United States v. Aero Mayflower Transit Co., Misc. No. 86-281.

• Citation: 646 F. Supp. 1467
• Decision Date: 31 October 1986
• Docket Number: Misc. No. 86-281.
• Parties: UNITED STATES of America, Petitioner, v. AERO-MAYFLOWER TRANSIT CO., et al., Respondents.
• Court: U.S. District Court — District of Columbia

646 F. Supp. 1467

UNITED STATES of America, Petitioner, v. AERO-MAYFLOWER TRANSIT CO., et al., Respondents.

Misc. No. 86-281.

United States District Court, District of Columbia.

October 31, 1986.

Joan E. Hartman, and on brief, Richard K. Willard, Asst. Atty. Gen., Michael F. Hertz and Robert L. Ashbaugh, Dept. of Justice, Joseph E. DiGenova, U.S. Atty., and John Bates, Asst. U.S. Atty., Washington, D.C., for petitioner.

James A. Calderwood, Edward J. Kiley, Washington, D.C., Lawrence E. Dube, Jr., Baltimore, Md., for respondents Aero Mayflower Transit Co., Air Land Fowarders — Suddath, Inc., Crest-Mayflower Forwarders, Inc., Mayflower Intern. Forwarding, Inc., Suddath Van Lines, Inc., United Van Lines, Inc., and Vanguard Freight Forwarders, Inc.

William L. Gardner, Joseph Brooks, Washington, D.C., for respondents Allied Van Lines, Inc., Allied Freight Forwarding, Inc., and Allied Intermodal Forwarding, Inc.

Thomas M. Auchincloss, Jr., Leo C. Franey, Washington, D.C., for respondents Bekins Intern. Lines, Inc. and Bekins Van Lines Co.

CHARLES R. RICHEY, District Judge.

Before this Court is the United States' petition for summary enforcement of administrative subpoenae and respondents' motion to quash the subpoenae or for leave to take discovery. After thoroughly considering the able oral and extensive written arguments, as well as the many supporting affidavits, this Court concludes that respondents have not sustained their heavy burden of proof. In consequence, the Court must order enforcement of the subpoenae forthwith.

BACKGROUND

The Antitrust Division of the Department of Justice has been investigating alleged anti-competitive practices in the moving and storage industry for at least three years. Memorandum in Support of Petition of the United States for Summary Enforcement of Administrative Subpoenas (hereafter Petitioner's Memorandum) 5 n. 1. These investigations have produced five indictments and one prosecution by information of local moving and storage companies and their principals. Id. They have not, however, so far produced a civil or criminal antitrust action against respondents.

In September, 1985, the Office of the Inspector General of the United States Department of Defense initiated its own investigations of possible anticompetitive activity in "certain industries" that contract with DOD. Affidavit of Michael C. Eberhardt, Assistant Inspector General for Criminal Investigation Policy and Oversight, Department of Defense (hereafter "Eberhardt Affidavit") ¶ 6. Through this project, the Inspector General concluded that its office should investigate practices in the moving and storage industry. Id.

There were two bases for this decision. For one, the indictments delivered by the Antitrust Division focused on price-fixing in moving and storage of goods for military personnel at Fort Jackson, South Carolina. Eberhardt Affidavit ¶ 11. Moreover, an August 1985 study by a team of Defense Department economists, later supplemented with a more detailed analysis by the same group, indicated that the rates paid by the Department of Defense for all moving and storage services, some $432 million each year, were consistent with the possibility of price-fixing and other collusive activity. Id.

Sometime that fall, the Antitrust Division of the Department of Justice and the Federal Bureau of Investigation invited the DOD Inspector General to participate in a joint investigation to detect price-fixing in Defense Department contracts for moving and storage services. Id. at ¶ 7. The joint investigation began during the winter of 1985-86. Pursuant to that investigation, on April 10, 1986, the DOD Inspector General signed 377 identical subpoenae to companies in the household goods moving industry. Id. 102 of these subpoenae were to interstate van lines, including respondents. The remainder were to local agents of those lines. Id. The subpoenae ordered the companies to produce documents concerning price-setting and performance of transport and storage contracts with the Department of Defense.

Respondent moving and storage companies informed the Inspector General's office that they would not comply with the subpoenae. Id. at Exhibits 4-6. On August 14, 1986, the government petitioned for summary enforcement of the administrative subpoenae. Respondents thereupon moved to quash the subpoenae or, in the alternative, for limited discovery to investigate the propriety of the government's subpoenae.

Respondents argue that the DOD subpoenae were issued for an improper purpose and exceed the subpoena power authorized by Congress. They also claim that, even if the Court is not persuaded that the subpoenae are invalid, the evidence so far adduced suggests a possibility of wrongdoing strong enough to entitle respondents to an evidentiary hearing and discovery about the legitimacy of the subpoenae. Finally, respondents Bekins International Lines and Bekins Van Lines claim that the DOD subpoenae are unconstitutional.

