DONALDSON v. UNITED STATES
Legal provision: Internal Revenue Code
Argument of Robert E. Meldman
Chief Justice Warren E. Burger: We?ll hear arguments in Number 65, Donaldson against the United States.
Mr. Meldman you may proceed, whenever you're ready.
Mr. Robert E. Meldman: Thank you.
Mr. Chief Justice and may it please the Court.
This case involves two issues relating to administrative summonses.
The first issue concerns the right of intervention in summonses enforcement proceedings.
Intervention under Rule 24 (a) of the Federal Rules of Civil Procedure, an intervention under this Court?s 1964 decision in Reisman versus Caplin.
The second issue relates to the use of administrative summonses in criminal investigations.
Petitioner moved to intervene in an enforcement proceeding in the District Court and was denied intervention.
There was no evidentiary hearing and there has been no written opinion by the trial court.
However, the court below when it considered petitioner?s intervention, determined that intervention should be governed solely by this Court?s decision in Reisman versus Caplin.
And the Fifth Circuit narrowly construed the Reisman decision to require that a proprietary interest or a privilege relationship be established by the proposed intervener before he should be allowed to intervene in the case.
Secondly, the Fifth Circuit held that the intervener must show that if he would be allowed to intervene, he could successfully defend in the summonses enforcement proceeding.
The Court of Appeals found that petitioner had not met their requirements and therefore denied intervention.
I believe that the facts in this case are basically undisputed.
In 1968, the Internal Revenue Service began conducting an investigation of Mr. Donaldson concerning his alleged failure to file federal income tax returns.
In connection with this investigation, special agents of the Internal Revenue Service issued administrative summonses to various third parties with whom Mr. Donaldson had transactions.
The respondents in this action, Acme Circus Operating Company Inc. and its accountant Joseph J. Mercurio were such third party witnesses to receive summonses.
Acme and Mercurio are not active parties in this appeal.
In September of 1968, when Donaldson learned that a special agent had inquired at the Acme Circus Company and requested certain information and certain documents, Acme informed Mr. Donaldson that they would comply with any request made by the Internal Revenue Service.
But Donaldson believing that the procedures being used to investigate him were not proper and sought to prevent involuntary compliance by the Acme Circus.
Following the guidelines set down by this Court in the Reisman case, Mr. Donaldson petitioned the District Court for a temporary restraining order enjoining this third party, Acme Circus from complying with any request through summonses by the Internal Revenue.
The District Court granted the temporary restraining order and the third parties were then restrained.
About seven weeks later the United States then commenced an independent action on petition and order to show a cause to enforce the administrative summonses that had been issued to the Acme Circus.
The summonses required that Acme and Mercurio furnish information concerning their financial dealings with the taxpayer.
In the Government?s petition, it alleged that these summonses issued by the special agent were to obtain information necessary for a determination of Donaldson?s correct tax liability.
Donaldson was not named a party to the summonses enforcement action and therefore moved to intervene under Rule 24 (a) (2) of the Federal Rules of Civil Procedure, intervention of right.
Donaldson alleged that he had an interest in this action and he would be bound by the decision of this action and that he was not adequately represented by the existing parties.
He also filed proposed answers in which he alleged that the purpose for which the special agent had issued these summonses was not in fact determination of correct tax liability but rather to gather evidence for use in a criminal prosecution.
Donaldson also alleged that Section 7602 of the Internal Revenue Code, the statute under which these summonses is issued, did not authorize the use of the summonses for criminal investigations.
As we have mentioned, there was no evidentiary hearing, the court simply denied intervention and the case comes before this Court on a writ of certiorari to the Fifth Circuit.
And we believe that the courts below have erred in three ways.
First, we believe that under Rule 24 (a) of the Federal Rules of Civil Procedure, Donaldson had an interest which was not adequately represented or protected, and therefore, he should have been allowed to intervene under Rule 24 (a) (2).
Secondly, this Court in its decision of Reisman versus Caplin, specifically approved taxpayer intervention in third party summonses enforcement proceedings in order to allow the taxpayer an opportunity to challenge and improper use of a Section 7602 summonses, and therefore, under the Reisman case, Donaldson was also a proper party to the enforcement proceedings.
Finally, Section 7602, the Section of Internal Revenue Code under which this summonses is issued, does not authorize the use of an administrative summonses to conduct criminal investigations and therefore Donaldson would've had a proper defense had he been allowed into the District Court.
Justice Byron R. White: What if he -- what if it had a, would you be here, would you still be wanting -- I suppose you would still be asserting that you would have a right (Inaudible)?
Mr. Robert E. Meldman: Yes Your Honor.
I think we would.
I believe that to determine the merits of a defense prior to allowing an individual to litigate his defense would be premature.
Justice Byron R. White: Well, why do you urging here, (Inaudible) intervention point or that the -- or that if you are in then you would've had a defense?
Mr. Robert E. Meldman: Your Honor, the way this case came up, we had filed our petition for a certiorari on the intervention question.
The court below, the Fifth Circuit had denied intervention because we could not have won even if we were allowed in.
And at the suggestion of the Solicitor General, both the defense and the court itself has now raised as well as the intervention question.
It's very difficult in this case to adequately discuss the defenses that could've been raised since we have no record, there is no evidentiary hearing, there?s no testimony whatsoever and we prepared our brief, we did it in an objective manner.
Justice Byron R. White: Was your position that if he -- if you're right, if we think you're right on intervention, and hold your right on intervention, we should remand without reaching the other -- any other question or not?
Mr. Robert E. Meldman: Your Honor, I would hope that you would reach the second question in our case.
However, if the Court chose not to --
Justice Byron R. White: On whether the administrative summonses can be used when there's a criminal prosecution in the background?
Mr. Robert E. Meldman: Yes, Your Honor.
As a practical matter or possibly, what we?re trying to say is true, if the Court does not reach the second issue intervention, maybe meaningless back in the District Court.
However, I think there are other cases pending that this Court may review that to -- maybe better vehicles for decision on the improper purpose.
As I was saying, we believe there's a number of ways we can reach the intervention question.
The first would be under Rule 24 (a) of the Federal Rules of Civil Procedure.
Under that rule where an individual claims an interest in the subject matter, disposition of the action may as a practical matter impair or impede his ability to protect that interest.
And the existing party does not adequately represented his interest, he is to be allowed to intervene in a proceeding in the District Court.
Now, recently Rule 24 (a) was amended so as to eliminate two requirements that previously existed.
First, that the movement be bound by a decree in that action.
And secondly, that he have either a legal or equitable claim in the property.
I believe under Rule 24 (a) (2) as its now amended, this taxpayer meets the tests of the Rule.
