CALIFORNIA BANKERS ASSN. v. SHULTZ
Legal provision: Amendment 4: Fourth Amendment
Argument of John H. Anderson
Chief Justice Warren E. Burger: We'll hear arguments next in 72-985, 72-1073, 72-1196.
Mr. Anderson you may proceed whenever you’re ready.
Mr. John H. Anderson: Mr. Chief Justice and may it please the Court.
My Name is John Anderson and I represent in these consolidated cases, the California Bankers Association.
These consolidated cases entail a challenge to an Act of Congress passed late in 1970 that has become to be known as the Bank Secrecy Act.
And in our discussions today, I think that initially important to distinguish as much as we can at all times between the two aspects of that Act.
One aspect to that Act entails and requires the banks uninsured and otherwise of this nation to microfilm and copy virtually every piece of paper that flows through the domestic banking system and to keep that paper microfilmed before a period ranging from two to five years.
The second part of the Act, Title II requires banks to make reports of certain kinds of designated currency transactions, domestic and foreign.
With that background in mind and in June of 1972, the private litigants in this case initiated in an action in United States District Court for the Northern District of California seeking to enjoin enforcement of both the recordkeeping and the reporting sections of the Bank Secrecy Act.
With one judge dissenting a three-judge court denied motions to enjoin enforcements of the recordkeeping section of the act but granted an injunction enjoining enforcement of the automatic reporting provisions of the Act.
The Government has appealed from that portion of that order enjoining enforcement of the reporting provisions.
The private litigants have appealed from that portion of the order refusing to enjoin the so called recordkeeping sections.
Let me begin with a very brief summary description of just what those record -- excuse me, reporting provisions entail.
The Act compels reports of all domestic currency transactions found by the secretary “have a high degree of usefulness in criminal, tax or regulatory investigatings -- investigations or proceedings.”
The implementing regulations currently enforced require banks among others to report automatically all $10,000.00 currency transactions.
And I should interject here that when I say currently enforced I use the phrase advisably because the Act authorizes and the regulations following through on that authorize a change in that dollar amount or in fact the definition of transaction at any time by the treasury secretary.
The transaction report of the currency transaction requires disclosure of a wide variety of information, including the name, address and business or profession of the party involved in the transaction, the name, address and business of the party or business entity for whom it may have been conducted --
Justice William J. Brennan: Ordinarily, what form would the transaction take this cash and a check?
Mr. John H. Anderson: No.
This is a currency transaction Mr. Justice Brennan which is defined in the regulations as being cash or near cash monetary instruments.
It does not entail for example a situation in which a person would go into a bank and simply deposit a check and not take out any currency.
Justice William J. Brennan: No, no. I mean does he -- suppose he cashes the check for $15,000.00.
Mr. John H. Anderson: That would included and as a matter of fact, in listing the requirements that must be reported at the time of a designated transaction, it requires a description of the nature of the transaction whatever that means together with the tight amount and denomination of the currency involved and a description of any check involved in the transaction.
Justice William J. Brennan: So that if I came in and while I cashed a check for $15,000.00 before -- it was cashed, the teller, whoever it was would have to get all this information from me, is that it?
Mr. John H. Anderson: That is correct.
Justice William J. Brennan: And then he’d also have to note down how many $50.00 bills or how many $100.00 and that sort of thing.
Mr. John H. Anderson: That is also correct.
Let me --
Justice William J. Brennan: What else?
Mr. John H. Anderson: And it also requires a description, as I say, the check involved also a description of the ID that is presented by the party seeking to engage in the transaction.
Justice William J. Brennan: What that’s mean?
Mr. John H. Anderson: This presumably means something like a driver’s license or a birth certificate or some other form of identification that would be acceptable to the banking entity.
Now, there is an exception --
Justice William J. Brennan: Description of the check would be -- I expect on what bank it was drawn and that sort of thing?
Mr. John H. Anderson: That is not further defined in the regulations Mr. Justice.
However, I will like to interject in one time, there is an exception to the reporting requirements.
The exception itself is the basis for one of our challenges to the constitutionality of this Act and it reads in words in effect to the following proposition that “if the bank in its judgment decides that this transaction is normal and regular for the person engaging in it, i.e. perhaps of a store which deals in large amount of cash that it need be reported.
However, we submit that the description is so vague as to leave the banks in a position of not knowing when in fact a prescribed transaction has occurred and since in fact there are criminal penalties, attendant refusal or failure to give the report, it raises a serious due process notice problem in our mind.
Justice William J. Brennan: I suppose, on the face of it that would mean, if I came in twice a week with checks for $15,000.00 to be cashed, a time might come when the bank would sink -- was no reason any longer to take that information from me because it’s a regular, even though I might be kingpin of the robbery racket?
Mr. John H. Anderson: That is correct Mr. Justice Brennan, however it has to be said that the regulation is couched in terms of regular and normal for the business or profession involved, I suppose --
Chief Justice Warren E. Burger: Wouldn’t it more likely to be that if they knew that particular person ran a machine shop with the payroll of about $15,000.00 a week that they could then conclude that this was normal for payroll purposes and not make a report.
Mr. John H. Anderson: That is true.
Chief Justice Warren E. Burger: But let's assume, that on the other hand, he was widely reputed to be a member of someone of this organized crime groups, do you think the bank could safely make that decision in that way?
Mr. John H. Anderson: I don’t know, frankly, Mr. Chief Justice --
Chief Justice Warren E. Burger: Well, what would you advice them if they asked you?
Mr. John H. Anderson: The -- my the advice to the bank in that particular instance would be in view of fact that criminal penalties attach failure to make a report as required by the Act that it is in your best interest to act cautiously and to make the report if you have any reason to believe this is not and regular for this particular party.
Chief Justice Warren E. Burger: I suppose you weigh in the equation, the facts that I have mentioned hypothetically that the man was engaged widely -- appear to be engaged in on lawful activity and unlike the other gentle man, did not have a machine shop with a $15,000.00 payroll every week.
Mr. John H. Anderson: Yes I think we certainly would, yes (Voice Overlap) --
Justice William H. Rehnquist: Well, doesn’t your answer to the chief justice’s question solve at least a good part of vagueness problem since if you don’t try to come within the exemption, the bank is perfectly free to report all transactions.
It doesn’t have to rely on the normal exception?
Mr. John H. Anderson: Yes.
The banks of course are free to report all transactions.
However, the -- our objection to the reporting requirement is not vagueness and as such.
Our objections run to the Fourth Amendment problem which I’ll get to if I -- if I may in just a moment.
Justice William H. Rehnquist: Well, doesn’t that at least solve your vagueness arguments so far as the exception is concerned?
Mr. John H. Anderson: Well, it is simply to say that in every instance that whenever a $10,000.00 currency transaction occurs of which they are in the case of large commercial banks, presumably many hundred a day, that a report would be required to be filed and I think my brother from the Solicitor General's office would agree that’s not what the treasury department wants.
It wants reports of transactions which in the judgment of the bank are unusual for that particular depositor.
The result otherwise would be a simple inundation of the Treasury Department with reports, which it presumably couldn’t use and would be useless to the extent of 95%.
So I -- I think as a practical matter I’d have to answer in that fashion.
The summary with respect to the reporting obligation I think can be put as simply this, that when the transaction occurred, the banks by some fashion are obligated to obtain a wide variety of information, about that transaction which in the absence of the compulsion under this Act, they would under no circumstances need for their own banking purposes, this is an obligation imposed by the government.
Now, turning to a very brief summary description of the recordkeeping, the Act makes a finding of adequate records, have a high degree of usefulness in the same words; criminal, tax and regulatory investigations or proceedings.
It makes a further finding that microfilm or other copies of bank records are highly useful and the Act then provides that, and I am quoting now “where the Secretary of the Treasury determines that the maintenance of appropriate types of records and other evidence by insured banks has a high degree of usefulness in criminal, tax or regulatory investigations or proceedings, he shall prescribe records -- regulations to carry out the purposes of the Act.”
Now, the regulations and alleged implementation of foregoing purposes of the Act have required the banks of the United States to copy and to retain as I have said for a period of -- from two to five years, virtually every single piece of paper that finds it way into the American Domestic Banking System with two exceptions.
One exception has to do with payroll checks emanating from a large payroll.
The catch at this point of course is that although they're not recorded at the issuing point, they would be recorded as they go into the presumably the account of the payee.
The second exception is for checks of under $100.00 in amount.
The catch here is, first that the bank microfilming equipment as a matter of common knowledge and although we had no chance to prove this in the -- at the District Court because this amendment was made after this -- the District Court decision, but the obligation not to copy checks under a hundred dollars is of little or no practical use to the bank because the microfilm equipment simply can’t distinguish between $100.00 checks and $1,000.00 checks.
Now, I will not read before the Court at this point, all of the documents that are required to be copied.
I submit, however, that a reading of the regulations, quoted on pages 38 and 39, excuse me, of the appendix will confirm our contention that this Act requires banks to copy and to retain for a period of two to five years, every single piece of paper that is submitted into the American Domestic Banking System in any formal sense, including such things as deposit slips, withdrawal slips and other advises to the bank.
Now the next --
Unknown Speaker: What page are you talking about?
Mr. John H. Anderson: I’m referring to pages 38 and 39 of the appendix in the red colored brief or in the blue colored brief.
Unknown Speaker: On the appendix, the colored brief.
