Venn v. United States

• Decision Date: 09 August 1968
• Docket Number: No. 25111.,25111.
• Citation: 400 F.2d 207
• Parties: Robert G. VENN, Appellant, v. UNITED STATES of America and Denis J. Jaster, Special Agent, Internal Revenue Service, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

400 F.2d 207 (1968)

Robert G. VENN, Appellant, v. UNITED STATES of America and Denis J. Jaster, Special Agent, Internal Revenue Service, Appellees.

No. 25111.

United States Court of Appeals Fifth Circuit.

August 9, 1968.

Robert Shupack, Miami, Fla., for appellant.

Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, Meyer Rothwacks, Richard C. Pugh, Joseph M. Howard, John P. Burke, Attys., Dept. of Justice, Washington, D. C., William A. Meadows, Jr., U. S. Atty., Alfred E. Sapp, Asst. U. S. Atty., Miami, Fla., for appellees.

Before JONES, WISDOM, and DYER, Circuit Judges.

WISDOM, Circuit Judge:

Robert G. Venn, the appellant, is the president and sole stockholder of the Venn Corporation, successor to Venn Cole & Associates, Inc., a Florida public relations firm that was associated with the Dickinson for Governor Campaign in 1964. Bishopric Green Fielden, Inc. (the taxpayer) handled the advertising for the campaign. The Internal Revenue Service assigned to Denis J. Jaster, Special Agent, defendant-appellee, the task of investigating the taxpayer's tax liability for 1964. In the course of the investigation, Jaster discovered that the taxpayer had issued three checks to Venn Cole totalling $20,000. In order to trace the tax consequences of these checks to the taxpayer, Jaster issued an Internal Revenue Summons to Venn, directing him to appear June 22, 1967, to give testimony and to produce corporation books and records for the year 1964.¹

Venn sued in the district court to quash the summons. The court ordered him to appear before Jaster July 5, 1967. He appeared on that day but declined to produce the requested books and records. He contended that the records were personal to him, since he was the sole stockholder of the corporation; that his privilege against self-incrimination relieved him of the necessity of furnishing the records; that the summons was so broad as to constitute a fishing expedition for purposes of pretrial criminal discovery. The United States filed a petition to enforce the summons, supported by Jaster's affidavit. The Court issued an order to show cause. Venn filed his opposition to the order and moved that the petition be dismissed.

At bottom, Venn's objections rest on the fact that he and his corporation are defendants in a criminal antitrust prosecution currently pending in the Southern District of Florida. In the course of those proceedings, the Government sought, with limited success, discovery of much of the same material specified in the summons. The Government asserts that there is no foundation for Venn's fears. The IRS agents testified in the hearing below that there is no connection between this tax investigation of Bishopric Green Fielden, Inc. and the criminal prosecution against Venn and that the Service has no intention to make use of the material sought for any purpose other than that named in the summons — the liability of the taxpayer.

After a full evidentiary hearing, the district court accepted the Government assurance that there is no pending investigation into Venn's tax liability and that nothing obtained by means of summons would be used in the antitrust action. The Court noted that it was "convinced that Petitioner has made an adequate showing of its need to issue the summons in question," and directed "the parties to work together so that the government may obtain the information it properly seeks without unduly burdening the Respondent."

We affirm. The existence of an unrelated criminal prosecution does not tie the hands of the Internal Revenue Service when the defendant happens to have material relating to a third party's tax liability which is under investigation. However, we conclude that the Government has not made the requisite showing that all of the material sought is relevant to the tax investigation to which it is keyed.

Venn's situation is unusual. We have found no other case of a third party's resisting a tax summons on the ground that the evidence obtained may be used against him in a criminal prosecution² unrelated to the investigation of the taxpayer. Unique facts, however, need not lead to a unique result.³