The subject to the Internal Revenue investigation is the taxpayer?s affairs, a matter I think in which every taxpayer has both the legitimate and substantial interest.
This interest would clearly be impaired if improper investigative procedures are utilized to go about making an investigation.
And finally, I think it?s clear even on the limited record we have here that the third parties who were participants in the District Court action had no interest in defending any of Mr. Donaldson?s rights nor challenging the summonses.
They were willing to comply with whatever the court ruled, both in the District Court, Court of Appeals and it assumed from this Court.
I think in the context of this test, they limit intervention where a taxpayer has a proprietary interest or a privilege relationship in the summonses material would be improper.
Donaldson is protesting the procedures being used to investigate him and not the ownership of the documents that are sought by the Internal Revenue.
In this case, we really only have two interested parties.
We have Donaldson on the one hand who has attempted to prevent disclosure of information through improper procedures.
The United States on the other hand, was trying to require disclosure of information under what they claim are proper procedures.
The third party who was the litigant in the District Court really has no interest in which side wins.
The second test I think --
Justice Byron R. White: (Voice Overlap) Is it your suggestion that if United States is investigating a criminal case and it goes to some third parties who had some documents that belonged to them, but the documents are irrelevant to their investigation that have -- they shouldn?t be able to take those that -- those third party should not be permitted to voluntarily to hand over those documents to the United States unless you have some opportunity to litigate about it?
Mr. Robert E. Meldman: No, Your Honor, we would have no objection to a third party voluntarily turning the papers over.
Our objection --
Justice Byron R. White: In this case, if the third parties had simply said, if you want these papers, we?ll give them to you.
You wouldn?t claim you would have a right to go in and get an injunction against turning the papers over?
Mr. Robert E. Meldman: Well, Your Honor, the way the request is made in Internal Revenue Service investigation is that the agent will make an oral request under Section 7602.
He will use this as his guide.
Justice Byron R. White: So you're really making a purely statutory argument --
Mr. Robert E. Meldman: Yes Your Honor.
Justice Byron R. White: -- without any constitutional overtones at all?
Mr. Robert E. Meldman: No, Your Honor, I don?t believe there are any constitutional claims here.
I think if you would have a situation where a Government agency would simply walk in and ask for some papers and the third party would voluntarily turn them over, I don?t think that we would have a situation where we?d have an objection.
As we pointed out in our brief, we think that there are other means to get these records.
We?re not really objecting to their investigation, but rather the means in which they?re going about it.
Justice John M. Harlan: Well, you did get an injunction here against the third parties turning them over?
Mr. Robert E. Meldman: Yes Your Honor we did.
Justice John M. Harlan: Or a restraining order.
Mr. Robert E. Meldman: Yes, it was a restraining order.
Justice John M. Harlan: The third party was perfectly willing to turn them over?
Mr. Robert E. Meldman: Yes, Your Honor. the request however again was made under the statutory authority.
Justice John M. Harlan: But it does ensure even though it?s a statutory argument, doesn?t your position go to the length of saying that any administrative summonses proceeding under these Sections, you have an automat -- a third party, the person whose records was invest -- who was a subject of investigation has a right to intervene at the threshold because his interest is not being protected?
Mr. Robert E. Meldman: Yes, Your Honor.
I think that would be a correct statement.
Justice John M. Harlan: Yes.
That?s what I thought.
It?s the broad proposition you?re arguing?
Mr. Robert E. Meldman: Yes Your Honor.
I believe this is --
Justice John M. Harlan: And these other subsidiary questions as to the construction of the Section itself and the -- are matters that are to be determined after you?ve once intervene?
Mr. Robert E. Meldman: Yes, Your Honor.
I believe that would be correct to the view of our case.
Justice John M. Harlan: Yeah.
Mr. Robert E. Meldman: We believe that when this Court considered this issue which it did in the Reisman case that -- this was the interpretation that the courts had given.
If the Court will recall in the Reisman case, a special agent had issued a summonses to a taxpayer?s accountant for a work papers and some documents.
The taxpayer?s attorney brought an injunctive action against both the accountant and the Commissioner of Internal Revenue.
Going to the District Court -- Court of Appeals? level, each level had a different theory for denying taxpayer the right to restraint.
When it came before this Court, this Court simply said that what they're asking for is equitable relief.
There's an adequate remedy at law, therefore, we dismissed the suit against the Commissioner of Internal Revenue and the accountants.
However, the Court went further and I believe that the Court could have stopped at that point had they not wanted to examine the entire procedures under which summonses are issued in Internal Revenue investigations.
And it's our believe and the Court of Appeals for the third the -- in the Sixth Circuit agree with us that upon this examination, the Court found that the proper procedure to be used would be for a taxpayer to intervene in an enforcement proceeding.
Now, the Court went on there and said, ?Should you have a willing third party such as Peat Marwick, the accountant in the Reisman, obviously the taxpayer wouldn?t have no opportunity to raise any defenses if they voluntarily turn the records over.?
So the Court suggested the procedure to be followed in a situation like that, was to restrain that third party and thereby triggering an enforcement proceeding into which the taxpayer could then intervene and have a -- have an adversary hearing and this is a procedure that we?ve attempted to follow in this particular case.
Chief Justice Warren E. Burger: But if the third party, Peat Marwick for example, delivered the documents or made them available on a simple request, the taxpayer would be denied the kind of protection you're arguing for, wouldn?t it?
Mr. Robert E. Meldman: Your Honor that maybe true, however --
Chief Justice Warren E. Burger: Peat Marwick might loose a client, but that would be the only sanction, wouldn?t it?
Mr. Robert E. Meldman: Your Honor, it?ll probably be so.
As a practical mater the only reason than an accountant or a bank or anyone would turn these records over to the Internal Revenue Service is because of the statutory authority that has been built up and the exposure that it gets and an accountant is well aware of 7602 and its sanctions.
There can be a contempt if there is a malicious refusal.
This is the reason that these people turn the records over.
There have been instances such as Your Honors has pointed out which we?d call a soft summonses where a special agent will come in and say, ?You know, I have the authority under the Internal Revenue Code to demand records with a summonses.
Now, I won?t bother with this piece of paper, just give me the records, I?ll give you a receipt? and this is not an uncommon situation.
Now, we don?t believe that the spirit of the law and the ruling of this Court can be simply pushed aside because the agent doesn?t mention a statute and I think as a practical matter this is what's happening.
Chief Justice Warren E. Burger: What do you do about the situation that I set up?
Do you -- you would say there is any remedy?