Mr. John H. Anderson: Yes.
That is the section of the regulations that are set forth both in the blue colored and in the red colored brief.
The purposes of the Act are not in dispute.
The main undisputed purpose of the Bank Secrecy Act was to aid in the detection of what the Government calls, White Collared Crimes and the government has repeatedly described the act in the - in that language.
Justice Byron R. White: Could I ask you a --
Mr. John H. Anderson: Yes.
Justice Byron R. White: What the bank policy is anyway, it is not (Inaudible)
Mr. John H. Anderson: With respect to copying of documents, the bank practices as alleged in the District Court uncontroverted varies very wildly.
Some banks keep an enormous number of records for a short time.
Other banks keep a small number of records for a long time and they are all numerous in between positions occupied by the, bank.
The uncontrovered evidence in the District Court was that the Bank of America, as an example which is commonly regarded as America’s bank did not keep more than half of the newly prescribed documents.
For example, did not keep checks for a two years, did not keep various other documents for five years and so forth.
Justice Lewis F. Powell: Aren’t checks microfilmed routinely in major banks like Bank of America?
Mr. John H. Anderson: Mr. Justice Powell I think that was a question Mr. Justice White was just asking and the evidence in the District Court was that the practice varied enormously from bank to bank.
And that for example in the Bank of America to which you referred which there was some little evidence in the District Court, the evidence was that yes, they did microfilm some checks, but they only kept them for a period of from 10, to 30 or 40 days for their own convenience and for purposes of dispute with depositor with respect to payment amounts and so forth.
The regulations under this Act require the banks to film, first of all, all the checks and secondly to keep them for a minimum of tow years.
So, that’s the case with the Bank of America.
But I think the central point that has to be made at this point is this, that absent, these requirements of recordkeeping, the practice among the banks of the United States varies very widely.
Some keep --
Justice Harry A. Blackmun: No, is that true, I thought you were talking about California banks?
Mr. John H. Anderson: No, I’m referring to the practice nationally, it is certainly the case in California also.
Justice Harry A. Blackmun: But do you think in or are you stating that the practice nationally is as varied as you indicated just now for California?
Mr. John H. Anderson: Mr. Justice Blackmun my information is that it is quite broad and as a matter of fact, one of these --
Justice Byron R. White: But that isn’t in the record?
Mr. John H. Anderson: There's nothing in evidence on that on the record, that is correct.
Justice Harry A. Blackmun: At least you surprised me by your answer.
I had assumed as I think Mr. Justice Powell assumed from our part of the country that all banks kept microfilms of all checks, maybe California is different.
Mr. John H. Anderson: That is not -- that is simply not the case.
As a matter of fact, one of the primary reasons for this legislation given by the Government at the time it was being proposed was that banks did not keep the records, and therefore, they found it difficult when subpoenaing records in the investigation of certain alleged crimes to obtain the records in question and it was -- that was part of the purposes or motivation for this.
Justice Harry A. Blackmun: Now you said a little while ago that the Bank of America has kept microfilm of some checks.
How did they distinguish between those they kept and those they did not keep?
Mr. John H. Anderson: No I -- I may have misspoke Mr. Justice Blackmun.
I believe I said that they keep microfilms of checks for a short period of time ranging from 10 to 30, some odd days.
There is an affidavit in the appendix describing the Bank of America’s practice on this point as an example and it is cited in our brief.
Justice William H. Rehnquist: Well, does the Bank of America keep the original check for a longer period of time than that?
Mr. John H. Anderson: No.
Mr. Justice Rehnquist the practice as I understand it, it is evidenced by an affidavit and contested in the record is that they microfilm the check and the original is returned to the payor in the normal course of banking operations.
Justice William H. Rehnquist: Oh!
The drawer -- should the drawer gets the check, yes.
Justice Byron R. White: Well, any - in any banks any checks they get in, drawn on some other bank, they said no.
Mr. John H. Anderson: Yes.
They return to the bank which is (Voice Overlap).
Justice Byron R. White: They do keep microfilm of those for a short time.
Mr. John H. Anderson: Yes.
That’s right, all checks.
Justice Byron R. White: But the question is whether it’s really -- whether its reasonable to have them keep as long, this regulation (Voice Overlap) --
Mr. John H. Anderson: No, I don’t think.
I think there is a substantial difference, legal difference between a compulsion to keep checks under order of law as under a statute and records or checks that are kept in the ordinary course of banking business for the bank's own purposes.
And secondly although we talk mainly about checks, I again respectfully invite the Court’s attention to that exhaustive list of documents which are required to be kept and which are listed on pages 38 and 39 of the appendix, neither the red nor the blue colored brief.
Now, as I have said the undisputed --
Justice William J. Brennan: Well, may I ask you, assuming its all as onerous as you suggest to require the banks to do this, what is the bearing of that on the issue we have to decide?'
Mr. John H. Anderson: Well, first of all, that turns to the real question which are our basic legal objections to the recordkeeping requirements --
Justice William J. Brennan: Well, not -- I don’t get to it if you're not ready to (Voice Overlap).
Mr. John H. Anderson: Well, I -- watching the time because we have a split argument, Mr. Justice Brennan.
Let me move to that because I do think it bears some discussion here.
The recordkeeping is in our judgment unconstitutional for three rather specific reasons.
First of all, in a quick summary, an analysis of those cases which this Court has considered dealing with compulsory or required recordkeeping will show that they have been in aid of a specific legislative, to use a broader word, national goal.
For example, wages and price -- wage in our laws, emergency price regulation or the tax laws are classic examples in which there is a specific Congressional purpose in which the Congress has approved recordkeeping, recognizing I would suppose that the recordkeeping as such imposes some burden on the citizenry so the question always in looking at the statute is, does this recordkeeping requirement commensurate with the legislative objective.
Here the Court will respectfully note that this is not in a -- of any specific Congressional goal or any specific Congressional policy.
It is in aid of all Government policy, criminal, civil, tax, regulatory, investigative or a proceeding which presumably means administrative rulemaking.
It is --
Justice William H. Rehnquist: What's your argu -- what is the argument -- what constitutional is -- provision is violated if it -- it falls under that first attack that you make?
Mr. John H. Anderson: I think it violated in two specific instances Mr. Justice Rehnquist.
First of all, it removes the ability of this Court to weigh the recordkeeping against a specific Government need therefore --
Justice William H. Rehnquist: But how -- but what provision of the constitution does that violate?
Mr. John H. Anderson: Well, there is a requirement beginning with the first recordkeeping case of consequent, Morton Salt versus the United States in which the Court says that you could -- can be required to keep record providing that it is reasonable and they bear some reasonable relation to a legitimate Congressional or Government goal.
Now, I submit to this Court --
Justice Byron R. White: What is that, a due process --?
Mr. John H. Anderson: No, that was a Fourth Amendment.
Justice Byron R. White: (Voice Overlap) connect with the -- your Fourth Amendment.
Mr. John H. Anderson: That is correct.
That is correct.
Justice Byron R. White: Well, so it isn’t separate from what you're going to get through (Inaudible)
Mr. John H. Anderson: I think Mr. Justice White, I am at it.
I think I have gone through to it by coming to the --
Justice Byron R. White: So you are going to end up with one constitutional objection?
Mr. John H. Anderson: well, it is a Fourth Amendment objection, that is correct, but it refers both to the recordkeeping and the reporting.
If I may return to the question Mr. Justice Rehnquist raised with respect to what's wrong with that kind of a recordkeeping as such, I submit to the court that when the legi --
Justice Byron R. White: (Inaudible)
Mr. John H. Anderson: -- the Congress has said our objective is all purpose, namely, all Government business, criminal, civil, regulatory and otherwise and you cannot weigh that against the recordkeeping objection.
There is no way that you can follow the test or the benchmark given in the Morton Salt case, namely that it has some reasonable relationship because for example, if Congress were to pass a new criminal statute the next year, you wouldn’t know what it was and you wouldn’t be able to equate it against the recordkeeping obligation which is imposed today.
Now the second thing which I believe to be more serious is the -- that analysis of the recordkeeping cases approved by this Court would show that they serve one of two purposes either for the purpose of regulating the record keeper.
A classic example would be a requirement that employers’ report wages and hours pay so that the waging (Voice Overlap) laws could be enforced or child labor laws could be enforced.
Price control is another example in which the vendor is required to indicate which charge -- prices he is charging for his items, these are essential to regulate the record keeper.
The second category which this Court has considered have been though -- that kind of recordkeeping required to regulate a particular business.
Two examples; firearms dealers in which there is a requirement that records to be kept for the purpose of regulating that particular business which is deemed by the Congress to be dangerous or to have some import beyond the normal sale of wares.
Another example would be the sale of dangerous drugs in which there is a record keeping requirement again, because that -- the nature of the business is such that it seems to call for this kind of recordkeeping.
Here the recordkeeping by the statement of the Congress, and by the Government’s own admission has absolutely nothing to do with the regulation of the record keeper.
It has nothing to do with the regulation of America’s financial institutions.
It is by its own design and enlistment of those institutions for the purposes of monitoring the people with whom those institutions deal.
Justice William H. Rehnquist: How about the -- how about the IRS requirement that you notify, the Government of everybody you paid dividends to and that sort of thing?
Mr. John H. Anderson: Yes.
That Mr. Justice Rehnquist isn’t my judgment.
