In re Subpoena

• Decision Date: 21 September 2012
• Docket Number: No. 11–20750.,11–20750.
• Citation: 696 F.3d 428
• Parties: In re GRAND JURY SUBPOENA.
• Court: U.S. Court of Appeals — Fifth Circuit

696 F.3d 428

In re GRAND JURY SUBPOENA.

No. 11–20750.

United States Court of Appeals, Fifth Circuit.

Sept. 21, 2012.

Frank Phillip Cihlar, Sr. Counsel, Gregory Victor Davis, Samuel Robert Lyons, Alexander Patrick Robbins (argued), Tax Div., App. Sec., Jonathan Richard Marx, U.S. Dept. of Justice, Washington, DC, for Plaintiff–Appellant.

Larry A. Campagna, Chamberlain, Hrdlicka, White, Williams & Aughtry, Houston, TX, George Blay Abney (argued), Chamberlain, Hrdlicka, White, Williams & Aughtry, Atlanta, GA, for Defendant–Appellee.

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

Before DAVIS, DENNIS and HAYNES, Circuit Judges.

DENNIS, Circuit Judge:

This appeal arises from a grand-jury investigation in which the target of the investigation (the “witness”) was subpoenaed to produce any records of foreign bank accounts he was required to keep under Treasury Department regulations governing offshore banking. The witness informed the government that he would not comply with the subpoena, citing his Fifth Amendment privilege against self-incrimination, and the government moved to compel the witness to comply. After hearing argument, the district court denied the government's motion, and the government subsequently appealed.

This appeal requires us to address the Required Records Doctrine, under which the government may require that certain records be kept and later produced without implicating the privilege against self-incrimination. Two of our sister circuits have held that the doctrine applies to subpoenas identical to the one at issue and that, therefore, the subpoenas' targets must comply with them. See In re M.H., 648 F.3d 1067, 1079 (9th Cir.2011); In re Special Feb. 2011–1 Grand Jury Subpoena Dated Sept. 12, 2011, 691 F.3d 903, 908–09 (7th Cir.2012). Because we conclude that the Required Records Doctrine applies in this case, we decline the witness's invitation to create a circuit split and accordinglyREVERSE the district court's denial of the government's motion to compel the witness to comply with the subpoena.

BACKGROUND

I.

The witness in this case is the target of a grand-jury investigation in the Southern District of Texas seeking to determine whether he used secret Swiss bank accounts to evade his federal income taxes. In February 2009, following an investigation into its cross-border banking business, the Swiss investment bank UBS AG (“UBS”) entered into a deferred-prosecution agreement with the Justice Department under which UBS (1) admitted to conspiring to defraud the U.S. government by helping U.S. taxpayers commit tax evasion and (2) provided the account records of approximately 250 of these taxpayers, including the witness.

Based on the records obtained from UBS, the government determined that the witness, through an offshore nominee entity, established an account with UBS in 2005. A grand-jury investigation subsequently uncovered other offshore entities the witness controlled. On February 25, 2011, the grand jury issued a subpoena to the witness for any foreign-account records he was required to keep under Treasury Department regulations governing offshore banking. See 31 U.S.C. § 5314; 31 C.F.R. § 1010.420. The subpoena requires the witness to produce, for the years 2005 to 2008,

[a]ny and all records required to be maintained pursuant to 31 C.F.R. § 103.32 relating to foreign financial accounts that [the witness] had/[has] 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.¹

The subpoena then states that “[s]uch accounts include, but are not necessarily limited to, the accounts of the following entities” and lists six entities that the witness allegedly controls.

On March 16, 2011, the witness informed the government, through counsel, that he would not comply with the subpoena, citing the Fifth Amendment. The witness argues that requiring him to produce the records sought would compel him to (1) admit the existence of the account, (2) admit his control over it, and (3) authenticate the records. Alternatively, the witness argues, assuming he has a foreign bank account but failed to comply with the record-keeping requirements of the Bank Secrecy Act (“BSA” or “the Act”), compelling him to produce these records would force him to admit to a violation of the Act's record-keeping provisions.

The government moved the district court to compel the witness to comply with the subpoena. The district court heard argument and subsequently denied the government's motion, which the government now appeals.

II.