Mr. Robert E. Meldman: Well, Your Honor I believe that this Court would find as we have urged them to do that Section 7602 summonses cannot be used in criminal investigations, that the matter would as a practical sense resolve itself since the special agents are the ones issuing this summonses, we have no objection to a summonses by a revenue agent in a civil audit and I don?t believe that there has ever been any controversy on that at all and I don?t think that any taxpayer ever objects to it.
Justice Harry A. Blackmun: Where however do you draw the line, the moment the special agent steps into the picture?
Mr. Robert E. Meldman: Yes, Your Honor.
I believe this would be the line.
We base this on the fact that this is where the Internal Revenue Service has separated its civil and criminal investigations.
For example in 1968, they made a public announcement that the purposes of the special agent were to investigate criminal tax fraud.
That henceforth this special agent must issue Miranda warnings to the taxpayer upon his contact.
Thirdly, their internal regulations separate the functions at this point in time.
They say that all civil aspects of this case must stop when a special agent enters the case.
For this reason, this is where we believe that the line should be drawn.
We might -- may point out to the Court that in the past few months, the Internal Revenue Service has now turned to using regular search warrants by their special agents.
Justice Harry A. Blackmun: Well, isn?t much of that though countered by Miranda and the new ruling?
In a sense this is all new, special agents have been used for years and years and years and these arguments had never appeared before?
Mr. Robert E. Meldman: Your Honor, I believe that, as we have pointed out in our brief at page 29 in the green cover, the regulations that govern the functions of the special agents change.
The case most prominently cited by the courts is Boren versus Tucker saying that there really is no distinction and the regulations existing in 1956 give a very at best grey area between their functions.
However, the regulations were changed in 1966 and now under the regulations, the special agent has but one function, to investigate criminal cases.
He is not responsible in any manner for either civil penalties or civil tax or civil determinations of any kind.
And we have made a comparison at page 29 of our brief of the two regulations.
I think this is a critical difference that has come about as you say within the last few years.
I might also point out to the Court in this connection that there is a specific section of the Internal Revenue Code, Sections 7608 that authorizes the special agents to use a search warrant and he need not go outside of the scope of the Internal Revenue Code to find this.
Now, we believe that an examination of the history of Section 7602 and the purposes for which it was issued makes it clear that this was meant to aid the Internal Revenue in determining correct tax liability, not to allow the Internal Revenue Service to conduct criminal investigations.
There maybe instances during the pendency of a criminal case where a tax liability may be unnecessary element.
However, we wish to the -- point out to the court that, for example in this case, where the investigation is for alleged failure to file that there is no need for a civil tax liability to be determined and we don?t feel that this is truly the function that the special agent here is meeting.
The second alternative they?ve suggested, by the Solicitor General would be a suppression.
He said, ?This maybe an adequate remedy.
Allow the summonses to be enforced and then if and when there is a criminal prosecution, the taxpayer could then bring a suppression action.?
I would like to point out two things to the Court on this point.
First, I think suppression is a very drastic remedy.
By its very nature can be employed only limited circumstances.
The issuance of the summonses if it?s invalidly issued, I don?t think it would be proper under a Section ? a Rule 41 (e) motion.
If it was issued for an improper purpose, this too may not be a proper 41 (3) motion for suppression.
Secondly, we believe had this Court believed that the proper procedure to be followed was suppression that it could've done away with the entire scope of the Reisman opinion, simply denied that taxpayer of relief and stopped and said that any time a summonses is issued for any purpose whatsoever, let the summonses be complied with and let suppression be the remedy.
However, I think it's a very impractical test to use.
Many times as the Court well knows when you get to the suppression, evidence has been commingled and there's no way to marshal one from the other.
I think if the Court determines and sets down a specific point in time when this summonses can no longer be used that the controversy that?s going on throughout the country will come to an immediate stop.
And we will have no longer a problem if a special agent trying to use a civil summonses for the criminal case.
Now, I think this is --
Justice Byron R. White: You would take the same position if the third was summoned to give a testimony?
Mr. Robert E. Meldman: Yes, Your Honor.
I think the same thing would be true.
Justice Byron R. White: You would have them -- you would want to write and sit there and make sure they didn?t ask you to make a question which went beyond this -- the proper use of a -- of 7602?
Mr. Robert E. Meldman: Your Honor, I would believe whether we would request that at the administrative level, I don?t know.
I would have to say as a practical matter, we?d have to go with the faith of the Government.
The only determination we can ever make is that when a special agent comes in that they have now started a criminal case.
There are rare instances where a civil agent is used to (Inaudible) but I think is a very rare instance and I think most taxpayers would take the position that if a Revenue agent wanted to question the third party, they?d have no objection at all.
Justice Byron R. White: Yes, but if he wanted the summonses in, I mean, actually --
Mr. Robert E. Meldman: A Revenue agent wanted to summon a third party, I don?t think the taxpayer would object.
If a special agent attempted to do this, then we think that what he?s doing is in essence usurping the power given to the grand jury.
Justice Byron R. White: But you should think that at soon as a special agent does it, you should be there to listen to the questions?
Mr. Robert E. Meldman: Your Honor, I believe that if a special agent issues the summonses, the third party should not be complied -- compelled to comply with it.
Justice Byron R. White: I see.
Chief Justice Warren E. Burger: We?ll take that up after lunch, if you want to enlarge your answer.
Mr. Robert E. Meldman: Thank you.
Chief Justice Warren E. Burger: Do you want to continue with your argument in chief or do you want to save the rest for rebuttal?
Mr. Robert E. Meldman: (Voice Overlap) --
Chief Justice Warren E. Burger: You have a -- let?s see how much, you?ve got 5 minutes left.
Mr. Robert E. Meldman: I?ll reserve it if I may.
Chief Justice Warren E. Burger: Fine, very well.
Argument of Lawrence G. Wallace
Mr. Lawrence G. Wallace: Mr. Chief Justice and may it please the Court.
This case case is here in the form of a denial of intervention affirmed by the Court of Appeals and we have briefed and are prepared to argue the issues involved partly with reference to general principles of the law of intervention.
But the manner in which the case arose suggests that the substance of what is at issue is no ordinary question of intervention at all.
This has been illuminated to some extent by questions from the bench but I believe that it will be helpful to make this analytical framework explicit.
The court proceeding in which the petitioner seeks to intervene is in effect one that he himself created.
There would have been no summonses enforcement proceeding in the District Court and indeed no judicial proceeding of any kind in which the petitioner or anyone else could seek to intervene had the petitioner not secured from the District Court a preliminary injunction restraining the witnesses summoned by the Internal Revenue Service from complying with the summonses until ordered by a court of competent jurisdiction to do so.
