U.S. v. Beacon Federal Sav. & Loan, Nos. 540

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Writing for the CourtBefore KEARSE, WINTER and PRATT; GEORGE C. PRATT
Citation718 F.2d 49
Parties83-2 USTC P 9611 UNITED STATES of America, and Barbara Palm, Petitioners-Appellees, v. BEACON FEDERAL SAVINGS & LOAN, Respondent, and Charles Centrella and Teresa Centrella, Intervenors-Appellants. UNITED STATES of America, and Barbara Palm, Petitioners-Appellees, v. NATIONAL BANK OF NORTH AMERICA, Respondent, and Charles Centrella and Teresa Centrella, Intervenors-Appellants. UNITED STATES of America, and Barbara Palm, Petitioners-Appellees, v. VANGUARD NATIONAL BANK, Respondent, and Charles Centrella and Teresa Centrella, Intervenors-Appellants. UNITED STATES of America, and Barbara Palm, Petitioners-Appellees, v. PERLOW & COMPANY and George Perlow, Respondents, and Charles Centrella and Teresa Centrella, Intervenors-Appellants. & 897, Dockets 82-6191, 82-6201, 82-6211 and 82-6221.
Docket Number895,Nos. 540
Decision Date21 September 1983

Page 49

718 F.2d 49
83-2 USTC P 9611
UNITED STATES of America, and Barbara Palm, Petitioners-Appellees,
v.
BEACON FEDERAL SAVINGS & LOAN, Respondent,
and
Charles Centrella and Teresa Centrella, Intervenors-Appellants.
UNITED STATES of America, and Barbara Palm, Petitioners-Appellees,
v.
NATIONAL BANK OF NORTH AMERICA, Respondent,
and
Charles Centrella and Teresa Centrella, Intervenors-Appellants.
UNITED STATES of America, and Barbara Palm, Petitioners-Appellees,
v.
VANGUARD NATIONAL BANK, Respondent,
and
Charles Centrella and Teresa Centrella, Intervenors-Appellants.
UNITED STATES of America, and Barbara Palm, Petitioners-Appellees,
v.
PERLOW & COMPANY and George Perlow, Respondents,
and
Charles Centrella and Teresa Centrella, Intervenors-Appellants.
Nos. 540, 895 & 897, Dockets 82-6191, 82-6201, 82-6211 and 82-6221.
United States Court of Appeals,
Second Circuit.
Argued Jan. 5, 1983.
Decided Sept. 21, 1983.

Page 50

Libero Marinelli, Jr., Attorney, Tax Div., Dept. of Justice, Washington, D.C. (Glenn L. Archer, Jr., Asst. Atty. Gen., Charles E. Brookhard, Michael L. Paup, Attorneys, Tax Div., Dept. of Justice, Washington, D.C., Raymond J. Dearie, U.S. Atty., E.D.N.Y., Patrick B. Northup, Asst. U.S. Atty., Brooklyn, N.Y., of counsel), for petitioners-appellees.

Jeffrey W. Waller, Melville, N.Y. (Jeffrey W. Waller, P.C., Melville, N.Y., of counsel) for intervenors-appellants.

Before KEARSE, WINTER and PRATT, Circuit Judges.

GEORGE C. PRATT, Circuit Judge:

On these consolidated appeals Charles and Teresa Centrella (taxpayers) ask us to review orders of the district court enforcing four third-party summonses issued by the Internal Revenue Service under 26 U.S.C. Sec. 7602. Three of the summonses seek financial records from taxpayers' banks; the fourth, addressed to taxpayers' attorney-accountant, seeks copies of prior tax returns, work papers and supporting documents. Taxpayers claim that each summons is overbroad, that enforcement of the summons to the attorney-accountant is barred by the attorney-client privilege and the fifth amendment privilege against self-incrimination, and that enforcement of all four summonses should be denied because they are part of an investigation that was intensified as the result of an unconstitutional search and seizure by the revenue agent.

The district court ordered enforcement of all four summonses. In doing so, it expressly found that there had been no violation of any internal procedure of the IRS, it declined to receive evidence on the search and seizure issue, and it did not comment on the privilege issues. We agree with the district court's implicit holdings that the summonses were not overbroad, and that taxpayers failed to establish a basis for blanket relief under the fifth amendment and attorney-client privileges. Since the record is inadequate for us to rule on the fourth amendment violation, however, we reverse and remand for further proceedings on that issue.

As part of a routine civil audit of the Centrellas' 1978 income tax return, agent Jean Competello visited the office of George Perlow, the attorney-accountant who had prepared the return. Taxpayers apparently claim that when Perlow was absent from the room in which the examination of documents was conducted, Competello searched Perlow's papers without permission, removed a document (or documents) from his files, took it (them) from the office, and photocopied it (them). It is unclear what actually transpired during this investigation, because neither Competello nor Perlow, the only participants in the events, submitted an affidavit or testified below. All that is before the court is an affidavit by taxpayers' litigation attorney, plus unsworn statements made to the court by him and by the Assistant U.S. Attorney.

The government admits Competello took a single document from the room without giving a receipt, copied it, and returned it to Perlow. The government claims, however, that the document was included among a group of documents Perlow had provided to Competello for examination and that Competello had Perlow's permission to read it. However Competello got the document(s), it appears to be uncontested that the document(s) caused the IRS to expand its investigation from a routine civil audit of taxpayers' 1978 return, into a joint civil and criminal investigation of the 1977, 1978 and 1979 tax years, and to transfer the investigation to the supervision of special agent Barbara Palm, where it continued with a dual civil and criminal character.

