U.S. v. Centennial Builders, Inc., No. 83-7524

CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)
Writing for the CourtBefore TJOFLAT, HILL and JOHNSON; JAMES C. HILL
Citation747 F.2d 678
Docket NumberNo. 83-7524
Decision Date28 November 1984
Parties-397, 84-2 USTC P 9979 UNITED STATES of America, Frank A. McCammon, Special Agent, Internal Revenue Service, Plaintiffs-Appellees, v. CENTENNIAL BUILDERS, INC., Charles H. Erwin, et al., Defendants, Charles H. Erwin, Fred D. Jones, Jones-Erwin Industries, Inc., and O.H.M., Inc., Intervenors-Appellants.

Page 678

747 F.2d 678
55 A.F.T.R.2d 85-397, 84-2 USTC P 9979
UNITED STATES of America, Frank A. McCammon, Special Agent,
Internal Revenue Service, Plaintiffs-Appellees,
v.
CENTENNIAL BUILDERS, INC., Charles H. Erwin, et al., Defendants,
Charles H. Erwin, Fred D. Jones, Jones-Erwin Industries,
Inc., and O.H.M., Inc., Intervenors-Appellants.
No. 83-7524.
United States Court of Appeals,
Eleventh Circuit.
Nov. 28, 1984.

Page 680

John M. Bray, David J. Curtin (argued), Washington, D.C., for Fred D. jones.

Frederick G. Helmsing, Mobile, Ala., for Charles H. Erwin, Jones-Erwin Ind., Inc. and O.H.M., Inc.

Ginny S. Granade, Asst. U.S. Atty., Mobile, Ala., Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, Chief Appellate Section, Charles E. Brookhart, John A. Dudeck, Jr. (argued), Tax Div., Dept. of Justice, Washington, D.C., for plaintiffs-appellees.

Appeals from the United States District Court for the Southern District of Alabama.

Before TJOFLAT, HILL and JOHNSON, Circuit Judges.

JAMES C. HILL, Circuit Judge:

Appellant-Taxpayers appeal from a district court order enforcing eight Internal Revenue Service administrative summonses. We affirm the order, finding no improper purpose on the part of the IRS nor any constitutional infirmities that would prevent enforcement.

I. BACKGROUND

Special Agent Frank McCammon of the Criminal Investigation Division of the IRS was assigned to conduct a tax investigation of appellants Fred D. Jones, Charles H. Erwin, Jones-Erwin Industries, Inc., and O.H.M., Inc. This undercover investigation was conducted as part of the IRS's "Business Opportunity Project," in which IRS agents posing as prospective purchasers of businesses contacted owners of businesses suspected of concealing income from the IRS in the hope that owners would disclose their illegal activities in an effort to enhance the saleability of the businesses. In early 1981, McCammon visited appellant Jones at his retail cleaning business, identifying himself as a private businessman and stating that he was interested in buying the cleaning business. During this meeting, the agent asked Jones for various information about his business. When Jones specifically asked McCammon whether he was an IRS investigator, McCammon denied that he was and continued questioning Jones.

Thereafter, in March, 1982, McCammon issued administrative summones to four banks, two corporations, and two accountants, requesting various books and records relating to the taxpayers' tax liability for the period in question. Taxpayers directed the respondents not to comply with the summonses (pursuant to Sec. 7609(b) of the Internal Revenue Code); and on November 18, 1982, the United States instituted these proceedings to enforce the summonses in the District Court. The district court held an enforcement hearing on August 31, 1983, and issued an order enforcing all eight summonses on September 9, 1983. This appeal followed.

II. DISCUSSION

Section 7602 of the 1954 Internal Revenue Code authorizes the Secretary of Treasury to issue summonses for various purposes relating to the calculation of a taxpayer's tax liability. If the person to whom the summons is issued fails to comply, the United States must seek judicial enforcement under Secs. 7402 and 7604.

To obtain enforcement of a summons, the government must make a preliminary showing that the summons is issued for a legitimate purpose, that the information sought is relevant to that purpose and not already within the Commissioner's possession, and that the appropriate administrative steps 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). Once the government makes this preliminary showing, the burden shifts to the taxpayer "to disprove one of the four Powell criteria, or to demonstrate that judicial enforcement should be denied on the ground that it would be an 'abuse of the court's process.' " United States v. Beacon Federal Savings & Loan, 718 F.2d 49, 52 (2d Cir.1983); see United States v. Powell, 379 U.S. at 58, 85 S.Ct. at 255.