The record shows they were willing to comply with the summonses and but for that preliminary injunction, there would have been no occasion for an enforcement proceeding.
So the petitioner in one important sense understates the case when he contends that he is the real party in interest in the enforcement proceeding.
There is simply is no issue in that proceeding other than the question whether the petitioner will be permitted to intervene.
And if so, whatever issues, he will be allowed to raise.
In other words, the case in substance involves nothing but an attempt by the petitioner to secure judicial interference with the conducting of an Internal Revenue Service investigation, an investigation relating to his tax liabilities, but directed in this instance only to third persons and to records that are not his and that do not embody any confidential communication, whose disclosure he claims, he is legally privileged to prevent.
On this view of the case, it is difficult to see why the petitioner stands on any different footing from that of any other person who wishes to prevent or interfere with an investigation of third persons by Government officials because he fears that the investigation may eventuate in the bringing of civil or criminal proceedings against him.
Chief Justice Warren E. Burger: Mr. Wallace, are you suggesting that if the material is material which could be secured by a subpoena duces tecum in a tax fraud case or by other discovery processes, does that automatically mean its available under an administrative subpoena or summonses?
Mr. Lawrence G. Wallace: Well, there is an issue if indeed there are parties who have raised it here that the -- the first issue is whether there's any right and the petitioner intervene to raise this -- the 7602 issue. That that is the statutory issue under 7602 that I believe you would have posed.
Chief Justice Warren E. Burger: But I thought you?ve started out by saying that intervention is not the real issue here that lurking under this issue is --
Mr. Lawrence G. Wallace: It?s really a question of whether ? and this is in effect a form of his trying to enjoin the use of the summonses here.
It comes to us in the form of an intervention, but in effect the proceeding was began by his application for the restraining order.
Chief Justice Warren E. Burger: I don?t know what his -- what your friend?s position would be on it, but he might answer the question I put to you by saying that even if, even if this would be available upon a subpoena served after they were in trial or just before a trial in a tax case, that doesn?t mean that its available for the investigation on preparation of the tax case against him.
That?s the point I?m trying to address (Voice Overlap) --
Mr. Lawrence G. Wallace: Well, that is the contention that he is trying to make here, that it is not available in the investigatory stage and we answered that both in our brief and I propose answer it in the argument, but I think first, there is this preliminary question whether he has any right to raise it at all at this stage of the proceedings in his effort to enjoin pro tanto the investigation by preventing this particular summonses from being enforced.
Chief Justice Warren E. Burger: Well of course as a practical matter, if he can?t raise it now, raising it in any other occasion as somewhat academic, isn?t it, after the cat is on the bag?
Mr. Lawrence G. Wallace: Well, there is the question of whether the fruits can be introduced against him if and when a civil or criminal proceeding is ever brought against him.
No such proceeding has ever been brought that this is an anticipatory suit on his part.
Chief Justice Warren E. Burger: Well --
Justice Hugo L. Black: What is the issue to be decided in the hearing?
You say there's a hearing?
Mr. Lawrence G. Wallace: He has thought a hearing --
Justice Hugo L. Black: I?m not talking about in the court.
I?m talking about when you take it before the Internal Revenue officer, what is the issue before him and do they take evidence?
Mr. Lawrence G. Wallace: Oh!
In the summonses proceeding itself?
Justice Hugo L. Black: Yes.
Mr. Lawrence G. Wallace: Yes.
The witness is summoned to bring with him records to be produced which is what is at issue here and also he sometimes is asked questions, usually questions concerning those records.
The witness is usually a bank or an employer or a corporate official who will have records bearing on the possible tax liability of a third person when the witness isn?t the taxpayer himself.
Justice Hugo L. Black: Of course if it is a grand jury, he couldn?t hope to intervene but I -- what is the authority of the commissioner to hold a secret hearing which involves another man?s faith and decline to let him om, that is logical?
Mr. Lawrence G. Wallace: Well, the authority is in Section 7602, if there's a question of statutory authority.
It is not very different from the authority of a police officer who just goes into a business office and questions someone to get information to see whether there may be a violation of law that --
Justice Hugo L. Black: Yes, but here, because they issued a summon and have a secret hearing, do they?
Mr. Lawrence G. Wallace: Yes.
The summonses, it?s a form of subpoena.
That is a form administrative subpoena very similar to what the Securities and Exchange Commission issues and the Federal Trade Commission --
Justice Hugo L. Black: I know, but did you give (Voice Overlap), does his complaint where he wants to intervene so that he is an object of investigation and that secret hearing?
Mr. Lawrence G. Wallace: Oh!
Not only his complaint but the summonses itself says that the purpose of it is to get information relating to his tax liability.
There's no dispute about that.
Justice Hugo L. Black: And he asked to intervene?
Mr. Lawrence G. Wallace: He asked to intervene but in a judicial proceeding that he has brought in effect.
Justice Hugo L. Black: Is this a judicial proceeding?
Mr. Lawrence G. Wallace: Well, he has brought a judicial proceeding.
Justice Hugo L. Black: Well, in his judicial --
Mr. Lawrence G. Wallace: He hasn?t -- he never asked to intervene in an administrative proceeding.
He asked that the records not be produced.
He asked to interfere with it.
Justice Hugo L. Black: Well, that -- not to (Voice Overlap) with the proceeding, isn?t it?
Mr. Lawrence G. Wallace: He didn?t asked to be present to question the witness.
He asked that the witness be restrained from attending it at all.
He said that the whole thing is improper and can?t be had.
Justice Hugo L. Black: He didn?t ask to be permitted to be there?
Mr. Lawrence G. Wallace: No, he didn?t.
That is not his request.
He is not trying to intervene in an administrative proceeding.
He is trying to prevent the summonses at all.
He says that it can?t be issued, there can?t be any inquiry.
That is his contention.
Justice Hugo L. Black: On what ground?
Mr. Lawrence G. Wallace: On the ground that its unauthorized for the Internal Revenue Service to inquire about someone?s income, if the inquiry may lead to criminal proceedings later on if they find out that he is fraudulently understated his tax.
That is his contention.
Now, the courts have --
Justice John M. Harlan: However, but not yet with merits.
Of course the (Inaudible)
Mr. Lawrence G. Wallace: Well, he upheld the denial of intervention --
Justice John M. Harlan: For the lack of standing?
Mr. Lawrence G. Wallace: For lack of standing but he did say that the standing question to some extent implicates whether what alleged in the motion to intervene would be any ground for refusing to enforce the summonses.
He looked to see what interest was being alleged in deciding whether there was standing.
It is a form of a standing question.