A good example of a situation in which it is necessary for the purpose of regulating the record keeper or in this case the reporting entity because those dividends are presumably deductible as an expense by the reporting entity and secondly, in more -- in this particular instance, that is a classic example, at least in my judgment of a reporting that is done in aid of a specific legislative Congressional objective, namely the collection of internal revenue and I don’t think that this statute would --
Justice Potter Stewart: Is that your -- your mistaken I think if you say that dividends are deductible by the corporations, they're not and that’s enlisting the services of the corporation to monitor tax payers, is it not?
Mr. John H. Anderson: I stand corrected Mr. Justice Stewart.
The second part of the argument however I think holds, namely that the reporting in that instance is in aid of a specific government goal which is the collection of internal revenues, it is not --
Justice Potter Stewart: But it is enlisting a corporation --
Mr. John H. Anderson: To the extent that it --
Justice Potter Stewart: -- to check on the tax returns of its shareholders, is it not?
Mr. John H. Anderson: To the extent and I stand corrected to extent it is not deductible, that is correct, that is correct.
The special, I find myself talking about the recordkeeping.
Justice Byron R. White: You think if that is alright, but if the purpose is not to enforce one law but several, you might even more justified?
Mr. John H. Anderson: Well, Mr. Justice White, I think the difficulty with that is twofold.
First of all, in the case in which Congress has compelled reporting or recordkeeping for the purpose of enforcing a specific law, Congress has gone through the process of deciding whether the recordkeeping in that case is justified, warranted and so on and so forth, there's been some weighing of its utility in a particular instance.
Secondly, this Court, I would submit would find it extremely difficult to test the reasonableness of this recordkeeping when the objective is not against a particular criminal statute or not against a particular civil law, but is in aid of all Government interest, however, defined.
The special evil it seems to me particularly with respect to the recordkeeping is that there appear to be any number of alternatives available which are not explored.
And unlike the case, for example the tax laws or some of the other civil regulatory laws in which recordkeeping or reporting by the entity involved appears to be absolutely essential to its enforcement.
The sheer arrest records that are available and to some extent are quoted in our brief would suggest that this not the only way in which the criminal and civil and regulatory laws of the United States can be enforced.
They happen to be at least in their judgment essential to those other laws, but not in this case.
Justice William J. Brennan: Mr. Anderson the colloquy between you and Mr. Justice Stewart, does this imply that insofar as these recordkeeping requirements are in aid of the internal revenue laws, you don’t object to them?
Mr. John H. Anderson: No, I object to the recordkeeping because I believe -- excuse me, I see the (Voice Overlap) --
Justice William J. Brennan: No, I know, it extends to more just a tax but it also -- among those things that you cited was taxed.
Mr. John H. Anderson: That is correct.
And it --
Justice William J. Brennan: Well, do suggest that even to that extent, this requirement is involved?
Mr. John H. Anderson: I suggest it’s invalid not because it’s not specifically related to a purpose, but for the other reasons that I've mention, namely that there is no way given the breadth of the obligation that this Court can perform its historic function and testing whether that recordkeeping obligation is reasonable under the Fourth Amendment.
Chief Justice Warren E. Burger: Your objection seems to go to the fact that the statute has many objectives and targets instead of just one, and perhaps your colleague will enlarge on that a little bit if he’s covering some of those points.
Mr. John H. Anderson: Thank you Mr. Chief Justice.
Chief Justice Warren E. Burger: Mr. Marson.
Argument of Charles C. Marson
Mr. Charles C. Marson: Thank you Mr. Chief Justice and may it please the Court.
I would be happy to enlarge on that point.
There is one essential difference between all of the recordkeeping and reporting statutes mentioned so far in the Bank Secrecy Act and that is that this one is in aid of criminal law enforcement and all the others are in aid of civil law enforcement.
Perhaps, first I should say --
Chief Justice Warren E. Burger: Oh!
Isn’t the -- doesn’t the dividend reporting aid, is that an aid of criminal --
Mr. Charles C. Marson: Well --
Chief Justice Warren E. Burger: -- as a man the receives a lot of dividends and never reports them deliberately.
Mr. Charles C. Marson: It can be tangentially useful to the criminal law --
Chief Justice Warren E. Burger: Let's say for the purpose --
Mr. Charles C. Marson: -- but its basic purpose --
Chief Justice Warren E. Burger: I think pretty (Voice Overlap) --
Mr. Charles C. Marson: -- purpose is to enforce the civil tax.
In Shapiro versus Thompson for example, the required records were primarily in aid of a civil regulatory system.
In Shapiro they were used for a criminal purpose but they were primarily in aid of some -- of a civil system.
In United States versus Sullivan in 1927, this Court held that one could not refuse to give it -- a tax return on the grounds of self-incrimination because its purpose was to collect -- it was neutral, it was a -- direct to the population at large.
Its purpose was to collect civil information for the tax.
Chief Justice Warren E. Burger: Aren’t you think the social security reporting requirements have more than one purpose?
Mr. Charles C. Marson: Certainly they do but not a primarily and almost exclusively criminal one, no.
If this Court permits reports and records to be kept and compelled in aid of the enforcement of the criminal law, it abolishes its supervisorial duty over subpoenas and summonses and the power of the Government to compel documents from anybody except --
Justice Harry A. Blackmun: What about those reporting requirements with respect to sales of firearms and the like?
Mr. Charles C. Marson: That’s an example of the regulation both of the seller and of the buyer.
My interpretation of what Mr. Anders -- the categories in which Mr. Anderson put these previously existing laws were -- is a little bit different, I would say that all this preexisting laws regulate other than the record keeper, the record keeper’s costumer or the record keeper’s costumer’s tax liability for example in his relationship to the record keeper.
The Donaldson case is a good example where they subpoenaed the records of the employees, former employer and the former employer’s account in order to check on the tax liability of the employee.
That was a record kept by the record keeper which was relevant to tax liability of the subject to the records, but only out of the relationship between the two whereas the record kept a -- Mr. Justice Brennan’s hypothetical $15,000.00 check, is a record directed to the relationship between him and some fourth party of whom criminality may be suspected.
I think I should back up a little bit and identify the somewhat --
Chief Justice Warren E. Burger: Well, it might also tend to produce some evidence of criminality on the part of the person who was going into a bank and buying $20,000.00 worth of drafts on a Swiss -- payable on a Swiss bank every week, wouldn’t it?
Mr. Charles C. Marson: If I tend to do that, any record keeping requirement might tend in some cases to evidence criminality, but one which is for, “the purpose,” and I am quoting the Government’s brief of enforcing the criminal law is a wholly different animal than one which is for the primary purpose of enforcing the civil law and has tangential criminal consequences.
The Government doesn’t disagree that compelling a report as opposed to the keeping of the record, is a search and seizure governed by the Fourth Amendment.
It doesn’t disagree that it is the criminal law for which these are largely compelled, but it does not explain why the warrant requirement has no application here while there is no judicial supervision whatsoever over these reports.
It doesn’t explain why it is abolished, not only the requirement of probable cause, but even the --
Justice Byron R. White: What standing have you got to object to that?
Mr. Charles C. Marson: To which?
I’m afraid I don’t understand your question.
Justice Byron R. White: Are you -- the warrant requirement as a -- to enforce your -- you're saying the warrant requirement would apply in the enforcement of the criminal law against somebody else and this just runs around the warrant requirement.
Mr. Charles C. Marson: Now, I rep -- I think I should inform the Court as to who it is that I represent here.
I represent Congressman Stark, a bank costumer, other foreign and domestic bank costumers, the Security National Bank and the American Civil Liberties Union.
Justice Byron R. White: So you're a -- you're really objecting to thank keeping records of your affair, of your client's affair?
Mr. Charles C. Marson: Yes, I also represent one foreign or four foreign investors who must affirmatively report their holdings and their transactions across the border and analytically we feel the foreign and domestic reporting requirements are constitutionally the same --
Justice Byron R. White: You are arguing reporting requirements more than record keeping?
Mr. Charles C. Marson: We are arguing them both.
Frankly from a constitutional point of view, we think the record keeping requirements are a little more frightful even than the reporting requirements.
Justice Byron R. White: Well, maybe its frightful but I don’t know about -- what about the Fourth Amendment, you may have --
Mr. Charles C. Marson: Well, the Fourth Amendment --
Justice Byron R. White: You may -- you as a bank costumer objecting to the bank having to keep records.
Mr. Charles C. Marson: I as a lawyer representing clients who must report -- object to the reports.
I, representing bank costumers whose records are kept under the coercion of the act object to the keeping of the records.
Justice Thurgood Marshall: Why?
Mr. Charles C. Marson: Because they violate the Fourth Amendment, the Fourth and Fifth Amendments combined and --
Justice Thurgood Marshall: Well, don’t you think a bank has the right to keep a record that will protect itself in case of a suit?
Mr. Charles C. Marson: Certainly it does and it already does then its --
Justice Thurgood Marshall: Well, I (Voice Overlap) -- well, why can’t it keep those reports?
Mr. Charles C. Marson: It does.
And we have no complaint directed to any record which the bank keeps in its own business judgment --
Justice Thurgood Marshall: Well, don’t -- you said you objected to the keeping of the record?
Mr. Charles C. Marson: We do when it is coerced by the Government and not relevant to the business purposes of the bank, then and only then do we object.