The Currency and Foreign Transactions Reporting Act of 1970, Pub.L. 91–508, 84 Stat. 1118 (1970) (codified as amended at 31 U.S.C. §§ 5311–25) (the BSA), regulates offshore banking and contains a number of record-keeping and inspection provisions. Its 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(a) of the Act instructs the Treasury Secretary to require U.S. citizens, residents, and institutions to “keep records and file reports” regarding foreign financial transactions and relationships. Id. § 5314. Accordingly, the Treasury Secretary implemented regulations that require (1) U.S. citizens and residents to disclose their foreign bank accounts, see 31 C.F.R. § 1010.350, and (2) that the records for such accounts “be retained by each person having a financial interest in or signature or other authority over any such account” for at least five years and be kept “available for inspection as authorized by law,” id.§ 1010.420. These record-keeping regulations were in effect at all times relevant to this case.

DISCUSSION

Because the BSA's record-keeping requirement is “essentially regulatory,” the records sought are of a kind “customarily kept” by account holders such as the witness, and the records have assumed “public aspects,” we conclude that the Required Records Doctrine applies and requires the witness to comply with the subpoena.

I.

“We review a district court's decision granting a motion to quash or modify a subpoena for abuse of discretion.” In re Grand Jury Proceedings, 115 F.3d 1240, 1243 (5th Cir.1997). Although this is a deferential standard, the district court abuses its discretion if its ruling is based on an erroneous view of the law. In re MBS Mgmt. Servs., Inc., 690 F.3d 352, 354 (5th Cir.2012).

II.

The Fifth Amendment to the United States Constitution provides that “[n]o person ... shall be compelled in any criminal case to be a witness against himself.” U.S. Const. amend. V. The Supreme Court has held that the privilege against self-incrimination bars the government from “compelling a person to give ‘testimony’ that incriminates him.” Fisher v. United States, 425 U.S. 391, 409, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976). Because “the privilege protects a person only against being incriminated by his own compelled testimonial communications,” the Court determined that it does not shield production of private papers voluntarily prepared or prepared by a third party. Id. at 409–10, 96 S.Ct. 1569.

Although one could reason that “[w]here documents are required to be kept and then produced, they are arguably compelled,” In re M.H., 648 F.3d at 1071, the Supreme Court has held that the privilege against self-incrimination does not bar the government from imposing record-keeping and inspection requirements as part of a valid regulatory scheme, see Shapiro, 335 U.S. at 32–33, 68 S.Ct. 1375. In Shapiro, the Court explained that Congress may impose record-keeping and inspection requirements as a condition of engaging in an activity that is within its power to regulate. Id. at 33, 68 S.Ct. 1375. In that case, “the Supreme Court required a wholesaler of fruit and produce to turn over certain records he was obliged to keep and maintain for examination pursuant to the Emergency Price Control Act, which applied in part to records ‘customarily kept.’ ” In re M.H., 648 F.3d at 1072. The Supreme Court explained that this Required Records Doctrine “applies not only to public documents in public offices, but also to records required by law to be kept in order that there may be suitable information of transactions which are the appropriate subjects of governmental regulation, and the enforcement of restrictions validly established.” Shapiro, 335 U.S. at 17, 68 S.Ct. 1375.

That being said, the Required Records Doctrine does not empower the government to command every citizen to keep a diary of their crimes under the guise of regulation. Seeid. at 71, 68 S.Ct. 1375 (Jackson, J., dissenting). Rather, any record-keeping or inspection requirement under Shapiro must be directed at “an essentially non-criminal and regulatory area of inquiry,” Marchetti v. United States, 390 U.S. 39, 57, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968) (internal quotation marks omitted), and may not be “directed almost exclusively to individuals inherently suspect of criminal activities,” Grosso v. United States, 390 U.S. 62, 68, 88 S.Ct. 709, 19 L.Ed.2d 906 (1968) (holding that the Required Records Doctrine does not permit the government to require record keeping of “wagering activities” as part of a “wagering excise tax” when gambling was generally illegal). Thus, the government may not make an end run on the Fifth Amendment and require criminals to self-report their offenses.

However, “[t]he hypothetical case in which every individual is required to maintain a record of everything he does that interests the government is remote from the case of the individual who enters upon a regulated activity knowing that the maintenance of extensive records...