Justice Hugo L. Black: What kind of proceeding is this at the moment, Internal Revenue Service, what -- how would you designate it?
Mr. Lawrence G. Wallace: Its just a subpoena that he wanted someone to produce records so he could examine them and that?s done by having the man bring the records to him and if he sees something there that he thinks is of importance, the Internal Revenue Service reproduces the record, makes a copy of it and then gives them back to him.
Justice Hugo L. Black: (Voice Overlap) does a statute authorize that he bring in the witness in the secret hearing?
Mr. Lawrence G. Wallace: Well, that the statute doesn?t specify that and --
Justice Hugo L. Black: Is that what the Government claim, that they have the right to do that?
Mr. Lawrence G. Wallace: Well, that?s not at issue here.
We?re not resisting any effort of the taxpayer to attend the hearing.
In fact, counsel for the taxpayer just said he didn?t want to attend the hearing.
Just before lunch, he said that he had to rely on the good faith of the Government.
So that?s not at issue here.
The only thing that is at issue is whether the -- he can prevent the Government from subpoenaing the records at all.
That?s his claim that the Government has no right to subpoena the records at all.
Now, this is the kind of anticipatory challenge by someone not yet directly affected by an investigation that the courts have generally refused to entertain with regard to any kind of official investigation.
The general rule in our view and we recognize that there are exceptions to it, but the general rule whether articulated in terms of standing or of ripeness or of adequate remedy at law has been that such challenges should be made in the form of a motion to suppress or in other proper objection to the use of the fruits of the investigation when and if civil or criminal proceedings are actually brought against the complainant.
And one consideration underlying this general is the prejudice to the public interest that would result from unwarranted interruptions and postponements of official investigations.
To cite only one example, statutes of limitations would continue to run while possibly protracted litigation might take place concerning the manner in which the officials were attempting to conduct their investigation.
And this general rule is also intended to protect the courts against unnecessary impositions on their time by the bringing of anticipatory and piecemeal litigation by persons who may never be harmed and who will have adequate opportunities to assert their claims if and when they are directly affected.
And indeed judicial economy is also a significant consideration in the law of intervention itself.
For example, on pages 14 and 15 of our brief, there is a quotation from a recent thoughtful opinion of the Court of Appeals here in the District of Columbia on the subject of intervention.
In Smuck against Hobson, and with the Court?s permission I?d like to read the first sentence of that quotation which says, ?The decision whether intervention of right is warranted does involve an accommodation between two potentially conflicting goals to achieve judicial economies of scale by resolving related issues in a single lawsuit and to prevent the single lawsuit from becoming fruitlessly complex or unending.
But in the present case, both of these considerations are on the same side of the balance and the side opposing intervention.
Instead of seeking to consolidated lawsuits, the petitioner here is attempting to proliferate them, not only by inducing the present summonses enforcement proceeding, but also as we show in our brief in footnote 8 on page 23, by inducing similar proceedings in the District Courts in the Eastern District of Louisiana and the Southern District of Illinois in which the same issues were raised in an attempt to intervene against subpoenas of other witnesses who have records bearing on Mr. Donaldson?s tax liabilities.
If there are counterbalancing considerations favoring intervention or favoring standing which may be the more accurate way to put it, they must inhere and whatever interest of his that the petitioner claims would be adversely affected by compliance with the subpoenas.
And we believe therefore that the Court of Appeals correctly analyzed this case as turning on the nature of the interests the petitioner is asserting and how those interests would be affected by compliance with the subpoenas and we contend that the court correctly concluded that the interests asserted are not sufficient to bring the petitioner within any proper exception to the general rule against interference with investigations of third persons.
Justice Byron R. White: And this would be -- I take it your position is, it wouldn?t make any difference what they were investigating for except, let's assume admittedly they were pursuing a criminal investigation?
Mr. Lawrence G. Wallace: Well, if that is improper and if the fruits of that are ever sought to be used against him, that?s the time when he maybe permitted to raise that issue.
Justice Byron R. White: Well, would you suggest that --
Mr. Lawrence G. Wallace: And fewer than half of these investigations --
Justice Byron R. White: Would you suggest -- well, I know, but would you suggest that it would be improper?
Mr. Lawrence G. Wallace: No, our suggestion is quite the contrary that it?s an investigation into whether there has been fraudulent understatement of taxes which involves both civil and criminal implications.
Justice Byron R. White: So you're saying it?d be quite alright for the Congress to arm the Internal Revenue Service with a invest -- with a coercive investigative powers in criminal tax cases that may not be available in other kind of criminal cases?
Mr. Lawrence G. Wallace: Well, this is not in the criminal case.
There's no pending criminal case.
It's just an investigation.
Justice Byron R. White: I just asked you -- I know, well, I mean if -- but --
Mr. Lawrence G. Wallace: This is not unusual.
Justice Byron R. White: What they're investigating is whether or not there is a criminal liability, assume that that?s their only --
Mr. Lawrence G. Wallace: As well as whether or not there's a civil liability or possibly no liability at all.
It?s the same thing that the Securities and Exchange Commission investigates with their subpoenas, this is not unusual.
It's -- there's Federal Trade Commission subpoenas.
Justice Byron R. White: But you're quite willing --
Mr. Lawrence G. Wallace: This is the nature of investigation.
You see --
Justice Byron R. White: You're quite willing to take this position even though you say, ?Yes, we are investigating to see whether there is criminal liability or not, although we?re also investigating civil liability.?
Mr. Lawrence G. Wallace: Of course, that is the duty of the Internal Revenue agent to conduct the investigation, see what the investigation discloses and whether he should recommend a criminal prosecution or that a civil penalty be assessed or that no action be taken.
Or possibly both the criminal prosecution and the civil assessment and then his recommendations are reviewed and sometimes overruled.
Justice Byron R. White: But you would argue that if there was some objections to these records at the trial that they should be overruled if the only objection is that they were coercibly sought before any case was filed?
Mr. Lawrence G. Wallace: Each -- I agree with that contention.
It should be overruled if that is the only basis for the objection, but I also say that that is the kind of objection that only someone with an interest of the rec -- in the record should have the standing to make at that stage in the first place, at the investigative stage in the first place.
Chief Justice Warren E. Burger: When you say an interest, do you really mean a proprietary interest, don?t you?
Mr. Lawrence G. Wallace: Or a privilege.
Chief Justice Warren E. Burger: Privilege or proprietary?
Mr. Lawrence G. Wallace: That is the kind of interest that was involved in Reisman against Caplin.
Chief Justice Warren E. Burger: He has a general interest certainly in this information, in a broad sense.
He obviously has a general interest in not letting the Government see it, but what you mean is to narrow down proprietary or privileged interest.
