United States v. Malnik

• Decision Date: 08 February 1974
• Docket Number: No. 72-3153.,72-3153.
• Citation: 489 F.2d 682
• Parties: UNITED STATES of America and Carl Rosen, Revenue Agent of the Internal Revenue Service, Plaintiffs-Appellants, v. Alvin I. MALNIK, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

489 F.2d 682 (1974)

UNITED STATES of America and Carl Rosen, Revenue Agent of the Internal Revenue Service, Plaintiffs-Appellants, v. Alvin I. MALNIK, Defendant-Appellee.

No. 72-3153.

United States Court of Appeals, Fifth Circuit.

February 8, 1974.

Robert W. Rust, U. S. Atty., Mervyn L. Ames, Asst. U. S. Atty., Miami, Fla., Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, John A. Townsend, Attys., Tax Div., Dept. of Justice, Washington, D. C., for plaintiffs-appellants.

E. S. Corlett, III, Miami, Fla., Harvey M. Silets, Chicago, Ill., for defendant-appellee.

Before WISDOM, DYER and INGRAHAM, Circuit Judges.

INGRAHAM, Circuit Judge:

This is an appeal from an order of the district court dismissing a petition to enforce an Internal Revenue Service summons issued under 26 U.S.C. § 7602.¹

The summons was issued on March 16, 1971, by Carl K. Rosen, an Internal Revenue Agent, to taxpayer Alvin I. Malnik, requiring him to give testimony and produce books and records² for the investigation of his tax liability for the years 1959, 1960, 1962 and 1963. Mr. Malnik was scheduled to appear before Agent Rosen on March 29, 1971, but the appearance date was postponed twice. Finally, Mr. Malnik's attorney, Harvey M. Silets, conferred with the Assistant Regional Counsel for the Internal Revenue Service, and it was mutually agreed that taxpayer Malnik would not appear personally at all. Instead, the Internal Revenue Service agreed to accept a written statement signed by taxpayer Malnik and his attorney to the effect that, had taxpayer personally appeared, "he would have asserted his appropriate constitutional privileges to all relevant and material questions propounded to him and to the production of such of the records therein enumerated in his possession." On the basis of this letter, the Internal Revenue Service did not require taxpayer to appear or to produce books and records under the summons. More than seven months after this mutual agreement, however, on December 7, 1971, the Internal Revenue Service filed a petition to enforce the summons. Although the district court first ordered compliance with the summons, on rehearing the court denied enforcement and dismissed the petition.

The following issues are presented on appeal: (1) whether the mutual agreement between the Internal Revenue Service and taxpayer Malnik constitutes a "blanket" refusal to answer questions based on the Fifth Amendment, and (2) whether the district court properly sustained taxpayer's Fifth Amendment objection to produce the requested books and records.

Although we disagree with the reasons underlying the district court's disposition of this case, we affirm.

I.

In Hoffman v. United States, 341 U.S. 479, 71 S.Ct. 814, 95 L.Ed. 1118 (1951), the Supreme Court enunciated the standard for measuring when a witness may properly claim his right against self-incrimination, and thus refuse to respond to questioning.

". . . To sustain the privilege, it need only be evident from the implications of the question, in the setting in which it is asked, that a responsive answer to the question or an explanation of why it cannot be answered might be dangerous because injurious disclosure could result. The trial judge in appraising the claim `must be governed as much by his personal perception of the peculiarities of the case as by the facts actually in evidence.\'"

Id., at 486-487; see United States v. Coffey, 198 F.2d 438, 440 (3rd Cir., 1952). A proper application of this standard implicitly requires that specific questions be propounded by the investigating body, and the claim of the right against self-incrimination must be claimed in response to each. A "blanket" refusal to answer all questions is unacceptable. United States v. Ponder, 475 F.2d 37, 39 (5th Cir., 1973); United States v. Ellsworth, 460 F.2d 1246, 1248 (9th Cir., 1972); Capitol Products Corp. v. Hernon, 457 F.2d 541, 542-543 (8th Cir., 1972); United States v. Roundtree, 420 F.2d 845, 852 (5th Cir., 1969). See also United States v. Johnson, 465 F.2d 793, 796 (5th Cir., 1972); Wright & Miller, Federal Practice and Procedure, § 2018, at 142 (1970). Thus a subject of a subpoena should appear before the interrogating officer and under oath specifically claim his constitutional rights as to particular questions while answering others not presenting a threat of self-incrimination. See United States v. Ellsworth, supra, 460 F.2d at 1248: United States v. Bell, 448 F.2d 40, 42 (9th Cir., 1971); Daly v. United States, 393 F.2d 873, 877-878 (8th Cir., 1968); United States v. Terry, 362 F.2d 914, 917 (6th Cir., 1966); United States v. Harmon, 339 F.2d 354, 359 (6th Cir., 1964), cert. den. 380 U.S. 944, 85 S.Ct. 1025, 13 L.Ed.2d 963; In re Turner, 309 F.2d 69, 71 (2nd Cir., 1962); Landy v. United States, 283 F.2d 303, 304 (5th Cir., 1960); United States v. Solon, 294 F.Supp. 880, 882 (E.D.N.Y., 1968), aff'd 405 F.2d 1211, 1212 (2nd Cir., 1968). On the basis of a record thus established, a reviewing court could scrutinize this record and determine whether the witness is mistaken in his claim "`and that the answers cannot possibly have such tendency' to incriminate." Hoffman v. United States, supra, 341 U.S. at 488, quoting Temple v. Commonwealth, 75 Va. 892, 898 (1881).