Justice Thurgood Marshall: Well, you have to have both coercion and relevancy because I can find relevancy without any problem.
Mr. Charles C. Marson: If, but for the act, the record would not be made or kept, then we object to it.
Justice Thurgood Marshall: On what ground?
Mr. Charles C. Marson: Because the bank acts as agent of the Government in doing that because its irrelevant to the regulatory purpose and because it constitutes a search.
Justice Thurgood Marshall: Because the keeper -- report, the bank might not turn the reports over.
Mr. Charles C. Marson: The bank as a matter of practice is (Voice Overlap) --
Justice Thurgood Marshall: Well, if the bank is keeping -- if the bank has been keeping reports for the last 35 years, would you still have a case?
Mr. Charles C. Marson: Yes, we would because the banks --
Justice Thurgood Marshall: Or you just found out?
Mr. Charles C. Marson: No.
Because the banks are not keeping as many records as long as the bank Secrecy Act coerces them to do.
Justice Thurgood Marshall: Well, suppose they had been?
Mr. Charles C. Marson: We have no objection to records kept in the ordinary course of business, none at all.
These are not kept in the ordinary course of business.
They are kept under the coercion of the Act.
The Act was passed for the purpose of coercing the keeping --
Justice Thurgood Marshall: Do you object to the keeping of the reports because they are given over to the Government, that’s your point isn’t it?
Mr. Charles C. Marson: No, it's one of our points.
Justice Thurgood Marshall: Well, if you win on that, would you give up the other one?
Mr. Charles C. Marson: If we win, we’ll give up the ones that we don’t need, yes.[Laughter]
We object only to the records that wouldn’t be there, but for the Act not for the records that would be there in the exercise of the business judgment of the bank, for example, to protect itself from suit, for example, to verify a statement that came back to the costumer.
Those, we have no problem with.
Only when we pass the point of business judgment and enter area of records not made or kept but for the Act, do we have a constitutional objection.
We feel that those -- that enters the area of agency that once the bank passes out of its business and regulatory function and enters into its unwilling function as keeping records as essentially a surveillance mechanism for the government, then they're acting in agency role.
The Government’s only answer to that is to quote Mr. Justice White’s opinion in United States versus White and say it’s just like a willing informant receiving information from a willing confidant and turning it over to the Government.
We think that analogy has no merit at all.
In the first place, the banks here, as their presence in Court testifies are not willing informants to the Government.
They object to the requirement, they go to jail if they don’t fulfill it.
In the second, it is by no means voluntary for the bank costumer to deal with the bank in the sense it is for Mr. Hoff ought to deal with the informant or Mr. White to deal with the informant in those two decisions.
The Government basically says that if you know these people are agencies of the Government, something not known, in Aurthur and White, your choice is to keep dealing with them and will call that voluntary or to give up banking and for that matter financial institutions entirely.
You may carry your cash to everybody you owe money to even if it’s the other end of the country or you may deal voluntarily with the agent of the bank.
We think that that distorts the meaning of the term voluntary beyond all recognition and that is the only answer the Government has to our theory that when a bank makes or keeps a record, it would not otherwise make or keep in its business judgment, it acts as an agent of the Government.
If it does that then analytically, there is no difference between the required reports and the required records because the search of the records has to be measured as of the time the agent of the Government, i.e. the bank, acts and copies the record.
Now, there is solid precedent aside from this agency theory for equating the constitutional effect of the recordkeeping and the reporting.
It's found in Marchetti versus United States.
There, the Court on rehearing asked the parties to brief the question of the effect of Shapiro versus United States and the Government repeatedly insisted in its brief that there was no application to Marchetti of Shapiro because Shapiro involved records and Marchetti involved reports.
In footnote 14 of Mr. Justice Harlan’s opinion in that case, he said, “The Court finds no meaningful distinction between the two.”
Now in Shapiro, a subpoena was issued for the records that were required to be kept, issued to a party who had adversary interest in contesting that subpoena.
Here, the situation is worse because the subpoena issues to a bank that has no such adversary interest.
The bank as a matter of general practice frequently, especially in violation of its higher level policy by lower level employees gives law enforcement what they ask for without a summons.
Even if they get a summons, they put it in the file and turn the material over.
The Government does not deny this -- these facts, the legislative history makes them perfectly plain.
People simply do not get a chance to contest subpoenas directed to their bank account in the ordinary course of events.
Even if they do, the Government’s reading of Couch and Donaldson would give no standing to the parties to assert Fourth and Fifth Amendment rights should that subpoena ever be discovered by them in time to litigate it.
Under our reading of course, the costumer does have Fourth and Fifth Amendment interest in records not otherwise made or kept in the business judgment of the bank and would under Couch and Donaldson have standing to object.
But even that would not avail the costumer a very much.
Let’s suppose that I am prosecuted on the basis of a copy of a check subpoenaed from my bank.
The Government says, “Well, it will be time enough for you to raise your Fourth and Fifth Amendment objections when you are prosecuted on the basis of the check.”
What would I have to prove?
I would have to prove that in the ordinary business practice of my bank, the check would not have been copied and it was, but for the Act that the check was copied.
Now, since ordinary business practice stopped -- practice stopped in July 1, 1972 when this regulations went into effect and since they went into effect because of rapid technological change as the years go by, that burden of proof changes from very difficult which it is now to impossible which it will be in a few years.
Next, the Government says, “Well, you have time enough to raise these objections when you're prosecuted or otherwise proceeded against without paying any attention to the relief we ask here.
If I successfully suppress that check, all I get is the suppression of one check.
We ask here for the invalidation of the Act.
But finally and most important when the Government says that it is time -- time enough when the subpoena is served in your bank, should you luck -- be lucky enough to find out about it and litigate it.
To litigate these questions, it ignores the difference between the Fourth Amendment in the exclusionary rule.
As Mr. Justice Rehnquist pointed out quite correctly in this opinion for the Court in U.S. v. Robinson only last month, virtually all of this Court’s Fourth Amendment jurisprudence has arisen since Weeks versus United States and in the context of the exclusionary rule.
This is one of the rare and happy cases in which you have innocent parties before you asking for the protection of privacy afforded by the Fourth Amendment.
The Government saying that we’re premature in this case because we haven’t been preceded against ignores the fact that the Fourth Amendment protects the innocent as well as the guilty to invert an old phrase, and ignores the fact that the Fourth Amendment protects privacy, not guilty secrets.
And so we are not prematurely here even assuming that we get notice of a subpoena of our bank account, even assuming we could litigate all this questions under Couch and Donaldson, now is the time, perhaps the only time in which these issues can be decided.
Finally, there is a connection between the Fourth Amendment and Fifth Amendment which makes the separation of them by the Government, we think indefensible in the case.
This Court has not had a majority for what Boyd versus United States means with respect to the intimate connection between the two amendments.
Since Boyd was decided in 1886, Mr. Justice Marshall’s exploration of the several different interpretations of that intimate relationship in his dissent in the Couch case throws some light on the issues here.
But I think to quote Mr. Justice Frankfurter when he was writing for the Court in Frank versus Maryland later overruled, in some excellent dictum, he said, “It is not necessary to accept any particular theory of the interrelationship of the Fourth and Fifth Amendment.
To understand what lies, not at its periphery but at its core, self-protection, self-protection of a party from being compelled to create and produce evidence against himself.
The central purpose, the purpose as the Government calls it, of the Bank Secrecy Act, is to force private citizens to create and deliver to the Government or hold for its later obtaining by means of judicial process or otherwise, evidence of crime, their own or someone else’s.
Now, if the Government told everybody, told private citizens to keep watch on their neighbor, record their comings and goings, report anything unusual that would be different from this case only in the fact that they were speaking to private citizens not regulated industries.
The Government here argues that the difference is constitutionally critical because it has plenary regulatory power over banks, it can order banks for purposes foreign to that power to keep watch over its costumers and their relation with still other fourth parties in order to enforce the criminal law.
Justice William H. Rehnquist: Mr. Marson, are you now arguing your challenge to the reporting regulations as well as to the recording -- recordkeeping regulation?
Mr. Charles C. Marson: Yes, in our view they're constitutional and distinguishable.
The reporting requirements are easier because they're an outright seizure.
Justice William H. Rehnquist: Well, have any of your clients engaged in transactions which they would be required to report or had they at the time, the filing of the complaint?
Mr. Charles C. Marson: They alleged at the time of the filing of the complaint which was a few weeks before the effective date of the Act that they had done so in the recent past and would do so in the immediate future, and therefore, we’re under the effect of the regulation.
I have four clients, Lieberman, Harwood, Bruer, and Durell, all of whom are required to report their folder -- their foreign holdings.
Lieberman sends monetary instruments in excess of $5,000.00 across the border.
Lieberman and the three others all have financial interest in or signature authority over foreign bank accounts.
As such, they are required affirmatively to report those of the Government and have been doing so because the District Court declined to enjoin that portion of the Act.
Justice Potter Stewart: Are you the (Inaudible) one of the parties to this case?
Mr. Charles C. Marson: Yes, I am.
It was easier to verify the complaint.
And finally, I might mention a word before my first section of time runs out about the American Civil Liberties Union.
The Government is willing to agree that we have a right to protect our membership list.
It is willing to agree that this case creates a membership list.
It is willing to agree that a frequently for law enforcement purposes has access to bank records without any process at all.