Mr. Lawrence G. Wallace: That is an interest in the records themselves, yes, a proprietary or privileged interest in the records.
Chief Justice Warren E. Burger: Would Section 7602 in this process be the means by which internal revenue agents would go to a bank and find out the total amount of deposits that a taxpayer made and how much he paid in interest for example to see if he had a basis for his deductions?
Mr. Lawrence G. Wallace: That is very frequently the case.
In fact, very often, the bank will supply such information upon informal request and if a summonses is issued at all, it is more or less simultaneously issued to be put in the files against the possibility of a future complaint that the bank needlessly turning over their -- the records to a government investigator.
This is the method in which these investigations are made and it has been for a very long time.
We?ve traced the genesis of Section 7602 in our brief and it has always been used in this manner and as Mr. Justice Blackmun suggested from the bench, this use has never been questioned until very recently.
There were no cases under the 1939 Code when the provisions explicitly said that the summonses could be used for fraud investigations.
We show that this has been consolidated now into one provision and it means the same thing, but there were no cases at all challenging this on the basis of a criminal purpose argument.
The only issue that ever arose was the issue that this Court settled in the Powell case, that there need not be a showing of probable cause in order to obtain enforcement, but no one ever claimed that because of the possibility of criminal liability, this process couldn?t be used at all.
Justice John M. Harlan: Under view of the Rule 24, the intervention doesn?t come to play at all?
Mr. Lawrence G. Wallace: Well, it is a useful reference.
I don?t think that the issue would be essentially different if we happen to be in a case in which the witness himself had interposed an objection and an enforcement proceeding had been brought and then the petitioner without having induced that proceeding tried to intervene in that proceeding, it just seems to me that the way this case arose highlights what's really involved here and that the operative consideration is the stage of the proceedings at which he is trying to assert his interest and the kind of interest he is trying to assert.
And that it seems to me why Rule 81 says that the Rules are applicable in these proceedings to enforce a subpoena only insofar as in the discretion the District Court thinks the rule is a proper guideline in the case.
We argue in terms of the rule, but the case is not really a conventional intervention case and I don?t think it?s a case about the Law of Intervention as such.
Justice Hugo L. Black: I understand on his application, I have just read, he seems to be asking for more than that, I understood you to say.
Didn?t he ask to intervene in the administrative proceeding where this witness was going to be examined?
Mr. Lawrence G. Wallace: No, he?s application was to intervene in the enforcement proceeding in the District Court, that?s his application --
Justice Hugo L. Black: (Voice Overlap) --
Mr. Lawrence G. Wallace: To intervene in the enforcement proceeding and asked the judge not to enforce the summonses, not to let there be a subpoena.
Justice Hugo L. Black: (Voice Overlap) he asked the District Court to protect him against the Government?s action in that subpoena, did he not?
Mr. Lawrence G. Wallace: He, I mean he first got a temporary restraining order telling the witness that he couldn?t comply with the subpoena until ordered by a court to do so.
And then, the summonses enforcement proceeding was brought and that?s what he wanted to intervene in to prevent the court from ordering the witness to comply with the summonses.
His whole contention is to try to get the witness not to comply with the summonses, that there cannot be any summonses.
Justice Hugo L. Black: I thought his contention in his complaint was that he wanted to intervene in this place?
Mr. Lawrence G. Wallace: In the --
Justice Hugo L. Black: To protect his interest.
Mr. Lawrence G. Wallace: No, that is not what he asserted.
He said before lunch that he did not wanted to attend the administrative hearing as such, but that he?s never made that claim, Mr. Justice Black.
He?s claiming only that its improper to have a summonses of this kind of a witness at all.
Justice Hugo L. Black: Well, is it the Government?s position that an Internal Revenue collector has a right to summon somebody, make out a case against defendant and not let the person who is the contemplated defendant get into the hearing?
Mr. Lawrence G. Wallace: I frankly don?t know the answer to that question Mr. Justice because it is not at issue in this case and I -- I?ve never had any occasion to look into it.
Justice Hugo L. Black: But it rather looks to me like it is, on the pleadings?
Mr. Lawrence G. Wallace: Well, that?s not the way we understand the case.(Voice Overlap) --
Justice Hugo L. Black: Was he not --
Mr. Lawrence G. Wallace: That that isn?t what he?s asked to do.
Chief Justice Warren E. Burger: Was he offered an opportunity to --
Mr. Lawrence G. Wallace: Well, no one has ever offered an opportunity.
No one has ever notified of a summonses.
It's only through, sort of a haphazard situation that someone other than the witness knows that a summonses has been issued.
This is true also if administrative procedure, subpoenas and the agencies.
The Securities in Exchange Commission for example issues a subpoena to a bank, doesn?t notify anyone else about it and if the bank produces the records that are asked for, that?s that.
This is not a hearing, all this is, is an investigation.
Justice Hugo L. Black: I thought it was a hearing?
Mr. Lawrence G. Wallace: Oh!
The summonses is nothing but an investigation.
Justice Hugo L. Black: Well --
Mr. Lawrence G. Wallace: That?s not a hearing.
Justice Hugo L. Black: Well, I don?t know how you define a hearing.
But if you summon a witness to come up before a man who is not a lawyer, he is not a judge, he is not a notary public ex officio justice of the peace and you summon in that to take evidence pointed directly to some individual, is it the Government?s position that he has no right to be there or knowing about it?
Mr. Lawrence G. Wallace: Well, as I say, that?s not at issue in this case, I don?t know what our position is.
I really -- I don?t feel I should take a position on the spur of the moment on that question.
I think it would be improper for me to do so.
Justice Hugo L. Black: Well, that?s alright.
At the present time, it looks to me like that is at issue?
Chief Justice Warren E. Burger: From your point of view Mr. Wallace, is this different in any way from the Government agency whether Treasury or FBI or others, calling on a person, a third person, for example a gun shop, they asked the gun shop to disclose its records to see whether they have sold a .38 caliber Smith & Wesson to a man who is under investigation, is this fundamentally any different from that or is it just essentially the same?
Mr. Lawrence G. Wallace: I think it's essentially the same that this is the kind of thing that a policeman does everyday when he questions people.
Justice Hugo L. Black: Well, where does a policeman have authority to summon people in and --
Mr. Lawrence G. Wallace: Well, not through a summonses, but --
Justice John M. Harlan: Well, I understand here there's a summonses?
Mr. Lawrence G. Wallace: Yes, but its -- very little different, our law is that he is going to ask these question.
