his wife, maintained foreign bank accounts both together and individually. For the years under investigation, the Target and his wife filed joint tax returns. Among other things, the government's investigation focused on the Target and his wife's failures to: (1) disclose on their tax returns their ownership of or income derived from their foreign accounts; and (2) file, with the U.S. Department of the Treasury, Forms TD F 90–22.1, Reports of Foreign Bank and Financial Accounts (“FBAR”) for these alleged accounts.¹

During the course of its investigation, on June 29, 2011, the grand jury, at the request of the U.S. Attorney, issued subpoenas duces tecum to both the Target and his wife. These subpoenas required the Target and his wife to produce any foreign financial account records that they were required to keep pursuant to the federal regulations governing offshore banking. Specifically, the subpoenas requested:

[f]or the tax years 2006 to the present: any and all records required to be maintained pursuant to 31 C.F.R. § 103.32 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 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.²

The Target and his wife informed the government that they would not produce the subpoenaed records. Thereafter, on September 20, 2011, the government filed a motion seeking to compel their compliance with the subpoenas. In its motion, filed in the district court, the government argued that the Bank Secrecy Act (“BSA”), 31 U.S.C. § 5311 et seq., and its implementing regulations, required the Target and his wife to keep the foreign financial account records sought by the subpoenas. Because the subpoenas were directed at only those records kept “within the requirements of [the] regulations,” the Required Records Exception to the Fifth Amendment privilege against self-incrimination applied, such that the Target and his wife could not resist complying with the subpoenas on Fifth Amendment grounds. The government requested that the district court grant the motion to compel and enter an order directing the Target and his wife “to show cause why they should not be held in contempt for failing to comply with the subpoenas.”

The Target and his wife filed a response to the government's motion to compel, arguing that the Required Records Exception did not apply to them based on the particular facts and circumstances of their case.

On November 7, 2011, the district court granted the government's motion to compel. In pertinent part, the district court found that the documents requested in the subpoenas fell within the Required Records Exception because: (1) federal law required the Target and his wife to maintain and make available for inspection records regarding their foreign financial accounts; (2) that recordkeeping requirement, imposed by federal statute and implemented by federal regulations, was part of a civil regulatory scheme that was “ ‘essentially regulatory’ and not criminal in nature”; (3) the records were of the sort that “bank customers would customarily keep”; and (4) the records had “public aspects” because they contained information that federal law required the Target and his wife to maintain and make available for inspection by the IRS, as well as report to the Treasury Department. The district court ordered the Target and his wife to produce the subpoenaed foreign financial account records “or be subject to contempt.”

The Target and his wife did not comply with the district court's order. On March 5, 2012, the government moved the district court to hold the Target and his wife in contempt, pursuant to 28 U.S.C. § 1826. The district court issued an order holding the Target and his wife in contempt for their failure to comply with the district court's earlier November 7 order. The district court, however, stayed the enforcement of its contempt order pending the outcome of any appeal. The Target and his wife timely appealed.

II. DISCUSSION

On appeal, the Target³ argues that he properly invoked his Fifth Amendment privilege against self-incrimination, and that the district court erred in concluding that the Required Records Exception applied to the subpoenaed records. The Target also argues that because his act of producing the subpoenaed records could potentially be incriminating, his Fifth Amendment privilege against self-incrimination should apply to his act of production, as well as applying to the records themselves.⁴

Before discussing these privilege issues, we review the Bank Secrecy Act and its related regulations.

A. The Bank Secrecy Act

The Currency and Foreign Transactions Reporting Act of 1970, Pub.L. 91–508, 84 Stat. 1118 (1970), is generally referred to as the Bank Secrecy Act (“BSA”). The BSA's purpose is “to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings....” 31 U.S.C. § 5311. Section 241 of the BSA, codified at 31 U.S.C. § 5314, provides that the “Secretary of the Treasury shall require a resident or citizen of the United States or a person in, and doing business in, the United States, to keep records, file reports, or keep records and file reports, when the resident, citizen, or person makes a transaction or maintains a relation for any person with a foreign financial agency.” Id. § 5314(a). In short, the Secretary of the Treasury must require U.S. citizens and residents, as well as any person doing business in the United States, to “keep records and file reports” regarding their foreign financial transactions and relationships. See id.

Pursuant to this Section 241 instruction, the Secretary of the Treasury has implemented regulations that require U.S. citizens, residents, and business entities to report their foreign financial accounts to the IRS. See31 C.F.R. § 1010.350. Specifically, the reporting regulation requires that:

Each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner of Internal Revenue for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under 31 U.S.C. 5314 to be filed by such persons. The form prescribed under section 5314 is the Report of Foreign Bank and Financial Accounts (TD–F 90–22.1), or any successor form.

31 C.F.R. § 1010.350(a) (emphasis added).

A separate regulation mandates that those persons who are required to report foreign financial interests under § 1010.350 retain certain foreign financial records for at least five years, making them “available for inspection as authorized by law.” Id.§ 1010.420. These foreign financial records must contain (1) “the name in which each such account is maintained”; (2) “the number or other designation of such account”; (3) “the name and address of the foreign bank or other person with whom such account is maintained”; (4) “the type of such account”; and (5) “the maximum value of each such account during the reporting period.” Id.⁵

The records named in the subpoenas here mirror the records that § 1010.420 requires persons maintaining foreign financial interests to keep and maintain for government inspection. The information contained in those subpoenaed records is also identical...