It is willing to agree that even if it serves the process, that process, usually it is not learned about by the costumer and still it says that we are prematurely here that we must again wait for some summons or subpoena to be served upon us.
We submit that a nationwide known scheme of the collection of membership lists in the hands of a third party with no instinct or interest in litigating is too much of an exposure of that membership list to be tolerated under the First Amendment.
The D.C. Circuit’s decision in United States Servicemen’s Fund turns on exactly that point.
It was the lack of a litigative in a third party who is holding the records that gave the United States Serving -- Servicemen’s Funds standing to intervene to seek the sort of equitable relief that we seek here.
If it please the Court, if there are no further questions, I’ll save the rest of my time for rebuttal.
Justice Thurgood Marshall: If any other organization in the country that couldn’t also be a party?
Mr. Charles C. Marson: The organization would have to be of the type that was controversial and whose members could reasonably plead that they could expect retaliation or exposure.
It would have to come under the rules set forth in for example, NAACP versus Alabama.
Justice Thurgood Marshall: So any of them, any group with would be able to (Inaudible)
Mr. Charles C. Marson: Any group who had a reasonable interest in the privacy of its membership list would.
Any group who didn’t care about the maintenance of that privacy and didn’t care because it wouldn’t affect First Amendment rights but not --
Justice Thurgood Marshall: Well, if any (Voice Overlap) American Union member Joe Doe goes in and cashes his bonds and gets a check for $15,000.00, how does he become -- get on the list as a member of the American Civil Liberties union, by cashing a check?
Mr. Charles C. Marson: Because the check goes through our account and the bank makes pictures of our account Mr. --
Justice Thurgood Marshall: No, no, no, no.
This is his own check.
Mr. Charles C. Marson: Oh!
Well, if his own bank takes a picture of his check and its written up to the American Civil Liberties Union.
Justice Thurgood Marshall: Well, how can the American Liberties Union have anything to do with that?
Mr. Charles C. Marson: Because he knows that his bank is going to keep a record of the fact that he paid money to the American Civil Liberties Union.
Justice Thurgood Marshall: Suppose the man cashed a check for $15,000.00 from Babies United payable to him and he’s member of the American Civil Liberties Union, does the American Civil Liberties Union have a right to bring an action to stop that?
Mr. Charles C. Marson: No.
Only checks that illustrate on their face that they are payable to us.
Chief Justice Warren E. Burger: Very well, Mr. Marson.
Argument of Wallace
Mr. Wallace: Mr. Chief Justice and may it please the Court.
The so-called Bank Secrecy Act, oh!
I should say before I begin that I asked the clerk to distribute a little Xerox copy because the regulations as they’re reproduced in the appendix to our jurisdictional statement and in the appendices to the California Bankers Association briefs omitted some intervening changes which made them inaccurate in minor respects that don’t affect the argument in this case.
Principally 103.35 is the one that can’t really be reconstructed without the aid of this, but with these in your hands along with the others, it will be possible to see what all of the regulations currently are.
They were amended in both December of 1972 and January of 1973 and the current regulations are reprinted in the Code of Federal Regulations.
The Act was enacted by Congress in 1970, following extensive and detailed hearings concerning the wide spread use made by persons in the United States of foreign bank accounts in bank secrecy jurisdictions for the purpose of concealing violations of the United States tax regulatory and criminal laws or concealing the fruits of such violations and concerning the difficulties in enforcing federal tax, regulatory and criminal laws that had been caused by the failure of some domestic banks and other financial institutions to keep adequate records of checking account transactions and of the identity of their costumers.
The purpose of the Act is to make available greater evidence of financial transactions in order to deter the use of the channels of commerce for illicit purposes.
Or in the words of the Senate Report, “In order to reduce the incidence of white collar crime.”
Titles I and II of the of the Act and their implementing regulations were challenged in this case.
Title I is the recordkeeping provisions and Title II are the reporting provisions which basically are in two parts for purposes of our concerns here; the reports of domestic currency transactions and reports of foreign financial transactions.
The Act’s provisions are not self-executing, but are designed to be implemented by treasury regulations.
Congress made clear its intention that those regulations were to focus both the recordkeeping and the reporting requirements on financial information having a -- in the phrase of both the House Committee Report and in the Act itself, a high degree of usefulness in criminal tax or regulatory investigations or proceedings and by self focusing the requirements to avoid undue burdens on the free flow of domestic and international commerce and finance.
After the Act's purpose or passage, after the Act’s passage in keeping with this Congressional purpose, a treasury department taskforce undertook a detailed study in consultation with representatives of financial institutions, of trade associations and of Government agencies to determine the specific categories of records and reports which should be required to implement the Act and the regulations emanated from rulemaking proceedings involving this taskforce studies.
They were first adopted in April of 1972 and then were amended in December of that year and in January of 1973, after further comment in rulemaking proceedings and also in light of further Senate hearings on proposed amendments to the Act that were conducted in August of 1972.
And that is why there are sometimes citations to Senate hearings which discussed the regulations that have already been developed under Act.
Those proposed amendments had to do with proposals to restrict access to the records which Congress has not enacted, but the Amendments to the regulations do specify restrictions on access by others in the Government.
The -- and original legislative history made it clear that the recordkeeping provisions did not expand access from it was under established legal process.
Now, turning first to the recordkeeping provisions of Title I as implemented by the regulations and these provisions were upheld by the District Court, these require financial institutions in the United States to record the identities of their account holders and require banks to make -- to maintain microfilm or other records of checks drawn on them.
These are requirements with respect to “on us checks” only for sums in excess of $100.00 dollars.
And then, there are -- in addition to checks for $100.00 or less, there are other exceptions developed and these are in the amended regulations that are listed on page 22 of the brief, this is our brief for the appellees.
There are a number of briefs in the case as you know, and the Government brief, is appellee on page 22, we summarize the other exceptions, dividend checks and payroll checks and others so long as they are drawn on an account, expected to average at least $100.00 checks per month.
All together then, that was exceptions coupled with the exception for all checks of one hundred dollars or lees add up to a very substantial exception to the microfilming requirements which have been the main focus of the complainant’s contentions in the case.
The additional --
Justice Potter Stewart: It is represented as you know that as a practical matter that exception is virtually meaningless because microfilming equipment can’t distinguish between a check under a $100.00 and check over a $100.00 and that the manpower required to separate them would not be worth the candle and that therefore as a practical matter its a meaningless distinction, a meaningless exemption, if you will and I personally don’t know the --
Mr. Wallace: There is relativity --
Justice Potter Stewart: -- that’s about.
Is there anything in the record about that?
Mr. Wallace: There's relatively little in the record that bears on this.
These amendments were made to the regulations after the District Court decision in this case.
There is some testimony in the hearings that we refer to, the Congressional hearings that we referred to in our brief in which some representatives of banking institutions made suggestions that indicated that it would be possible and in one instance that it would be possible by machine to make such separations --
Justice Potter Stewart: It would be possible to do.I mean a human being could easily do it but you’d -- the representation is that that would add so much expense it would -- its -- that is therefore as a practical matter cheaper to microfilm them all.
Mr. Wallace: At that --
Justice Potter Stewart: Nobody could quarrel with the proposition that is possible --
Justice Thurgood Marshall: Maybe because the (Voice Overlap) --
Mr. Wallace: The fraudulent practice --
Justice Thurgood Marshall: But of course the (Voice Overlap)the way it is today show -- shouldn’t have many hundred dollar checks?[Laughter]
I mean, unless you're going to buy a pack of cigarettes or something?
Mr. Wallace: The problem in practice has been for banks to microfilm all of their checks and of course for banks that have been doing that even though they have not been retaining those microfilms as long as it is required under the regulation --
Justice Thurgood Marshall: Three year --
Mr. Wallace: It's five years for this particular aspect of it.
It's two years in which to reconstruct entries into demand accounts in the bank, but for the microfilming “on us checks,” it's five years.
The hearings did bring out that most of the banks had been microfilming their checks although the period for which they retained them has varied a great deal.
And certainly banks that have been microfilming all of their checks would be likely to retain all of their checks for the five-year period rather than have to sort out the microfilms afterwards.
The regulations developing the exceptions were developed in consultation and in light of comments by members of the industry.
And while there is nothing in public record, the Treasury Department did include the exception in response to industry suggestion that this would be a useful and in keeping with the Congressional purpose, not to cause any unnecessary burdens on the flow of commerce that substantially contribute to the purposes of the Act.
There's nothing in the record about what banks are doing since the adoption of the regulations.
The Treasury Department has some information, however, that would give us a basis for introducing evidence in a proper proceeding that this is a useful exception from some institutions and that it's an exception that they're able to take advantage of.
Justice Lewis F. Powell: May I ask this question, I think its in the record somewhere but I can’t put my finger on it.
Does this Act draw the line with respect to certain size banks?
Mr. Wallace: It does not with respect to any of this requirements.
Justice Lewis F. Powell: How about the regulations?
Mr. Wallace: Neither do the regulations.
Justice Lewis F. Powell: You mean it applies as a -- equally to a ten million dollar bank in a small town as it would to a ten billion dollar bank?
Mr. Wallace: That is correct. Of course, it doesn’t specify that microfilm has to be the process by which a copy of the check is retained.
The hearings indicated that it was only the largest institutions that were getting away from microfilming, not the smaller ones, that they were using the microfilming process.
That was what the evidence before Congress appeared to indicate.