As a matter of fact, usually these summonses operates not by having the man come to the Internal Revenue man at all, but the Internal Revenue man goes to the office and says, he?d like to see these records and the custodian of the records says, alright, here are the -- why don?t you look at the records.
Justice Hugo L. Black: That?s alright, that --
Mr. Lawrence G. Wallace: -- the police give me a summonses to put in my file.
Justice Hugo L. Black: (Voice Overlap) quite different, isn?t it?
The summoning of person to come before a man who is not a judge, has no judicial capacity to give evidence which is to be used to convict a man of a crime, that?s the different?
Mr. Lawrence G. Wallace: That -- this is an evidence that can be used in the criminal case --
Justice Hugo L. Black: Well, may be it can (Voice Overlap) I don?t know.
Mr. Lawrence G. Wallace: The records, -- the records can be introduced and he has a chance to object to the introduction of the records at the time of the trial.
Justice Hugo L. Black: Well, I?m talking about the witness who is summoned?
Mr. Lawrence G. Wallace: No, but he -- well, he has a right to confront a witness before his testimony can be used against him.
That?s the same as if the policeman asked somebody on the street something about him, then you have to bring him into court and make him say it again then have him cross-examined.
Justice Hugo L. Black: I can?t quite understand why you say it?s the same, simply meeting the man on the street and asking him a question.
You summon him up before a United States officer and ask him question, does he put onto oath?
Mr. Lawrence G. Wallace: I don?t know the answer to that, I assume he is.
Justice Hugo L. Black: And somebody finds out that they are investigating it to the extent that they want to be there to protect --
Mr. Lawrence G. Wallace: No, he wants to stop it altogether.
He doesn?t want to be there.
He just wants to stop it.
He says it can?t be done, that?s what at issue here.
Justice Hugo L. Black: Well, that maybe --
Mr. Lawrence G. Wallace: That?s the only thing he -- that?s the claim he made.
Justice Hugo L. Black: (Voice Overlap) --
Mr. Lawrence G. Wallace: Is that it can?t be done.
Justice John M. Harlan: I hope you're ? (Inaudible) a chance, (Inaudible) to give your views about the reasonableness.
Mr. Lawrence G. Wallace: Well, the reason in Kayes, yes, however its pronounced, I don?t know how the general pronounces his name, that involved an attempt to get from the accountant the working papers of the taxpayer?s attorney.
And in that situation, there was a proprietary interest being asserted by the attorney and a claim of privilege that the taxpayer might to assert and in that situation, the Court said that the general method that was used by the petitioner here is the appropriate way to assert those interests.
Now it just used general language, but I don?t think that it forecloses the issue of whether when there is no comparable interest in the records being disclosed, there should be any kind of anticipatory way that a taxpayer can prevent the investigation from going ahead or the records from being turned over, produced by a third person who was willing to produce them.
I don?t -- our view is that the case simply did not itself to that question and the Courts of Appeals have differed as to the implications of the case.
As to that question, our position is that this kind of anticipatory cutoff of the investigation can take place only at the behest of summon with that kind of an interest.
Justice John M. Harlan: What you're saying, I take it is that the broad language, if there is a broad language, in the displacement, has to be read in context to what the particular issue, wasn?t it?
Mr. Lawrence G. Wallace: Well, if that -- it -- I think so.
I think that was the taxpayer and that was the would-be intervener that the court was referring to.
And there the court did keep talking about how to assert their interests and that was the kind of interest involved.
Chief Justice Warren E. Burger: Would you say that the materials sought in the Reisman case was nearer to be being the kind in which the taxpayer had a proprietary interest than in the present case or less so?
Mr. Lawrence G. Wallace: Oh! It was much nearer to it.
I think the taxpayer had a claim of privilege that may or may not have been a valid claim.
But what was involved there according to the complaint was that the working papers of the taxpayer?s attorney which the attorney had turned over to the accountant and the accountant was being asked to produce them in the investigation and the attorney wanted to enjoin that claiming a proprietary interest in those papers and the court said that the attorney could intervene to assert that interest in a summonses enforcement proceeding and that the taxpayer could intervene to assert his interest which would have been a privilege interest, an interest in what would be disclosed there other than an anticipatory interest about possible future use that might be made of it.
Justice Harry A. Blackmun: Mr. Wallace, is it your position that this may actually accrue to the benefit of the taxpayer to with if your investigation turns up nothing that then no criminal prosecution will ever be instituted?
Mr. Lawrence G. Wallace: Well, that is true.
I always hesitate to say what may accrue to someone else?s benefit when he is supposing my position, but it certainly is true that in fewer than half of the cases in which full scale fraud investigations are made by special agents, are criminal prosecutions ever brought and yet in many more of the cases, fraud penalties are collected.
Justice Harry A. Blackmun: (Inaudible) to your answer to Mr. Justice Black?s question as to whether the witness would be under oath to be that you didn?t know?
Mr. Lawrence G. Wallace: I believe he would be under oath, but I just -- I am -- frankly, I?m not very knowledgeable about the proceedings at the summonses.
Chief Justice Warren E. Burger: If so, that?s something new in recent years because in former years, there were -- they were not, they were merely a question.
Mr. Lawrence G. Wallace: Well, then perhaps that?s what it is.
I -- I?m sure there?d be no oath taken in the business office when the Internal Revenue agent goes there and --
Justice Hugo L. Black: Would you mind giving us a memorandum on that, I understood they have a way?
Mr. Lawrence G. Wallace: Alright, I would be happy to furnish you with the memorandum, certainly Mr. Justice.
Justice Hugo L. Black: Well, on that particular point.
Mr. Lawrence G. Wallace: Yes, on that point.
Justice Hugo L. Black: Because I didn?t, Judge --Mr. Judge -- Justice Clark said in the Reisman case, that however the Government concedes that a witness or any interested party may attack the summonses before the hearing officer and was a man to whom who was required to appear a hearing officer?
Mr. Lawrence G. Wallace: No.
I believe that reference in the Reisman opinion is to the hearing before the judge or before a magistrate as to whether -- as -- at the hearing, that?s right, as to whether the summonses would be enforced.
I believe he?s referring to the summonses enforcement proceeding.
Justice Hugo L. Black: That?s right.
Well, the hearing officer, not before the judge?
Mr. Lawrence G. Wallace: Well, it can be brought before a magistrate, this kind of enforcement proceeding.
Justice Hugo L. Black: (Inaudible)
Mr. Lawrence G. Wallace: Although it?s usually brought before a judge.
Justice Hugo L. Black: Well, I imagine he knew the difference between a judge and the hearing officer and he said before a hearing officer, they have them note it.
Mr. Lawrence G. Wallace: Not in the Internal Revenue Service.