The leading cases on the enforcement of tax summons under 26 U.S.C. § 7602⁴ and 7402(b)⁵ are United States v. Powell, 1964, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 and Reisman v. Caplin, 1964, 375 U.S. 440, 84 S.Ct. 508, 11 L.Ed.2d 459. In Reisman, an attorney for the taxpayer sued to restrain the enforcement of a summons issued to the taxpayer's accountant, asserting that the material sought was attorney's work-product, and that its seizure would infringe the taxpayer's rights against self-incrimination. The Court held that the action should be dismissed, since the summons of itself had no force, and the taxpayer, whose rights the attorney was seeking to protect, had an adequate remedy at law if judicial enforcement of the summons should be sought. The person summoned could be penalized for failure to comply only if the summons had been enforced by a court under the terms of § 7402(b). "Any enforcement action under this section would be an adversary proceeding affording a judicial determination of the challenges to the summons and giving complete protection to the witness," 375 U.S. at 446, 84 S.Ct. at 512, 11 L.Ed.2d at 464 and appropriate grounds on which the summons could be challenged in the judicial proceeding would include "that the material is sought for the improper purpose of obtaining evidence for use in a criminal prosecution, * * * as well as that it is protected by the attorney-client privilege." Id. at 449, 84 S.Ct. at 513, 11 L.Ed.2d at 466.

Powell dealt with the standards the Internal Revenue Service must meet to obtain judicial enforcement of its summons. The Court held that the statutes did not authorize the courts to hold the IRS to a showing of the nature of probable cause, but that the Commissioner "must show that the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose, that the information sought is not already within the Commissioner's possession, and that the administrative steps required by the Code have been followed." 379 U.S. 57-58, 85 S.Ct. at 255, 13 L.Ed.2d at 119. However, "the burden of showing an abuse of the court's process is on the taxpayer." Id. at 58, 85 S.Ct. at 255, 13 L. Ed.2d at 120.

It would be a misuse of the tax summons for the IRS to endeavor to use it to obtain evidence for use in an existing criminal prosecution. Reisman v. Caplin, 375 U.S. at 449, 84 S.Ct. at 513, 11 L.Ed.2d at 466; Boren v. Tucker, 9 Cir. 1956, 239 F.2d 767, 772-73; United States v. O'Connor, D.Mass.1953, 118 F.Supp. 248. This rule has been applied even when the person summoned and the person prosecuted are not the same. Application of Myers, E.D.Pa. 1962, 202 F.Supp. 212.⁶ However, the mere fact that the evidence obtained through the summons may be later used against the taxpayer in a criminal prosecution is no barrier to enforcement. Wild v. United States, 9 Cir. 1966, 362 F.2d 206,⁷ supra; Sanford v. United States, 5 Cir. 1966, 358 F.2d 685; Boren v. Tucker, supra.

Venn occupies a middle ground. He has not been charged with any offense under the tax laws, nor is his own tax liability or that of his corporation under any question.⁸ He is, however, facing trial under a federal indictment.⁹ In the course of the pretrial proceedings in the antitrust case, the Government sought discovery of much of the same material named in the indictment, and the district court granted a major portion of that request. The IRS agent who issued the summons testified that his investigation has no connection whatever with the antitrust prosecution, but is solely for the purpose named in the summons, the determination of the tax liability of Bishopric Green Fielden, Inc. As we noted, in granting enforcement of the summons, the district court accepted, as do we, "the assurance of the Government that there is no pending criminal or civil investigation into the tax liability of Robert Venn nor is one now contemplated." The court included in its order the requirement that "no matter obtained by way of this petition shall be used against Venn in the antitrust suit now pending before the Honorable Ted Cabot in Case No. 65-535-Cr-TC." However, we would be blind as judges to what we know as men were we not to realize that what is known to the Internal Revenue Service may well become known, informally perhaps, to the Antitrust Division of the Department of Justice.

We consider the danger of possible self-incrimination through enforcement of this summons is not great. But it is not insignificant. To obtain enforcement of the summons, the IRS should show that the material sought is relevant to the purpose of the inquiry. Here, the only evidence indicating a financial connection between Venn Cole & Associates, Inc. and the taxpayer corporation consists of three checks the taxpayer issued to the public relations firm when the services of both were employed in a political campaign during the tax year under investigation. The summons, however, asks for virtually all of the financial records of Venn Cole. Jaster, the agent in charge of the investigation, testified that he would need all of the records in order to trace the tax consequences of the three checks. Venn has counter-offered to testify orally about the checks and their purpose. The first asks too much, while the latter gives too little.

This is not a case such as we dealt with in First National Bank of Mobile v. United States, 5 Cir. 1947, 160 F.2d 532, where the Service sought disclosure of a major portion of the financial records of a bank, approximately six million items, in the course of an investigation of another party. However, the principles we announced there are applicable here. "A third party should not be called upon to produce records and give evidence under the statute unless such records and evidence are...