Justice William H. Rehnquist: Are you suggesting a small bank would use something other than microfilm?
Mr. Wallace: Well, if it chose to, it could under the regulations.
The regulations don’t specify the form in which copies are to be maintained but the practice of small banks is to use microfilm and the main reason for the need for the recordkeeping requirements brought out in the hearing was that in view of the largest banks in the country had decided not to engage in the pervasive photocopying that was common practice in the industry and they were problems about periods of retention.
There was a great deal of a testimony about the need and the usefulness of bank records in aiding investigations both to determine tax liability.
There was a testimony by the Internal Revenue agents.
There was a testimony by United States attorneys indicating in detail various -- sometimes quite intricate criminal schemes that had been investigated through the use of bank records and problems that they run into when the bank records were not available and there was testimony by the Assistant Attorney General in charge of the criminal division indicating the importance of having such records available for use in evidence in trials, rather than relying on oral testimony.
Justice William J. Brennan: Maybe irrelevant but do the banks get any compensation for the service from some federal agency that they involve considering time and personnel and everything else (Voice Overlap) --
Mr. Wallace: There is no compensation provided in the Act or the regulations Your Honor.
The findings made by the Congressional Committees were that these requirements would not impose an undue burden indeed that there would not be a very substantial burden imposed on most banks at all because they are already made copies of these records for their own purposes and extending the period in which they retain them in considering the --
Justice William J. Brennan: Well, I've been thinking off -- it must -- the rolls stored in warehouses, taking them out, locating them?
Mr. Wallace: There would be --
Justice William J. Brennan: Providing copies, this must involve expense?
Mr. Wallace: There are expenses.
There was a testimony in the hearings about the expenses and as a matter of fact, the testimony was that the cost had been estimated to range between one half mill and one and a half mills for a check, a mill being a tenth of a cent.
And the Senate Committee specifically said the cost of microfilming has been estimated in the hearings, to range between ½ of the mill and ½ miles for check, a cost, that does not appear to be unduly onerous compared to the normal service charge of ten cents per check.
And across which is --
Justice William J. Brennan: More expense in that involved, is it?
That merely the microfilm is a histo -- expensive storing for this length of time and the expense of locating what some Government agency may want the bank to show up or expect making copies of whether it is the Government they want.
Mr. Wallace: The recordkeeping requirements don’t impose any additional requirements on the bank with respect to access to such records as they have and there wasn’t a complete cross breakdown, there was testimony in the hearings that -- by representatives of the banking industry that the costs would not be unduly onerous and the costs are tax deductible.
We have a quotation in our brief on that precise point --
Justice Potter Stewart: You could sue him I suppose on a capitalistic system that whatever the cost of doing business are, that will be paid for by the bank's costumers ultimately and the bank will continue to make what profit it can make in a competitive economy, isn’t it?
Mr. Wallace: I would presume so although there's no indication that anyone has raised the service cost from ten cents to ten and a half cents check.
Justice Potter Stewart: Well, maybe they’ve been able to economize somewhere else.
Justice Thurgood Marshall: Can we go to the next point?
If the banks get nothing for this, what's your penalty if they don’t comply?
Mr. Wallace: Well, there are provisions for civil penalties --
Justice Thurgood Marshall: In criminal --
Mr. Wallace: -- or the possibility for criminal violations, that is correct.
This is a regulation imposed by Congress on them as something they have to meet in order to engaged in their enterprise in interstate commerce.
Justice Thurgood Marshall: Then I guess the answer is they don’t want -- they're ignoring business.
Mr. Wallace: That’s right.
The Congress concluded that in regulating this industry which provides many opportunities for evasion of other legal requirements if adequate records are not kept of the identities of costumers and what has occurred in their accounts so that’ll be available when legitimate investigatory needs are shown that this is part of the burden to be borne as a good citizen.
As a --
Justice Thurgood Marshall: Do you think Congress could put that on any other business?
As well in the banking business?
Mr. Wallace: Well, the Congress has imposed a great many recordkeeping requirements on numerous businesses in order to implement various federal --
Justice Thurgood Marshall: Internal revenues -- internal revenue for example?
Mr. Wallace: That’s correct.
Justice Thurgood Marshall: I’m talking about these provisions on the basis of what you say here which is that you might want to prosecute.
Mr. Wallace: Well, that’s the only one basis that these provisions are also needed to investigate whether internal revenue has been paid adequately --
Justice Thurgood Marshall: But what the petition said, it’s your whole thrust in your brief and I think they’ve got so many, you keep talking about criminal.
Mr. Wallace: Well, there was a great deal of focus on criminal schemes and the use of secret accounts to conceal the fruits of criminal schemes that --
Justice Thurgood Marshall: Secret accounts in domestic banks?
Mr. Wallace: Secret accounts in foreign banks and getting it there through secret transactions in United States banks and transactions that couldn’t adequately be traced and --
Justice Thurgood Marshall: But immediately you say criminal --
Mr. Wallace: Bank costumers who aren't accurately identified --
Justice Thurgood Marshall: But must -- won’t you agree with me, what lies in it?
The way you say your thrust is criminal, you waived the Fifth Amendment flag, don’t you automatically?
Mr. Wallace: Are you speaking of the privileging against self-incrimination?
Justice Thurgood Marshall: Yes.
Mr. Wallace: Well, if someone is being required to incriminate himself and pleads the privilege, that question is raised.
I don’t think it's raised in this case.
Justice Thurgood Marshall: Well, the only pleading -- the only pleading I can do to that stage would be to cash in a check.
Chief Justice Warren E. Burger: Well, does the bank have any Fifth Amendment privilege, Mr. Wallace?
Mr. Wallace: No, the banks, that corporations who don’t have a Fifth Amendment privilege and no one else --
Justice Thurgood Marshall: We’re not talking about --
Mr. Wallace: -- is being required to keep a record --
Justice Thurgood Marshall: I’m talking about 40 -- $100.00 man has got a check for a $101.00.
Mr. Wallace: Well, if he is --
Justice Thurgood Marshall: He gives up all his right -- he gives up all his right when he puts that bank -- that check in the bank.
Mr. Wallace: Well, I haven’t said anything about giving up all his rights.
He is -- communicated to the bank what that check communicates --
Justice Thurgood Marshall: And that’s all he meant to commute -- that’s only person he meant to communicate to, right?
Mr. Wallace: Well, if he has a right to uphold the confidentiality of that communication from disclosure that would arise -- that question would arise when an attempt was made to get the bank to disclose it.
This Court said in the Couch case that there is no such privilege.
That maybe --
Justice Thurgood Marshall: (Voice Overlap) --
Mr. Wallace: -- all he meant to communicate it to but the bank can be compelled to testify as to its knowledge of what he communicated to them.
Justice Thurgood Marshall: Yes, but I don’t think that the Couch case said that the -- accountant that was given these internal revenue materials was obliged to turn that over to the Government, I don’t think that’s (Voice Overlap) --
Mr. Wallace: Neither does the Act.
The Act gives the Government no additional access to any records required to be kept, no access --
Justice Thurgood Marshall: What if you don’t (Voice Overlap) --
Mr. Wallace: -- if they don’t have a normal legal process of a summons or a subpoena.
Justice Thurgood Marshall: What about the reporting provision?
Mr. Wallace: Well, the reporting provisions are something else and I’ll turn to those now with just -- if I may, wanted to close in comments about the recordkeeping provisions.
Justice Thurgood Marshall: (Inaudible)
Mr. Wallace: So that we -- won’t need to return to them unless there are further questions --
Justice William H. Rehnquist: Mr. Wallace, I do have one more question about the recordkeeping provisions.
I get the impression from your argument that there was -- at least some testimony before Congress to the effect that banks were shifting away from retaining these records.
The reason I ask is because my own experience in private practice is just what Justice White and Justice Powell intimated in their questions that I can’t remember ever having any trouble subpoenaing a check record from a bank.
It seems to me that in my own little locale, they kept them several years.
So, was this in effect an effort by Congress to see that a -- what had been an adequate voluntary system was preserved when there was an impetuous to turn away from it?
Mr. Wallace: That was the major thrust of it.
And that was the testimony.
It was just a very few of the largest banks that had decided that it wasn’t worth their while to photocopy everything and to keep these records as long as they had in the past.
In fact the House Committee Report said that most banks would be virtually unaffected by this particular aspect of the requirements and that it is just a few size of the ones, the Bank of America was particularly testified about and that is correct Your Honor.
So, the principle as we understand it, of the California Bankers Association argument that this is undue burden whether that stated as a Fourth or Fifth Amendment objection and it’s hard for us to see why a recordkeeping requirement is a search or seizure, but it seems to us it has to be more a Fifth Amendment objection.
That is answered by the consideration, it seems to us that Congress gave to the needs that the Government had as a necessary improper means of facilitating enforcement of tax, regulatory, and criminal laws that this would not be undue burden and I don’t think this Congressional judgment as been shown by anything presented in the record here not be an entirely constitutional one.
The other objections that had been raised to the requirements by the individuals, if I can just summarize, our position with respect to them quite briefly, we don’t see that there's been any compulsion on the individual with respect to the recordkeeping requirements that would form a predicate for a Fifth Amendment objection nor had any of the individuals before the Court claimed that anything required would tend to incriminate them which is a necessary predicate for a Fifth Amendment objection.
