United States v. Malnik, Civ. No. 71-1850.

• Citation: 348 F. Supp. 1273
• Decision Date: 10 April 1972
• Docket Number: Civ. No. 71-1850.
• Parties: UNITED STATES of America, and Carl C. Rosen, Revenue Agent of the Internal Revenue Service, Petitioners, v. Alvin I. MALNIK, Respondent.
• Court: United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida

348 F. Supp. 1273

UNITED STATES of America, and Carl C. Rosen, Revenue Agent of the Internal Revenue Service, Petitioners, v. Alvin I. MALNIK, Respondent.

Civ. No. 71-1850.

United States District Court, S. D. Florida.

April 10, 1972.

Robert W. Rust, U. S. Atty., by P. D. Aiken, Asst. U. S. Atty., Miami, Fla., for petitioners.

Harris, Burman & Silets, Chicago, Ill., Corlett, Merritt, Killian & Okell, Miami, Fla., for respondent.

ORDER DISMISSING PETITION TO ENFORCE INTERNAL REVENUE SUMMONS

JAMES LAWRENCE KING, District Judge.

Petitioner, Carl K. Rosen, an Internal Revenue Agent, employed in the audit division of the office of the District Director of Internal Revenue, Miami, Florida, is conducting an investigation of the income tax returns of Alvin I. Malnik and his wife, Deborah C. Malnik, for the years 1959, 1960, 1962 and 1963. The Respondent, Alvin I. Malnik, is a resident of Miami Beach, Florida.

On March 16, 1971, Petitioner Rosen issued and served a summons on Respondent Malnik, pursuant to the provisions of Section 7602, Title 26, U.S.C. The summons directed the Respondent to appear before Rosen on March 29, 1971, at the offices of the Internal Revenue Service at Miami, Florida to give testimony relating to the tax liability of Respondent for the years 1959, 1960, 1962 and 1963. It also directed the Respondent to bring with him and produce for examination, the following books, records and papers:

"General ledgers; general journals; accounts receivable ledgers, escrow ledgers, cash receipts and disbursement journals; fee income invoices and journals; purchase invoices; deposit tickets, cancelled checks and bank statements of the domestic and foreign bank accounts from which accounts you had the right of ownership and withdrawing funds; closing statements, purchase, sales and loan agreements from which agreements you derived income, expenses, loans for yourself and third parties, and interests in various enterprises and franchises; broker statements, partnership agreements, journals and ledgers, all specifically related but not limited to your law practice, real estate transactions, mortgage and loan businesses, banking business and investments in closely held and publicly owned corporations. The records summonsed are those of all corporations in which you were either a stockholder, officer or director and which records are now in your possession or control, including domestic and foreign corporations, including World Bank of Commerce, Ltd., and the World Bank of Commerce (Overseas), Ltd. of the Bahamas. The foreign banks referred to above include but are not limited to the Barclay Bank and the Bank of World Commerce, Bahamas, and the International Credit Bank, Switzerland."

The date for Respondent's appearance with his records was continued by agreement to and including April 21, 1971. On April 20, 1971, the date for compliance by him was further extended until May 4, 1971. Thereafter, counsel for Respondent conferred with representatives of the Internal Revenue Service and, as a result, it was agreed by both counsel for the Internal Revenue Service and counsel for the Respondent that the time for compliance with the summons would be continued and that in lieu of the appearance of Respondent that the Internal Revenue Service would accept a written statement directed to Petitioner Rosen and signed by counsel and Respondent indicating that the Internal Revenue Service would accept a declaration that Respondent would claim his constitutional privileges to such of the questions which were asked of him to which said privilege attached and to those records enumerated in the summons which were in his possession and to which the privilege also attached.

On December 15, 1971, the United States of America and Carl K. Rosen filed Petition to enforce the Internal Revenue summons pursuant to the authority of Sections 7402(b) and 7604(a), Internal Revenue Code, 1954. Based upon said Petition and supporting affidavit of Petitioner Rosen, this Court entered an order upon Respondent to show cause why he should not be compelled to testify and produce the records demanded of him in the summons. A copy of the order was served upon Respondent Malnik who thereupon filed his answer to the Petition.

