U.S. v. Bdo Seidman, Llp
| Decision Date | 10 October 2002 |
| Docket Number | No. 02 C 4822.,02 C 4822. |
| Citation | 225 F.Supp.2d 918 |
| Parties | UNITED STATES of America, Petitioner, v. BDO SEIDMAN, LLP, etc., Respondent. |
| Court | U.S. District Court — Northern District of Illinois |
AUSA, United States Attorney's Office, Chicago, John A. Lindquist, III, United States Department of Justice, Tax Division, Washington, DC, for Plaintiff.
Harold C. Hirshman, Tamara Lynn Meyer, Sonnenschein, Nath & Rosenthal, Chicago, Lawrence M. Hill, White & Case, New York, NY, for Defendants.
This effort by the United States for enforcement of a group of summonses against accounting firm BDO Seidman, LLP ("BDO") has generated, during its three months of existence, more than one bulky submission of paperwork from each side of the controversy. But while the situation in that respect does not fit the adage variously ascribed to a number of sources,1 but perhaps best known in Horace's version—"the lab'ring mountain scarce brings forth a mouse"2—the situation is not nearly as complex as BDO attempts to portray it.
What is at issue here is an investigation of BDO as to its potential liability under the Internal Revenue Code ("Code")3 for promoting potentially abusive tax shelters, which the government asserts the firm failed to disclose properly in accordance with statutory requirements. That investigation implicates a host of statutory provisions, including Code §§ 6111, 6112, 6694, 6700, 6701, 6707, 6708, 7407 and 7408 at a minimum. And for more than two decades this Court has looked to United States v. Kis, 658 F.2d 526 (7th Cir.1981) () for the operative rules that govern judicial enforcement of such summonses.
Kis has similarly been reaffirmed and applied regularly by our Court of Appeals. As succinctly put in 2121 Arlington Heights Corp. v. IRS, 109 F.3d 1221, 1224 (7th Cir.1997) ():
First, the government must make a prima facie case that the IRS issued the summons in good faith. That isn't much of a hurdle. The government must only show: the investigation underlying the summons has a legitimate purpose; the information sought may be relevant to that purpose; the information is not already in the IRS's hands; and the IRS has followed the statutory steps for issuing a summons. The government typically makes that showing through the affidavit of the revenue agent conducting the audit.
In those terms this is not a difficult case. All four of those prima facie elements are indisputably present, even though BDO makes unpersuasive efforts to challenge each of them.
As for BDO's questioning the "legitimate purpose" factor, that fails utterly in the face (among other things) of the decision in Tiffany Fine Arts, Inc. v. United States, 469 U.S. 310, 105 S.Ct. 725, 83 L.Ed.2d 678 (1985). That unanimous decision validated the use of "dual purpose" summonses, so long as the requested information is relevant to a legitimate investigation of a summoned taxpayer such as BDO—and that certainly applies here.
As for the relevance component (with its corollary requirement of no overbreadth), United States v. Arthur Young & Co., 465 U.S. 805, 814, 104 S.Ct. 1495, 79 L.Ed.2d 826 (1984) (emphasis in original) supplies definitive support for the government's position that the test is one requiring only "even potential relevance to an ongoing investigation, without reference to its admissibility." And in addition to our Court of Appeals' like holding in reliance on Arthur Young in 2121 Arlington Heights, 109 F.3d at 1224, Government Mem. 7 n. 5 lines up a plethora of cases from other Courts of Appeals applying the same undemanding standard.
Next BDO throws up a really unsupported objection to the "already in the IRS' possession" factor. On that score the supplemental declaration of Revenue Agent Michael Friedman provides a compelling showing that the objection cannot and does not prevail.
Finally, BDO does not directly charge bad faith on the government's part—instead it casts a number of pejorative aspersions that might suggest such an evil motive. But this Court has already indicated, and it reconfirms here, that those aspersions do not begin to meet the government's persuasive showing of a good faith investigation stemming from information provided to it.
All of that, then, leaves only BDO's claim of privilege under Code § 7525 (). In that respect the United States is correct that BDO's original blanket assertion of that privilege must fail (see, e.g., United States v. Lawless, 709 F.2d 485, 487 (7th Cir.1983)). But nothing daunted, BDO has most recently threatened to overwhelm the court by tendering two massive privilege logs—one of 86 pages listing 826 documents, and the...
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U.S. v. Bdo Seidman
...and that BDO had failed to show that enforcement of the summonses would constitute an abuse of process. See United States v. BDO Seidman, LLP, 225 F.Supp.2d 918, 920 (N.D.Ill.2002). The district court then BDO to produce, on or before November 4, 2002, all responsive documents except those ......