United States v. Billingsley, 72-1070.

• Decision Date: 08 December 1972
• Docket Number: No. 72-1070.,72-1070.
• Citation: United States v. Billingsley, 469 F.2d 1208 (10th Cir. 1972)
• Parties: UNITED STATES of America, and John D. Heeney, Special Agent, Internal Revenue Service, Plaintiffs-Appellants, v. Lorene BILLINGSLEY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

469 F.2d 1208 (1972)

UNITED STATES of America, and John D. Heeney, Special Agent, Internal Revenue Service, Plaintiffs-Appellants, v.Lorene BILLINGSLEY, Defendant-Appellee.

No. 72-1070.

United States Court of Appeals, Tenth Circuit.

December 8, 1972.

Carleton D. Powell, Atty., Dept. of Justice, Washington, D. C. (Scott P. Crampton, Asst. Atty. Gen.; Meyer Rothwacks, and Crombie J. D. Garrett, Attys., Dept. of Justice, Washington, D. C., and Nathan G. Graham, U. S. Atty., of counsel, with him on the brief), for plaintiffs-appellants.

G. Douglas Fox, Tulsa, Okl. (Richard D. Jones, of Gable, Gotwals, Hays, Rubin & Fox, Tulsa, Okl., and James O. Ellison, of Boone, Ellison & Smith, Tulsa, Okl., with him on the brief), for defendant-appellee.

Before LEWIS, Chief Judge, and SETH and McWILLIAMS, Circuit Judges.

LEWIS, Chief Judge.

Appellants seek judicial enforcement of summonses issued pursuant to section 7602 of the Internal Revenue Code by a special agent of the Internal Revenue Service to Mrs. Lorene C. Billingsley, the appellee.

In October 1968 Special Agent John D. Heeney was brought into an investigation being conducted by Joe A. Fink, an agent in the Audit Division of the Internal Revenue Service, concerning the tax liability of William L. Mills, Jr.In December 1969 Heeney recommended that Mills be criminally prosecuted for tax evasion and filing a false return.This recommendation was first reviewed and approved by Heeney's immediate supervisor.It was then approved by the Chief of the Intelligence Division in Oklahoma City.At this point Heeney's recommendation was forwarded to the Assistant Regional Commissioner (Intelligence) in Dallas for review.Upon request, Heeney submitted additional information to the Assistant Regional Commissioner.The office of the Assistant Regional Commissioner then requested further information regarding transactions involving the appellee, Mrs. Billingsley, and Mills in order to determine whether certain income was attributable to Mills.Summonses were thereafter issued by Heeney for the purpose of clarifying inconsistencies between statements made by Mrs. Billingsley at an interview and an affidavit furnished by her.In April 1971appellants filed a petition in district court for judicial enforcement of the summonses.The district court refused to enforce the summonses and dismissed appellants' petition.The district court's opinion is reported at 331 F.Supp. 1091.

Section 7602 of the Internal Revenue Code does not expressly restrict the power to issue a summons thereunder as long as the purpose is to ascertain the correctness of any return and the material sought is relevant to such inquiry.In Reisman v. Caplin, 375 U.S. 440, 449, 84 S.Ct. 508, 11 L.Ed.2d 459, the Supreme Court suggested in dictum, however, that a summons could be challenged on the ground that its purpose is to obtain evidence for use in a criminal prosecution.In Donaldson v. United States, 400 U.S. 517, 91 S.Ct. 534, 27 L. Ed.2d 580, the Court delineated an objective standard for determining when an investigation is sufficiently criminal in nature to warrant adherence to the Reisman dictum.The Court stated:

We hold that under § 7602 an internal revenue summons may be issued in aid of an investigation if it is issued in good faith and prior to a recommendation for criminal prosecution.Id. at 536, 91 S.Ct. at 545(emphasis added).

In construing this language, the district court in the instant case held that Heeney had made the recommendation referred to and concluded that the summonses should not have been issued.We hold, however, the the recommendation referred to in Donaldson occurs, at the earliest, when the Internal Revenue Service forwards a case to the Department of Justice for criminal prosecution.Cf.United States v. Kyriaco, C.D.Cal., 326 F.Supp. 1184, 1186.In placing no particular significance on the initial recommendation for criminal prosecution by a special agent in the Intelligence Division of the Internal Revenue Service, this holding would seem to conform to the rationale and analysis of Donaldson.

The Court in Donaldson recognized that the courts of appeals have uniformly approved "the use of a summons in an investigation that is likely to lead to civil liability as well as to criminal prosecution."Donaldson v. United States, supra,400 U.S. at 532, 91 S.Ct. at 543.The Court then sanctioned the use of a section 7602 summons in an investigation with both civil and criminal aspects by stating that the Reisman dictum referred to the situation "where the sole object of the investigation is to gather data for criminal prosecution."Donaldson v. United States, supra, at 533, 91 S.Ct. at 543;seeUnited States v. Couch, 4 Cir., 449 F.2d 141, 143, cert. granted, 405 U.S. 1038, 92 S.Ct. 1311, 31 L.Ed.2d 579.

In the instant case, as in all other tax fraud investigations, the potential for civil liability necessarily accompanied the potential for criminal prosecution.While a criminal investigation remains solely within the Internal Revenue Service, the civil aspects are inextricably associated with the criminal.SeeDonaldson v. United States, supra,400 U.S. at 534-35, 91 S.Ct. 534, 27 L.Ed.2d 580.It is not until the Service refers a case to the Department of Justice, however, that two distinct agencies are involved and the civil and criminal aspects at least begin to disentangle.The instant case is not unique and the evidence demonstrates that the Service's investigation of Mills was both civil and criminal in nature.Moreover, the civil aspects of the investigation closely paralleled the criminal aspects.¹Heeney's recommendation to his superiors in the Service that Mills be criminally prosecuted did not reorient the investigation so that its sole object was criminal in nature.That Mills might be indicted and prosecuted remained a mere possibility.²Thus the investigation of Mills had not reached the point where its objective was solely criminal even though the special agent had made an initial recommendation for criminal prosecutio...