Justice Hugo L. Black: (Inaudible)
Mr. Lawrence G. Wallace: No, there are no hearings in the Internal Revenue Service.
It?s not an administrative agency; it?s a part of the executive.
Chief Justice Warren E. Burger: Very well, Mr. Wallace.
You have about five minutes left counsel.
Rebuttal of Robert E. Meldman
Mr. Robert E. Meldman: Thank you Mr. Chief Justice.
If I may possibly I can clarify some of the questions that were left open.
In response to a -- your inquiry Mr. Justice Black as to whether or not the individuals are put under oath.
There -- as a practical matter two procedures are followed.
When a summonses is served, if it is served that the place of business, an individual is not formally sworn under oath then asked to give the records over.
However, under the Internal Revenue Code, any information given to an officer of the Internal Revenue Service is considered to be the equivalent of being given under oath, since it is subject to a perjury charge if it is false whether he be sworn actually or not sworn.
The Section of the Internal Revenue Code provides specifically for perjury charges.
The second type of practical application is where an individual will be served with a summonses and requested to appear at the Internal Revenue Office, in office there.
The reference to the hearing officer in the Reisman case as is indicated in further on in the case is to the agent that issued the summonses.
He in essence conducts a hearing.
I think as Justice Black pointed out, it?s an informal grand jury if you would with a one man grand jury sitting there and he proceeds to gather evidence and information.
I might point out to the court that on page 9 of our appendix in the brown cover, the summonses reproduced and the beginning of the summonses reads, ?Greeting.
You are hereby summoned and required to appear before me, an officer of Internal Revenue Service,? and it goes on.
In the same style that a subpoena would be given.
The summonses on the bottom makes note of the fact that failure to comply with these summonses will render you liable to proceedings in the District Courts and on the backside of the summonses, it proceeds to tell you, you can be found of contempt and fined up to a thousand dollars and so on.
It?s a very commanding thing given to an individual on the outside.
Judge -- Chief Justice Burger had asked whether the United States in essence is really saying that, had something else been used, the taxpayer would not have objected if the same information could've been gotten by a subpoena duces tecum.
Mr. Chief Justice, I think that this is the nub of our case.
We say that there are grand jury proceedings.
We say that there are search warrants.
There are many remedies available to the Internal Revenue Service.
What we are objecting to is the use of this adminaturn -- administrative internal coercive summonses to take this taxpayer or take this third party and bring him in.
Chief Justice Warren E. Burger: Well, are you conceding that a grand jury could get this information without any difficulty?
Mr. Robert E. Meldman: Yes, Mr. Chief Justice.
We have never denied that.
We are strictly --
Chief Justice Warren E. Burger: Are you then suggesting as part of your total argument that if -- that Congress has no power to get it in this way that that leaves the enforcement aspect to calling people before grand juries, that?s what -- that?s where it would leave them, would it not?
Mr. Robert E. Meldman: I don?t believe so Mr. Chief Justice.
A search warrant is the other thing that can be used and the Internal Revenue Service is now beginning to use that.
This is what all the other law enforcement agencies use, is a search warrant.
As to the question whether this is criminal --
Justice Hugo L. Black: (Voice Overlap) may I ask you one question?
Mr. Robert E. Meldman: Yes.
Justice Hugo L. Black: Before whom did you ask to intervene, before what agency?
Mr. Robert E. Meldman: Mr. Justice Black, it is not in the record that came up here.
Originally a letter was sent to the agent that had issued this summonses, the Internal Revenue agents.
We had objected to the issuance of the summonses by the Revenue agent and asked to either confer ahead of -- have a hearing with him.
Because of what had happened in the past, our letter read if we did not receive a reply within 20 days, we will assume that you have rejected our request, this is what happened.
Justice Hugo L. Black: Well, do you concede that you were not seeking some kind of an order to intervene before the hearing officer here in order to present your views before him?
Mr. Robert E. Meldman: Well, Your Honor, we were objecting to the summonses and be it before the hearing officer or otherwise.
If the hearing officer would seat in the position where he could make a determination, whether or not that summonses was valid, we would have sought a full hearing there.
We made a token attempt to make an intervention there if you would.
Justice Byron R. White: But your issue is that he -- they aren't entitled to get the records at all by this mode?
Mr. Robert E. Meldman: By this mode?
This is correct.
Justice Byron R. White: And it wouldn?t satisfy you if the ruling was that, yes, they can get them, but you can be present after they get them?
Mr. Robert E. Meldman: I think this would be a great step forward Mr. Justice White.
Justice Byron R. White: And it wouldn't satisfy you, that isn?t your argument here.
Mr. Robert E. Meldman: No, it isn?t.
Justice Byron R. White: Yes.
Mr. Robert E. Meldman: I may tell you that.
Justice Harry A. Blackmun: In effect, does the result of your position if it is upheld that 7602 is nullified for all practical purposes?
Mr. Robert E. Meldman: No, I don?t believe so.
7602 is to be used in investigating civil tax liability and checking a man?s income tax return and it should be left and they should have this power to verify deductions to see if proper interest has been reported and so on.
We have no quarrel with that.
Chief Justice Warren E. Burger: But sometimes really we know as a practical matter, that if the agent went by this process under 7602 and found out that the deductions that a taxpayer has been claiming for interest for a long period past, as a regular practice had never been in fact paid, that civil inquiry would lead very likely to a criminal prosecution, would it not?
Mr. Robert E. Meldman: That?s true Mr. Chief Justice, however, we have not even objected to the summonses in that case.
We?ve only objected to the use of the summonses by a special agent after a referral to the Intelligence Division when he is making a full-scale criminal investigation.
Our objection is that virtually now, the only use of these summonses and the Government admits this at page 30 into their brief is in criminal cases and not for the statutory authority that they were originally granted.
Justice Harry A. Blackmun: Well, if that is so, then your position does mean that 7602 is nullified?
Mr. Robert E. Meldman: If they continue to only make this -- use of the summonses, yes it would.
Justice Potter Stewart: Well, what -- the way to enforce your position I suppose would be to say that whenever a 7602 summonses is issued and responded to the taxpayer then being investigated cannot be criminally prosecuted, that would be the sanction to enforce your position, would it not?
Mr. Robert E. Meldman: Yes Your Honor and there have been cases cited in the brief, I believe Hinsky (ph) versus Clark which did just that.
The District Court enforce the summonses with the provision that they could not be used in a criminal case.
Justice Potter Stewart: Right, alright.
Chief Justice Warren E. Burger: Thank you.
Justice Potter Stewart: Thank you.
Chief Justice Warren E. Burger: The case is submitted.