Petitioner first contends that the procedure agreed to by counsel for Respondent and counsel for the Internal Revenue Service avoiding the necessity of Respondent's personal appearance before Petitioner when both parties were aware that Respondent would, where appropriate, claim his constitutional privilege under the Fifth Amendment, constituted "making a blanket refusal to comply with the summons." Respondent filed an affirmative defense, verified by his counsel, setting forth the understanding arrived at by the representatives of both sides. Under these circumstances, the Court finds that the procedure followed by Respondent in claiming his privilege was understood and agreed in advance. Under the circumstances, such procedure does not constitute "a blanket refusal" or a "blanket" claim of Respondent's privilege under the Fifth Amendment. This agreed procedure was no more than a useful and commendable effort by both sides to avoid going through a mere formality.

On January 10, 1972, the matter came on to be heard upon the show cause order previously issued by this Court. Petitioner urged that Respondent's claim that compliance with the summons would violate his rights under the Fifth Amendment to the Constitution of the United States was not well founded. It urged that it was a matter of record that Mr. Malnik had twice been prosecuted for the tax years which were the subject of the inquiry in the instant Internal Revenue summons and was acquitted of those charges. Respondent had been accused of alleged violations of Section 7206(1), Internal Revenue Code, 1954. In addition, Petitioners urged that the six-year Statute of Limitations for bringing a criminal action for violation of the Internal Revenue laws, 26 U.S.C. § 6531, had expired, since the last year under examination in the summons was 1963. Petitioners argued, therefore, that the United States cannot prosecute Malnik for the years involved in the summons. The Government also stated that the United States would not grant immunity from prosecution to Mr. Malnik.

The claim of the privilege under the Fifth Amendment to the Constitution of the United States may be claimed by the Respondent in a proceeding such as this where the Respondent is required to appear pursuant to a summons issued under the authority of the Internal Revenue Code and produce his records and give testimony to an Internal Revenue Agent. Where enforcement of such summons is requested of this Court, however, it is, for the Court to determine whether his silence is justified. The Court can require him to answer only if it clearly appears to the Court that he is mistaken in his claim of privilege. Cf., Rogers v. United States, 340 U.S. 367, 71 S.Ct. 438, 95 L. Ed. 344 (1951).

Hoffman v. United States, 341 U.S. 479, 71 S.Ct. 814, 95 L.Ed. 1118 (1951) is the leading case on the extent to which a witness may claim his privilege against self-incrimination and the attendant necessity and manner of establishing the incriminating effect of his potential answer. A clear and explicit interpretation of the effect of the Hoffman decision was given by Judge Hastie in United States v. Coffey, 3rd Cir. 1952, 198 F.2d 438, 440:

"It is enough (1) that the trial court be shown by argument how conceivably a prosecutor, building on the seemingly harmless answer, might proceed step by step to link the witness with some crime against the United States, and (2) that this suggested course and scheme of linkage not seem incredible in the circumstances of the particular case. It is in this latter connection, that the credibility of the suggested connecting chain, that the reputation and known history of the witness may be significant."

In this connection, the Government, upon oral argument, stated that there was no criminal investigation being conducted of the Respondent Malnik and that his reputation and known history were not such to cause the Court or the Government to believe that answers to questions relating to the instant income tax investigation would tend to incriminate him. Respondent argues, however, that the Government's contention that the Statute of Limitations has expired for criminal prosecution and that having once been acquitted for the years in question forecloses the claim of the privilege, is not well founded as it totally overlooks the ability of the Government to bring additional charges for income tax violations against Mr. Malnik for the same years. We agree. In United States v. Beacon Brass Co., 344 U.S. 43, 73 S.Ct. 77, 97 L.Ed. 61 (1952), the defendants were charged with an attempt to defeat and evade taxes owed by Beacon Brass, "by making certain false and fraudulent statements and representations, at a hearing and conference before . . . the United States Treasury Department." The lower Court dismissed the indictment on the ground that these allegations did not make out the offense of "evasion". The Supreme Court, however, reinstated the indictment indicating:

"The language of § 145(b) presently 26 U.S.C. Section 7201 which outlaws wilful attempts to evade taxes `in any manner' is clearly broad enough to include false statements made to Treasury representatives for the purpose of concealing unreported income." 344 U.S. at

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