Page 681

Appellants do not dispute that the government made a sufficient prima facie showing of the Powell factors; but they argue that the district court erred in enforcing the summonses in that the summonses were issued for an improper purpose and as a result of alleged constitutional violations.

A. Purpose of Issuance of Summonses

The summonses in this case were issued in March, 1982, and these enforcement proceedings commenced on November 18, 1982. In the intervening time, a TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) amendment to section 7602 became effective, which somewhat expanded the IRS's power to issue summonses by permitting summonses to be issued solely for a criminal tax purpose as long as the IRS has not referred the tax case to the Department of Justice for criminal prosecution. I.R.C. Sec. 7602. Prior to this amendment, the IRS could not use its summons power for a solely criminal purpose. The district court ruled that the TEFRA amendments to Sec. 7602 applied to the summonses issued in this case, and thus held that the summonses were properly issued because there had been no Justice Department referral. Appellants contend that the summonses should have been judged under the standards of the pre-TEFRA Sec. 7602, and that they should thus be given a chance to prove that the summonses were improperly issued for solely criminal purposes.

We assume without deciding that these summonses, issued before the TEFRA amendment to Sec. 7602 became effective, should have been judged under the pre-TEFRA standards. 1 However, we reject appellants' contentions and hold that the record in this case clearly demonstrates that the summonses were not issued for solely criminal purposes.

Pre-TEFRA law indicated that a Sec. 7602 summons would not be enforced if the taxpayer could prove that the single purpose of the IRS as an institution (the motivation of the individual agent requesting the summons was irrelevant) in issuing the summons was to gather evidence for a criminal prosecution. United States v. Johnson, 652 F.2d 475, 477 (5th Cir.1981). This placed an "extremely heavy burden" upon the taxpayer, because the issuance of a...

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25 practice notes
  • Presley v. United States, No. 17-10182
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • July 18, 2018
    ...should be denied on the ground that it would be an ‘abuse of the court’s process.’ ’ " 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 ......
  • La Mura v. U.S., Nos. 83-5678
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • June 25, 1985
    ...United States v. Powell, 379 U.S. 48, 57-59, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964); United States v. Centennial Builders, Inc., 747 F.2d 678, 680 (11th Cir.1984); Matter of Newton, 718 F.2d 1015, 1019 (11th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 1678, 80 L.Ed.2d 153 (1984). Th......
  • W.D.I.A. Corp. v. Mcgraw-Hill, Inc., No. C-1-93-448.
    • United States
    • United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
    • December 18, 1998
    ...those rights. The use of "testers" has been affirmatively approved by the courts. See U.S. v. Centennial Builders, Inc., 747 F.2d 678, 683 (11th Cir.1984) ("[u]ndercover work is a legitimate method of discovering violations of civil as well as criminal law"); Grant v. Sm......
  • Desnick v. American Broadcasting Companies, Inc., No. 94-2399
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • January 10, 1995
    ...the premises with signs forbidding the entry of testers or other snoops. Perhaps none, see United States v. Centennial Builders, Inc., 747 F.2d 678, 683 (11th Cir.1984), but that is an issue for another day. What we have said largely disposes of two other claims--infringement of the right o......
  • Request a trial to view additional results
25 cases
  • Presley v. United States, No. 17-10182
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • July 18, 2018
    ...should be denied on the ground that it would be an ‘abuse of the court’s process.’ ’ " 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 ......
  • La Mura v. U.S., Nos. 83-5678
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • June 25, 1985
    ...United States v. Powell, 379 U.S. 48, 57-59, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964); United States v. Centennial Builders, Inc., 747 F.2d 678, 680 (11th Cir.1984); Matter of Newton, 718 F.2d 1015, 1019 (11th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 1678, 80 L.Ed.2d 153 (1984). Th......
  • W.D.I.A. Corp. v. Mcgraw-Hill, Inc., No. C-1-93-448.
    • United States
    • United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
    • December 18, 1998
    ...those rights. The use of "testers" has been affirmatively approved by the courts. See U.S. v. Centennial Builders, Inc., 747 F.2d 678, 683 (11th Cir.1984) ("[u]ndercover work is a legitimate method of discovering violations of civil as well as criminal law"); Grant v. Sm......
  • Desnick v. American Broadcasting Companies, Inc., No. 94-2399
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • January 10, 1995
    ...the premises with signs forbidding the entry of testers or other snoops. Perhaps none, see United States v. Centennial Builders, Inc., 747 F.2d 678, 683 (11th Cir.1984), but that is an issue for another day. What we have said largely disposes of two other claims--infringement of the right o......
  • Request a trial to view additional results

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