There is no basis in the legislative history or purpose or anything that was developed in the course of developing the regulations for belief that the Government was going to seek to get the membership list of any particular organization and therefore the First Amendment claim seems to us to be a -- too speculative for presentation to the Court, a fortiori on the basis of this Court’s decision last term in Laird against Tatum.
Since there isn’t even any data gathering by the Government yet shown to be taking place in the present case and the data gathering was in involved in Laird by the Government in Laird against Tatum although no use of that data printing in proper or likelihood of that use had been shown of the Fourth Amendment claim seems to me that there's no search or seizure being made of the costumer because the bank with whom he’s dong with business is required to keep records of its financial transactions with him and other costumers.
Into the extent that -- it could be said and we suggest some reasons why it may not be accurate to say so that the bank is operating as a Government agent, it is never been held by any court to my knowledge that the Fourth Amendment is violative when the Government keeps records of its dealings (Voice Overlap) --
Chief Justice Warren E. Burger: I suppose the Government is acting or the private bank or company is acting as a Government agent when they withhold taxes, social security and --
Mr. Wallace: Well, in the same sense, that is right.
And they're required to keep many records and the thrust of the argument of the individuals here is that when they have dealings with the Government and the Government keeps records of those transactions that the Government has engaged in assuming that the bank is acting as an agent of the Government that somehow raises a Fourth Amendment violation to us.
That is merely the Government’s keeping of records of information voluntarily disclosed to the Government by someone doing business with it.
We don’t really think that the analogy of a Government agent is the accurate one here, but without that analogy there's no search or seizure with respect to the individual at all here since there’ no access by the Government provided by the Act to the records that are required to be kept.
Now, the domestic currency transaction reporting provisions of Title II or the part of the Act that was struck down by the District Court, this is actually the least innovative feature of the Act because since 1945, financial institutions have been providing reports under the Trading with the Enemy Act and implementing regulations and also under Section 2 of 51 of the revised statutes which was another basis for those regulations.
Of essentially similar information and these had been of proven efficacy in the enforcement of the Internal Revenue Laws.
Treasury report indicative for example that in 1957 and 1958 alone, 129 fraud cases have been developed involving -- which led to the generation of 13 and a half million dollars in additional taxes in penalties based directly on information derived from these reports.
And the Congressional objective in providing for such reporting requirements in the new Act was to make the standards for such reports by the institutions more definite.
The hearings indicated that the criminal use of financial institutions had increased in recent years and there was much testimony and findings in the Committee reports indicating that large amounts of cash are generated and have to be concealed in illicit transactions and also have to be converted to assure the ultimate success of those transactions into usable forms of credit.
And so these provisions in their implementing regulations were included in the Act and these regulations require reports only by the financial institutions of these transactions not by any individuals and only of currency transactions in excess of $10,000.00 and not commensurate with the customary conduct of the business of an established costumer of the bank.
The information to reported is summarized in our brief, this time, it's -- our brief as appellant, on pages 14 and 15 in the text of the brief.
The information is relatively simple and its to be secured from the party to the transaction, the other party, the transaction by the bank as a condition of the banks engaging in such transactions.
And this is again a regulation of the activities of the banks in commerce.
The District Court -- the rationale of the District Court in striking down these provisions of the Act was as we have contended in detail in our brief entirely hypothetical.
It was based on the speculation that it might be possible to have implementing regulations which would require the reporting of other transactions, other than those specified in the regulations including the reporting of all transactions by check on -- personal checking accounts.
Justice William H. Rehnquist: If you clarify for me what the term currency transaction means, Mr. Wallace?
Can you give an example?
Mr. Wallace: Well, these are transactions -- one example was given by Mr. Justice Brennan if he should get $15,000.00 in currency just by presenting a check and asking for that much currency although the denominations of the smaller bills would not have to be reported on the reporting form, that was the only exception I would take to the description that was made.
It's only bills of a hundred dollars and over that must be mentioned --
Justice William J. Brennan: Well, was that by -- is that in denomination in the currency going?
I am looking at page 15 of your brief.
Mr. Wallace: Well, --
Justice William J. Brennan: Say?
Mr. Wallace: Yes.
I get --
Justice William J. Brennan: I get the amount in denomination?
Mr. Wallace: Yes.
That’s the -- the form itself does not require all of that.
It's in our jurisdiction of statement on page 121 and the denomination there, we were just summarizing it on pages 14 and 15.
The amount has to be given and then the amount in denominations of $100.00 or higher, the form is relatively concise, but --
Chief Justice Warren E. Burger: Mr. Wallace, what about the corollary if that if -- if I walk into the bank every week with $15,000.00 in large bills to buy a draft on a Swiss bank to transfer the money to --
Mr. Wallace: That too would be a currency transaction to be reported.
Chief Justice Warren E. Burger: That’s the same?
Mr. Wallace: And it would be for currency or other bearer instrument transactions such as a bank check made out to cash or something of the sort which anybody could cash, a bearer instrument that has the same negotiability as currency, virtually the same that’s what these are involved with.
Justice William J. Brennan: So I gather (Inaudible) on the currency transaction with the Court.
If you had then the $15,000.00, $10,000.00 in denominations of a hundred and five, hundred and the thousand dollar.
You just put the number, the total.
How many hundred, how many 500, how many 1,000, but I suppose --
Mr. Wallace: No, I understand that that would be adequate.
These reports has been purposely kept relatively simple with the idea that if an internal revenue, or if it is called for, of course they’ll be getting into more detail then and if there isn’t, there is no point in burgeoning transactions with onerous requirements.
A great deal of time has been devoted to developing the regulations and forms.
The regulations didn’t take effect until two years after the Act was passed because of the efforts that were made.
There was an overriding Congressional purpose not to cause unnecessary burdens on the flow of these transactions.
There is a -- one aspect of the domestic currency transaction reporting provisions that I should devote a few minutes to because it’s a problem that has been raised for the first time in the case, in the briefs for the appellees filed not long ago in the case and that is a contention that the regulation, a contention made in the red covered brief by the Bankers Association that the regulation is invalid implementing this provision because it doesn’t require a report to be made by the costumers as well as the bank and the legislative history indicates that Congress did contemplate and indeed the Act required the report to be made by both parties in order to assure that the costumer would be notified.
This contention it seems to us is not before the Court in this case.
It's raised by the California Bankers Association, its on pages 37 through 39 of their red covered brief.
Justice Potter Stewart: When was that brief filed?
Does it -- got a date in the front of it, a stamp?
Mr. Wallace: We received -- and in on January 5th in our office.
Justice William H. Rehnquist: The red covered brief?
Mr. Wallace: Well, it -- there was a white covered brief that was identical to it and then the red covered briefs were substituted for it.
It might --
Justice William J. Brennan: But it don’t seem it got substituted.
Mr. Wallace: The brief for the appellee, California Bankers Association.
Justice Byron R. White: (Inaudible)
Mr. Wallace: It’s the same as the white covered brief.
Its exactly the same --
Justice William J. Brennan: And what page are you referring to?
Mr. Wallace: Its no pages 37 through 39.
Justice Potter Stewart: We have a white one --
Mr. Wallace: Well, that’s the same --
Justice Potter Stewart: Filed January 2nd.
Mr. Wallace: That’s the same brief.
The printer had been instructed to bind it in red and had it bound it in white and sent it to them, and then he sent substitute copies but they're all -- there's no change inside --
Justice Potter Stewart: So what page now?
Mr. Wallace: 37 through 39, a contention is made that the regulation is invalid because it requires only the financial institution to file the report whereas the Act contemplated that the regulation would require both the institution and the costumer to file the report.
We don’t believe this contention is properly before the Court because its made here by the Bankers Association who are obviously not within the zone of interest to be protected under their own contention which was assurance that the costumer would be notified as the Congressionally stated purpose of requiring both to file the report.
There is nothing to stop the California, the members of the California Bankers Association from notifying their costumers when they file such reports either in person at the time the information is secured or by sending the costumer a copy of the report or indeed by having the costumer countersign the report which is not required by the treasury regulations, but the report would still be accepted by the treasury if it were filed that way.
Justice Potter Stewart: There's no -- the statute is unambiguous and what it requires --
Mr. Wallace: Well, --
Justice Potter Stewart: And you say that the executive branch has chosen to disregard it.
So it would be like one of these incumbent cases, isn’t it?
Mr. Wallace: The -- when you say the statute is unambiguous Mr. Justice Stewart, let me look at the statute at the bottom of page 37.
The report of any transaction required to be reported under this chapter shall be signed or otherwise made.
Justice Potter Stewart: Both?
Mr. Wallace: Both.
Well, of course the information is secured by the bank from the costumer and the otherwise made language was believed by the (Voice Overlap) --
Justice Potter Stewart: But it's for both language that we’re talking about.
Mr. Wallace: Yes.
That there are other -- additional provisions of the Act that are -- have a bearing, namely Section 206 of the Act which gives the Secretary broad authority, this is in our jurisdictional statement on page 80 which gives the Secretary broad authority to make exceptions to the requirements of the act as he sees fit in developing the regulations and another answer is that while the House Committee Report interpreted this language as requiring the report to be made by both for the reasons stated in the excerpt from that Committee report set out at page 38 of the brief.
The Senate Committee took exact to the contrary view and this is not set out in the brief filed by the appellees.
We didn’t want to burden the Court with an additional reply brief because we didn’t think the issue is in the case to begin with.