On June 29, 1981, agent Palm served a third-party summons on Perlow, requesting his retained copies of taxpayers' 1977, 1978 and 1979 tax returns, prior years' returns, and "work papers, materials, and tax records" used in preparing those returns. Acting

Page 51

on taxpayers' instructions, Perlow refused to comply with the summons.

On November 5, 1981, agent Palm served summonses on three banks at which taxpayers held accounts, seeking records of their checking and savings accounts, safe deposit boxes, loan and credit card applications, and certificates of deposit. Taxpayers also directed the banks not to comply with the summonses.

Nearly six months later, on May 3, 1982, the government petitioned the district court under 26 U.S.C. Secs. 7402(b) and 7604 to enforce the summonses. Taxpayers intervened pursuant to Fed.R.Civ.P. 24(a)(1) and 26 U.S.C. Sec. 7609(b), and resisted enforcement on the grounds that (1) the IRS issued the summonses for a bad faith purpose solely in furtherance of a criminal investigation; (2) the summonses were overbroad; (3) enforcement was barred by the fourth amendment's prohibition against unreasonable searches and seizures; and (4) with respect to the summons issued to Perlow, enforcement was barred by the attorney-client privilege and by the fifth amendment privilege against self-incrimination.

When the matter first came on before the district court it was handled somewhat informally. The district court did not require the taxpayers to make a substantial showing of governmental misconduct before it agreed to schedule a hearing to determine whether the IRS had recommended criminal tax proceedings, why the IRS had delayed so long in bringing enforcement proceedings, and the circumstances surrounding removal of the document(s) from Perlow's office.

At the subsequent evidentiary hearing, the government had two witnesses available: agent Palm, who was to testify concerning the IRS's institutional posture; and agent Competello, who was to testify concerning the events surrounding the taking of the document(s). After the court asked the government to show that the IRS had acted in accordance with its internal procedures, and to prove that the summonses were issued in good faith pursuit of statutory purposes, agent Palm testified. When her cross-examination was concluded, the government did not call agent Competello to testify, but instead rested and moved for the orders of enforcement, arguing that Palm's testimony established that the summons had been "issued in good faith for a legitimate purpose for records not in our control," that there had not yet been any determination as to whether the taxpayers owed any money, and that it was conducting "a joint [civil and criminal] investigation which is appropriate."

Taxpayers' attorney argued in substance that the court should look behind the government's internal procedures to determine whether a violation of taxpayers' fourth amendment or fifth amendment rights had led to issuance of the summonses. The government's...

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17 practice notes
  • Gluck v. U.S., Nos. 84-5323
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • August 28, 1985
    ...an investigation triggered by the information improperly obtained from the grand jury. See United States v. Beacon Federal Savings & Loan, 718 F.2d 49, 52-53 (2d Cir.1983). The quashing of summonses, not the suppression of evidence, is the remedy sought by the appellants here. Having dispos......
  • Hudson Valley Black Press v. I.R.S., No. 01 CIV. 8571(WCC).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 3, 2004
    ...in an action brought by the IRS against the party in possession. 26 U.S.C. § 7609(b); United States v. Beacon Federal Savings & Loan, 718 F.2d 49, 54 (2d Cir.1983). A court should deny enforcement where "the summons had been issued for an improper purpose, such as to harass the taxpayer or ......
  • Presley v. United States, No. 17-10182
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • July 18, 2018
    ...’ " United States v. Centennial Builders, Inc. , 747 F.2d 678, 680 (11th Cir. 1984) (quoting United States v. Beacon Fed. Sav. & Loan , 718 F.2d 49, 52 (2d Cir. 1983) ). But significantly, a court’s review is narrowly circumscribed. A court may inquire as to only whether the "IRS issued a s......
  • U.S. v. White, No. 83
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • August 2, 1988
    ...did establish a prima facie case for enforcement. See, e.g., Sancetta, 788 F.2d at 71; United States v. Beacon Hill Fed. Sav. & Loan, 718 F.2d 49, 52 (2d Cir.1983); Kis, 658 F.2d at The declared purpose of the subject investigation is unquestionably legitimate under Sec. 7602, which authori......
  • Request a trial to view additional results
17 cases
  • Gluck v. U.S., Nos. 84-5323
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • August 28, 1985
    ...an investigation triggered by the information improperly obtained from the grand jury. See United States v. Beacon Federal Savings & Loan, 718 F.2d 49, 52-53 (2d Cir.1983). The quashing of summonses, not the suppression of evidence, is the remedy sought by the appellants here. Having dispos......
  • Hudson Valley Black Press v. I.R.S., No. 01 CIV. 8571(WCC).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 3, 2004
    ...in an action brought by the IRS against the party in possession. 26 U.S.C. § 7609(b); United States v. Beacon Federal Savings & Loan, 718 F.2d 49, 54 (2d Cir.1983). A court should deny enforcement where "the summons had been issued for an improper purpose, such as to harass the taxpayer or ......
  • Presley v. United States, No. 17-10182
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • July 18, 2018
    ...’ " United States v. Centennial Builders, Inc. , 747 F.2d 678, 680 (11th Cir. 1984) (quoting United States v. Beacon Fed. Sav. & Loan , 718 F.2d 49, 52 (2d Cir. 1983) ). But significantly, a court’s review is narrowly circumscribed. A court may inquire as to only whether the "IRS issued a s......
  • U.S. v. White, No. 83
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • August 2, 1988
    ...did establish a prima facie case for enforcement. See, e.g., Sancetta, 788 F.2d at 71; United States v. Beacon Hill Fed. Sav. & Loan, 718 F.2d 49, 52 (2d Cir.1983); Kis, 658 F.2d at The declared purpose of the subject investigation is unquestionably legitimate under Sec. 7602, which authori......
  • Request a trial to view additional results

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