United States v. Lubus

• Decision Date: 23 January 1974
• Docket Number: Civ. No. B-707.
• Court: U.S. District Court — District of Connecticut
• Parties: UNITED STATES of America and Salvatore Coviello, Revenue Agent, Internal Revenue Service v. Hickey J. LUBUS.

370 F. Supp. 695

UNITED STATES of America and Salvatore Coviello, Revenue Agent, Internal Revenue Service v. Hickey J. LUBUS.

Civ. No. B-707.

United States District Court, D. Connecticut.

January 23, 1974.

Peter Mear, Asst. U. S. Atty., New Haven, Conn., Robert Sevila, Dept. of Justice, Washington, D. C., for petitioners.

Sherin V. Reynolds, Bridgeport, Conn., for respondent.

MEMORANDUM OF DECISION

NEWMAN, District Judge.

This is an action to enforce compliance with a summons issued by the Internal Revenue Service to respondent, Hickey J. Lubus, pursuant to 26 U.S.C. § 7602. The Internal Revenue Service, as part of its Tax Returns Preparers Project,¹ summoned respondent to give testimony and produce a list of the names and addresses of individuals for whom he prepared federal income tax returns for the calendar years 1970 and 1971. He appeared on the specified date, December 1, 1972, but refused to testify or produce the requested records. The Government then instituted this action seeking judicial enforcement of the summons.² A hearing was held on October 2, 1973, at which witnesses for the Government and respondent testified.

Respondent resists enforcement on three grounds: first, that compelled compliance with the summons would constitute a denial of his Fifth Amendment privilege against self-incrimination; second, that the summons is excessively vague and broad, because it fails to set forth the names of any specific taxpayers whose liabilities are under investigation; and third, that the information sought by the Internal Revenue Service is already in its possession and practicably available.

Under the particular circumstances of this case, respondent's assertion of his self-incrimination privilege is a sufficient reason to deny enforcement of the summons. There are two quite different types of analysis that lead to this conclusion. Since cases construing the Fifth Amendment have not always kept the distinction clear, some elaboration may be useful.

There are two different contexts in which courts have had to determine the validity of an invocation of the self-incrimination privilege. The first arises when a person, required by valid compulsory process to be a witness, invokes the privilege in response to a particular question. The person may be a witness at trial, before a grand jury, or before an investigative body that has subpoena power. When the privilege is invoked, the inquiry is usually whether the information sought by the particular question asked might tend to incriminate. The test is often stated to be whether the answer might be a link in the chain of evidence needed to convict the witness. Hoffman v. United States, 341 U.S. 479, 488, 71 S.Ct. 814, 95 L.Ed. 1118 (1951).

The second context arises when a person, who may or may not be a witness in a proceeding, invokes the privilege as a defense to complying with a requirement, imposed by law, to furnish certain information, either in testimony or documents. When the privilege is invoked in this context, the inquiry is usually whether the "public need" for the information outweighs the "individual claim to constitutional protections." California v. Byers, 402 U.S. 424, 427, 91 S.Ct. 1535, 29 L.Ed.2d 9 (1971). The claim of privilege has been upheld as to some required disclosures, Albertson v. S.A.C.B., 382 U.S. 70, 86 S.Ct. 194, 15 L.Ed.2d 165 (1965); Marchetti v. United States, 390 U.S. 39, 88 S.Ct. 697, 19 L.Ed.2d 889 (1968), and rejected as to others, California v. Byers, supra; Shapiro v. United States, 335 U.S. 1, 68 S.Ct. 1375, 92 L.Ed. 1787 (1948).

Some confusion has developed because the phrase "compelled disclosure" has been applied to the demand for information in both contexts, yet the nature of the compulsion is different in each. In the first context, the compulsion flows from the power of the questioning body to issue subpoenas, i. e., the availability of compulsory process. In the second context, the compulsion flows from the legal requirement that certain information be disclosed. The Supreme Court has confined this second context to situations where the requirement of disclosure was imposed by statute, as in Albertson, Marchetti, and Byers, or by regulation, as in Shapiro. The doctrine, which has sometimes been characterized as a "required records" exception to the self-incrimination privilege, has never been applied to a situation where the only "compulsion" upon a witness to answer was the questioning body's power to subpoena. Obviously, if the balancing test of Byers were applied to determine the validity of a plea of privilege by every trial, grand jury, or investigative agency witness, the "required records" exception would become the general rule.