Malnik first contends that the mutuality of the agreement with the Internal Revenue Service is different from one party's unilateral objection to answer all questions, and thus under these unique facts no blanket refusal to respond to questioning exists. We simply cannot agree. Malnik's Fifth Amendment objection to comply with the subpoena is presented to us in the absence of specific questions that may or may not tend to incriminate. To sustain his objection this court, as well as Malnik, would have to completely and accurately anticipate every question. Regardless of the mutuality of the agreement, we think such an objection constitutes a blanket refusal to comply with the subpoena and therefore is unacceptable.

Malnik also urges that the district court correctly applied the Hoffman standard and therefore properly dismissed the petition for enforcement of the subpoena. Because the trial judge "must be governed as much by his personal perception of the peculiarities of the case" in making the determination whether the privilege against self-incrimination may be sustained, Hoffman v. United States, supra, 341 U.S. at 487, quoting Ex parte Irvine, 74 F. 954, 960 (C.C.S.D.Ohio, 1896), Malnik argues that the surrounding facts and circumstances of this case justify the court's dismissal of the enforcement petition.³ We do not believe, however, that the peculiarities of this case compel a dismissal of the petition. It is simply impossible to anticipate every question that might be asked and conclude that each would present a distinct possibility of self-incrimination if answered by the witness. This is not to say that if Malnik testifies and produces documents, he may not object to every question. It is just that we cannot speculate and say that any response to all possible questions would or would not tend to incriminate the witness. Therefore, we think that Malnik should have been required to appear pursuant to the subpoena and raise his constitutional claim with regard to specific questions.

II.

The second issue is whether the production of books and records of designated corporations and partnerships is subject to Malnik's Fifth Amendment claim against self-incrimination. With regard to corporations, it is well established that a corporate officer or custodian of books and records must produce such records even though they might tend to incriminate the witness. United States v. White, 322 U.S. 694, 699, 64 S.Ct. 1248, 88 L.Ed. 1542 (1944); Wilson v. United States, 221 U.S. 361, 384, 31 S.Ct. 538, 55 L.Ed. 771 (1911). This rule is premised upon the governmental necessity to investigate such organizations, presumably conceived for the benefit of the public. Hale v. Henkel, 201 U.S. 43, 74-75, 26 S.Ct. 370, 50 L.Ed. 652 (1906). The one exception to this rule, which was relied on by the district court,⁴ is when the records are held by the corporate officer or custodian in a personal, as opposed to a representative, capacity.⁵

Significantly, however, the distinction between personal and representative capacity has been narrowly defined. Even when the corporation has had only one stockholder, the courts have declined to hold that the corporate records and books were held in a personal capacity. Wright v. Detwiler, 345 F.2d 1012 (3rd Cir., 1965); Hair Industry, Inc. v. United States, 340 F.2d 510, 511 (2nd Cir., 1965), cert. den. 381 U.S. 950, 85 S.Ct. 1804, 14 L.Ed.2d 724 (1965); United States v. Guterma, 272 F.2d 344, 346 (28nd Cir., 1959); Christianson v. United States, 226 F.2d 646, 653 (8th Cir., 1955); see United States v. Crespo, 281 F.Supp. 928, 936-937 (D.C.Md., 1968). The only case we have found in which a corporate officer or custodian can possess corporate records in a personal capacity, and consequently claim the privilege against self-incrimination, is when it is a foreign corporation. Application of Daniels, 140 F.Supp. 322, 327-328 (S.D.N.Y., 1956).

Relying initially on the government's failure to deny Malnik's contention that he held the corporate records in a personal capacity, the district court refused to require compliance with the summons. But we feel that this reason is an insufficient basis for denying enforcement of the petition under the peculiar circumstances of this case. Indeed, if Malnik can demonstrate that he holds these records in a personal capacity, he should be provided with the opportunity to do so. We cannot agree, however, that Malnik set forth sufficient evidence to show that the records were held in a personal capacity and thus subject to his claim against self-incrimination.

With regard to partnership documents, the Supreme Court in United States v. White, supra, set forth the test...