Sylvestre v. U.S.

• Decision Date: 30 October 1992
• Docket Number: No. 92-1636,92-1636
• Citation: 978 F.2d 25
• Parties: -321, 92-2 USTC P 50,560 Roger SYLVESTRE, Petitioner, Appellant, v. UNITED STATES of America, et al., Respondents, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 25

978 F.2d 25

71 A.F.T.R.2d 93-321, 92-2 USTC P 50,560

Roger SYLVESTRE, Petitioner, Appellant, v. UNITED STATES of America, et al., Respondents, Appellees.

No. 92-1636.

United States Court of Appeals First Circuit.

Submitted Sept. 23, 1992.

Decided Oct. 30, 1992.

Roger Sylvestre, on brief, pro se.

James A. Bruton, Acting Asst. Atty. Gen., Gary R. Allen, Charles E. Brookhart, S. Robert Lyons, Tax Div., Dept. of Justice, Washington, D.C., Lincoln C. Almond, U.S. Atty., and Everett C. Sammartino, Sr. Asst. U.S. Atty., Providence, R.I., on brief for respondent, appellee, United States.

Before BREYER, Chief Judge, TORRUELLA and SELYA, Circuit Judges.

PER CURIAM.

On April 14, 1992, the IRS issued and served a summons to each of 3 banks as third party recordkeepers, seeking records of savings accounts, checking accounts, and the like, pertaining to Roger Sylvestre. Pursuant to 26 U.S.C. § 7609, Sylvestre is entitled to notice of a third party summons and may petition to quash such a summons. Sylvestre was given notice and did, in fact, seek to quash each of the 3 summonses. The IRS objected to the petition to quash and sought enforcement of the summonses. After a hearing, the district court denied the petition to quash and granted enforcement of the summonses. Sylvestre has appealed. We affirm. ¹

To obtain enforcement of a summons, the IRS

must show that the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose, that the information sought is not already within the Commissioner's possession, and that the administrative steps required by the Code have been followed....

United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-255, 13 L.Ed.2d 112 (1964). In addition, enforcement of an IRS summons is precluded if a referral to the Justice Department for criminal prosecution is in effect. United States v. LaSalle Nat'l Bank, 437 U.S. 298, 318, 98 S.Ct. 2357, 2368, 57 L.Ed.2d 221 (1978).

" 'Assertions by affidavit of the investigating agent that the requirements are satisfied are sufficient to make the prima facie case.' " United States v. Lawn Builders of New England, Inc., 856 F.2d 388, 392 (1st Cir.1988) (quoting Liberty Financial Services v. United States, 778 F.2d 1390, 1392 (9th Cir.1985)). In this case, the IRS submitted an affidavit of Revenue Agent Paul H. McGunagle. In it, McGunagle stated, inter alia,

1. He is reviewing the possible income tax liability of Sylvestre, who is engaged in the occupation of chiropractic physician.

2. A review of IRS records indicated no federal tax returns were filed by Sylvestre for 1985 through 1990.

3. During his review, he had learned that certain accounts in Sylvestre's name may or do exist in the 3 banks to which summonses were issued.

4. Service and notice of the summonses were made as required by law, including notification to Sylvestre, and all procedures required by the Internal Revenue Code were followed with respect to the summonses.

5. The bank records are relevant for the purpose of reconstructing income received and said records are not already in the possession of the IRS.

6. No previous examination of the records has taken place for the periods under review and this matter has not been referred to the criminal tax division of the Justice Department.

It is evident that these averments by the revenue agent satisfy a prima facie case for the enforcement of these summonses. A review for possible income tax liability is certainly a legitimate purpose and records of financial institutions are relevant to that purpose. These bank records would not be expected to be already in the possession of the IRS. And, the agent stated that the matter had not been referred to the criminal division of the Justice Department and that all the required administrative steps were followed.

Once a prima facie case for enforcement was made, it became Sylvestre's burden to refute the elements of the prima facie case or to present sufficient evidence that the court's process, invoked to enforce these summonses, was abused--that is, that the summonses had been issued for an improper purpose or for any other purpose reflecting on the good faith of the investigation. United States v. Powell, 379 U.S. at 58, 85 S.Ct. at 255. We see no need for a lengthy discourse as to the merits, and our corresponding rejection, of each of the numerous unsupported grounds Sylvestre listed in his attempt to quash these summonses. We address only Sylvestre's most potentially viable challenge--his claim concerning the IRS' failure to comply with the notice provisions of § 7609(a)(1).

Section 7609(a)(1) provides that notice of a third party summons shall be given to any person identified in the description of the records contained in the summons [in this case, Sylvestre] within 3 days of the day on which service is made, "but no later than the 23rd day before the day fixed in the summons as the day upon which such records are to be examined." The third party summonses were served on April 14, 1992 and directed the banks to produce the records on May 8, 1992. The IRS gave Sylvestre notice of these summonses on April 17, 1992. Notice, therefore, was given to Sylvestre within 3 days of the April 14th service on the banks, ² but 21, not 23, days before the (May 8th) day for examination of the records.

That the notice to Sylvestre fell two days short of the statutory provision, however, does not, as Sylvestre would have it, bar the enforcement of these summonses. As the Fifth Circuit has stated, in affirming the enforcement of a third party summons despite the premature disclosure of information about the records sought,

[w]e, too, decline to elevate form over substance and reject the suggestion that every infringement of a requirement of the Internal Revenue Code absolutely precludes enforcement of an IRS summons.

Nothing in the language of the Code itself mandates this sanction for infringement. The correct approach for determining whether to enforce a summons requires the court to evaluate the seriousness of the violation under all the circumstances, including the government's good faith and the degree of harm imposed by the unlawful conduct.

United States v. Bank of Moulton, 614 F.2d 1063, 1066 (5th Cir.1980); see also United States v. Texas Heart Inst., 755 F.2d 469, 478 (5th Cir.1985) (where the taxpayer has received every benefit of the administrative steps required by the Code and has not shown any prejudice resulting from the failure to follow the strictures of the notice requirement, such failure by the IRS is harmless and enforcement of the summons is not barred), overruled in part on other grounds, United States v. Barrett, 837 F.2d 1341 (5th Cir.1988) (en banc) (per curiam), cert. denied, 492 U.S. 926, 109 S.Ct. 3264, 106 L.Ed.2d 609 (1989).

It is obvious that the purpose of notice, in advance of the date fixed for examination of records, to one, like Sylvestre, who is...