This case initially appears to arise in the first context, i. e., the Internal Revenue Service has the power of compulsory process by virtue of § 7602 to propound relevant questions, but there is no statute or regulation that explicitly imposes upon the respondent the obligation to maintain and disclose the specific information that the Internal Revenue Service now seeks. Since there is no question that the Fifth Amendment privilege is available to a person who appears before an Internal Revenue Service agent pursuant to § 7602, United States v. Silverstein, 210 F.Supp. 401 (S.D.N.Y.), aff'd, 314 F.2d 789 (2d Cir.), cert. denied, 374 U.S. 807, 83 S.Ct. 1696, 10 L.Ed.2d 1031 (1962), the issue here could be viewed as the traditional one of whether the respondent has a realistic apprehension that the information sought might tend to incriminate him.

However, the only court of appeals that has thus far considered the validity of a plea of Fifth Amendment privilege to a summons seeking the type of information sought here has analyzed the problem as if the case arose in the second context, that of a lawfully compelled disclosure, and has enforced the summons upon a conclusion that the balance mandated by Byers weighed in favor of the Internal Revenue Service. United States v. Turner, 480 F.2d 272 (7th Cir. 1973).³ Turner employed this analysis because the court viewed the case as one involving a "regulatory scheme." The opinion makes clear that the regulatory scheme relied upon is the Internal Revenue Service Tax Preparers Project. However, this project "regulates" what Internal Revenue Service agents will do in performing their duties of collecting revenue and perhaps uncovering instances of fraud. The Tax Preparers Project does not include any regulation that imposes upon tax preparers a duty to maintain and disclose a list of their customers. Thus the existence of the project per se should not subject the privilege to the Byers test. Otherwise any investigative agency could subject a witness's privilege to a "public need"- "private right" balancing test simply by instructing its agents to focus their inquiry on specific categories of targets.

There is a possible theory that might support a testing of respondent's privilege by the Byers formula. A regulation requires any person to sign his name to every return that he prepares. 26 C.F.R. § 1-6065-1(b)(1972). Turner relied on this regulation only to minimize the weight to be accorded the preparer's claim of privilege in making the Byers analysis, and specifically disclaimed reliance on the regulation for purposes of showing that it created a "required records" exception to the privilege. 480 F.2d at 278. Nevertheless only a slight extension of the Shapiro-Marchetti-Byers cases is needed to consider this regulation a sufficient compulsion to invoke the Byers formula. The regulation requires a person to disclose the fact that he is the preparer of each of the returns he prepares. The disclosure presently sought — a list of the preparer's customers — is simply a collection of the facts previously required to be disclosed. While no case appears explicitly to have considered as "required disclosures" a request for assembled information previously required by regulation to be disclosed seriatim, the considerations that were thought to justify the balancing approach in Shapiro and its progeny are arguably of equal force here. Of course viewing the lists sought here as information required by regulation to be disclosed does not defeat the privilege, but only subjects it to the balancing test of Byers. Because the balancing approach can thus be deemed applicable and because it in fact was employed by the one court of appeals to have considered the issue in a similar context, it will be used here. Obviously if the Byers balance is struck in respondent's favor, his claim of privilege, tested in the absence of the Byers weighing, must be sustained, since Byers, where applicable, permits a strong showing of public need to outweigh what would otherwise be a valid claim of privilege.

The "private right" portion of the balancing involves an assessment of the degree of risk of self-incrimination resulting from disclosure, for the privilege can thwart compelled disclosures only if the hazards are "substantial," California v. Byers, supra, 402 U.S. at 431, 91 S.Ct. 1535, 29 L.Ed.2d 9, or "real and appreciable," Marchetti v. United States, supra, 390 U.S. at 48, 88 S.Ct. 697, 19 L. Ed.2d 889 (1968). Assessing risk of self-incrimination requires consideration of various objectively ascertainable factors — irrespective of the subjective fears or perceptions of the individual — principally the composition of the group from which information is sought, and the nature and form of the disclosure. The risk is greatest where the individual is a member of a group that is "highly selective" and "inherently suspect of criminal activities," California v. Byers, supra, 402 U.S. at 430, 91 S.Ct. 1535, 29 L.Ed.2d 9; Marchetti v. United States, supra, 390 U.S. at 47, 88 S.Ct. 697, 19 L.Ed.2d 889; Albertson v. SACB, 382 U.S. 71, 79, 86 S.Ct. 194, 199, 15 L.Ed.2d 165 (1965), or where the activities are in "an area permeated with criminal statutes"...