THE PURPOSE OF THE SUBPOENAE WAS PROPER.

This Court must order production of material sought by an Inspector General unless his subpoena is "plainly incompetent or irrelevant to any lawful purpose of the agency in the discharge of its duties...." See, Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 63 S.Ct. 339, 87 L.Ed. 424 (1943) (standard enunciated); see also, United States v. Morton Salt Co. 338 U.S. 632, 642-43, 70 S.Ct. 357, 363-64, 94 L.Ed. 401 (1950); United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-55, 13 L.Ed.2d 112 (1964); Federal Election Commission v. Committee to Elect Lyndon LaRouche, 613 F.2d 849, 862 (D.C.Cir. 1979), cert. denied, 444 U.S. 1074, 100 S.Ct. 1019, 62 L.Ed.2d 755 (1980). Respondents argue that the DOD investigation is merely a smokescreen to obtain information for the Justice Department and therefore the subpoenae serve no lawful purpose of the DOD Inspector General. The Court cannot agree.

For one, the subpoenae and investigation are well within the Inspector General's powers. A short explication of the legislative history and statutory language makes this clear.

Designed to attack a perceived epidemic of waste, fraud, and abuse in federal agencies and programs, the Inspector General Act of 1978 centralized audit and investigative functions within fifteen federal departments and agencies under one official, an Inspector General. S.Rep. No. 1071, 95th Cong., 2d Sess., reprinted in 1978 U.S. Code Cong. & Ad.News 2676-79; 5 U.S.C. app. §§ 2, 4. While the Department of Defense was excluded from the 1978 Act, by 1982 Congress was convinced that DOD would benefit from centralization of its large investigative and audit staffs. Consequently, the Defense Authorization Act of 1982 amended the Inspector General Act of 1978 to create an Inspector General within the Department of Defense. Pub.L. No. 95-452, reprinted in 1978 U.S.Code Cong. & Ad.News 2676.¹

The legislative history of the Inspector General Act and the language creating the DOD Inspector General demonstrate beyond cavil that chief among the "functions assigned" by the Act is "... the prevention and detection of waste, fraud, and abuse" and conduct of appropriate investigations into suspected misfeasance. 5 U.S.C. app. § 8(c)(1), (2); S.Rep. 1071, 1978 U.S.Code Cong. & Ad.News at 2676, 2681-82. Economists' findings that pricing patterns in over $430 million of contracts suggest collusive activity, especially when coupled with indictments of some contractors for price-fixing, clearly support an Inspector General investigation into the suspect activity.

Only if the Inspector General's investigation is a sham could respondents sustain their argument. But the evidence does not clearly support such a claim.

Respondents make much of the unprecedented breadth of the Inspector General's investigation. See, Aero-Mayflower Memorandum in Opposition to Petition for Summary Enforcement of Administrative Subpoenas 26-27. They invite the Court to infer impropriety from the fact that the DOD Inspector General issued more subpoenae to moving and storage companies on April 10, 1986, than his office issued in total from 1982 until March, 1986. Id. Respondents' figures prove only that DOD had never before undertaken so massive an investigation. This Court can see no impropriety in an official's decision to abandon a pattern of restraint and exercise the full powers of his office, especially given the quantum of evidence supporting a comprehensive investigation of the moving and storage industry.

Moreover, this Court is not persuaded that the type of cooperation between the DOD Inspector General and the Justice Department of which respondents complain is prohibited. Respondents allege that case law bars transfer of Inspector General-gathered information to another agency. That line of cases, however, is not applicable to the situation at bar.

Those cases prohibit the Internal Revenue Service from using its subpoena power solely to unearth evidence of criminal conduct and thereby further a Justice Department investigation. See, United States v. LaSalle National Bank, 437 U.S. 298, 98 S.Ct. 2357, 57 L.Ed.2d 221 (1978); United States v. Genser, 595 F.2d 146 (3d Cir.), cert. denied, 444 U.S. 928, 100 S.Ct. 269, 62 L.Ed.2d 185 (1979); United States v. Garden State National Bank, 607 F.2d 61 (3d Cir.1979); United States v. Kis, 658 F.2d 526 (7th Cir.1981), cert. denied sub nom. Salken v. United States, 455 U.S. 1018, 102 S.Ct. 1712, 72 L.Ed.2d 135 (1982). The principles governing these cases, however, are specific to IRS subpoenae.

The purpose of IRS investigations is not to prosecute delinquent payors but to procure tax payments. United States v. Security Bank and Trust Co., 661 F.2d 847, 850 (10th Cir.1981). Accordingly, the I.R.S. is statutorily prohibited from continuing civilly once the Justice Department has begun a criminal investigation. I.R.C. § 7122(a); United States v. Art-Metal-U. S.A., Inc., 484 F.Supp. 884,...