Since there is no withstanding duress of the individuals in the case, they don’t claim that they engage in the transactions of this type that that they contemplate engaging in such transactions.
The Senate Committee report with respect to exactly the same statutory language, I’m quoting out from page 15 of the brief, took exactly the opposite view in analyzing the domestic currency reporting requirements.
Justice Potter Stewart: In the brief?
Mr. Wallace: This is not a brief, sir.
This is page 15 of the Senate Committee report which is not before the Court, but is available to the Court and I’ll read the entire paragraph since its quite short and it’s the only part dealing with the analysis of the domestic currency reporting provisions.
“These sections authorize the Secretary to require reports on transactions in currency or other monetary instruments involving domestic financial institutions when the transactions are in such amounts or under such circumstances as the Secretary may proscribe.
The reports can be required of the financial institution or the party involved or both.
The Secretary is authorized to designate domestic financial institutions as agents of the United States to receive required reports.”
That is Section 223 which is never implemented and that is the analysis given in the Senate Committee report.
But the question is one that the Secretary gave a lot of attention to in developing the regulations.
He came to the conclusion that he did based on comments that were made by the industry as to the cumbersomeness of the process if they had to get their costumers to file reports of such transactions and in light of the overall Congressional purpose of not imposing unnecessary burdens on commerce, the Secretary concluded that -- and the exemption authority given him should be utilized here and that the purposes of the Act would adequately be served.
Justice Potter Stewart: But that’s not -- one of the purposes of this provision contained in the House Report certainly is not served because -- is that correct?
Mr. Wallace: As the House --
Justice Potter Stewart: Because this does enable the bank to give this information to the Internal Revenue without any knowledge whatsoever on the part of its costumer, isn’t that correct?
Mr. Wallace: The regulation does require (Voice Overlap) --
Justice Potter Stewart: And that precisely what the House Report said that the requirement was --
Mr. Wallace: That is precisely what the House Report said.
Justice Potter Stewart: Designed to forestall.
Mr. Wallace: Precisely what the House Report said and it was contradicted by the Senate Report dealing with exactly the same language in the Act.
The conference report said nothing about it, It just adopted the same language.
Both reports are referring to the same language and they're just -- I don’t think the issue is before the Court in the case and for that reason we haven’t briefed it.
It wasn’t even introduced in the proceedings in the District Court.
There wasn’t an objection raised at that time.
The only basis on which the individuals before the Court claimed that they can race the issue, is not that they have engaged or contemplate engaging in this cash transactions, but that the Act as a whole is not separable and that if this invalid, the parts that concern them are invalid.
It seems to us that the concerns expressed by Congress about why they needed to have the various provisions pretty well refute the contention if the Court found one aspect of it to be invalid that it should strike down the entire Act, indeed the fact that a substantially similar, domestic reporting provisions antedated the act under the Trading with the Enemy Act and stood alone for many years indicates that Congress didn’t think all of these had to be one package.
Now, I’d like to say just a few words about the foreign transaction reporting provisions of Title II in their implementing regulations which were upheld by the Court below and which require reports of the transactions of the individuals here do say they engage in of transportations of monetary instruments involving more than $5,000.00 into or out of the United States and reports by persons in the United States of their relationships with foreign financial institutions.
Much of the testimony developed in the hearings was concerned with the very serious problems caused by the concealing or purifying of fruits of domestic criminal activity in the concealing of on going violations of tax, regulatory and criminal laws by the use of secret bank accounts in a Bank Secrecy Jurisdictions, accounts over which Congress does not have direct regulatory authority.
The examples given were detailed and varied of the evasions of capital gains taxes through sales of security of illegal trading in gold, the concealing of securities manipulations, the concealing of insider trading in securities and numerous other examples, a man making a loan to himself from his own secret bank account and then deducting the interest payments that it is one that I recall from the hearings.
It was testified by Robert Morgan Thaw (ph), former United States attorney of the Southern District of New York that in his estimation, thousands of such accounts involving hundreds of millions of dollars were being used for illicit purposes and the Commissioner of Internal Revenue, Randolph Thrower testified that the integrity of the self-assessment system of the taxation itself was being threatened by the use of these accounts.
The objections that have been raised to this are first of all a claim that there might be a problem under the self-incrimination provision of the Fifth Amendment.
We don’t believe that claim is before the Court because no one in Court has said that filing such a report would tend to incriminate him which is the prerequisite for raising any claim of privilege under the Fifth Amendment.
And in any event the claim would be premature.
These are reports to be filed with the Internal Revenue return itself and under the Sullivan case, the claim should be made -- it's going to be made on the return and under Marchetti and Grosso, even if there was something so inherently incriminating here that the individual would be justified in not filing any report at all.
That would not mean that they’re entitled to the kind of relief they have sought in this case which is invalidating the entire Act because others might well be able to comply without incriminating themselves and indeed it's very likely that couriers and others would comply.
The Marchetti and Grosso cases both specifically said the tax there was not being struck down.
They were merely upholding a valid claim of privilege made by someone who showed that he couldn’t file the report required without incriminating himself.
And the Fourth Amendment and the claims that are made with respect to this provision seem us to be answered by the cases saying that reports required for valid regulatory purposes are not an unreasonable search and seizure.
The Court said, “This is far back as Boyd in the passage that we refer to.”
There is under our laws no reasonable expectation of privacy in bringing things in to and out of the country.
The customs laws indicate quite the contrary.
Nor is there a reasonable expectation of privacy with respect to financial transactions in bank accounts which are subject to in this country to the internal revenue summons -- procedures and to other processes that do not require a search warrant to be issued initially --
Justice Thurgood Marshall: Whatever, in fact everybody in the United States is under that and yet in this a lot of percentage of people are never going to get involved in any criminal offense, but they still get their name put in?
Mr. Wallace: No.
That they have to make a report of their transactions in overseas banks just as they --
Justice Thurgood Marshall: I’m not talking about overseas banks.
I am talking about the the local ones, with the local ones, a guy who doesn’t know where Switzerland is?
Mr. Wallace: Yes.
If he engages in a cash transaction --
Justice Thurgood Marshall: And he’s made a cash transaction of $230.00 to buy a washing machine and he get -- he goes to --
Mr. Wallace: It would have to be $10,000.00 in order to record the requirement (Voice Overlap) --
Justice Thurgood Marshall: You raise $10,000.00 to buy a house.
Mr. Wallace: It have to be a -- as -- so it have to be an excess of $10,000.00.
Justice Thurgood Marshall: His own grandfather left the 10,000.
Mr. Wallace: If he did that by cash, the cash transaction, the institution -- the bank would file a report of it.
Justice Thurgood Marshall: And he wouldn’t know about it?
Mr. Wallace: Well, there's nothing to keep the bank telling him about it and the Secretary has publicized these regulations very widely and has held press conferences, has disseminated --
Justice Thurgood Marshall: Well, you don’t pay --
Mr. Wallace: -- what's about them and so forth.
Justice Thurgood Marshall: And you don’t pay the bank notifying date.
And I assume that the bank wouldn’t notify him and pay the bill themselves, could I assume that, from my experience with banks?
Chief Justice Warren E. Burger: The bank might send out a notice with its mention, a monthly canceled checks.
Mr. Wallace: I think one could as reasonably assume that when the bank as in the information for the report, the bank will be telling you why they need this information.
Justice Potter Stewart: Well, the House Committee talked about the risk of the Secretary of the Treasury putting pressure on the bank to give it -- this information without informing its costumers.
Mr. Wallace: That -- the House Committee report said that.
We don’t believe that issue is before the Court in this case.
Justice Potter Stewart: No, but that risk -- but that was --
Mr. Wallace: And that issue was --
Justice Potter Stewart: -- is -- exist under the regulations.
That’s why there was --
Mr. Wallace: Under the regulation but it's not --
Justice William H. Rehnquist: Well, might not the bank themselves become kind of anxious to supply the information without having the costumer cooperate.
In other words, it might be a two-sided end-runner on the costumer so to speak.
The banks would probably prefer to furnish it without having to serve a copy on the costumer so that a costumer doesn’t get its -- see it and say, you know, what's my bank done to me?
Mr. Wallace: Well, that wasn’t -- what was indicated in the commentary that the Department received as the reason why the banks thought it would be better for them to be doing it themselves.
They claim that it would be an impediment to the expeditious conduct of their business if they had to stop and drop the whole reports so that the costumer could sign it while the costumer was present.
But that is not in the record.
This is information developed in the course of drafting the regulations which we could've introduced in the District Court if the issue had been raised in the District Court but which it was not and we don’t think its here for decision in any event.
And I must -- there are further questions, our submission that Congress faced with testimony about various serious problems adopted, a very restrained method of enacting legislation that was necessary and proper to see to it to the channels of commerce, were using to facilitate rather than hinder the enforcement of various tax, regulatory and criminal laws and it's difficult to see how they could've done anything effective that would be more restrained than what they have done in the enacting -- implementing regulations.
Chief Justice Warren E. Burger: Mr. Marson.
Rebuttal of Charles C. Marson
Mr. Charles C. Marson: Mr. Chief Justice and may it please the Court.
The choice of adjectives such as restrained is of course largely up to the user.
We do not think that the surveillance of two hundred million bank accounts which is how many there are in this country is restrained.
We do not think that the copies -- copying of in excess of 20 billion checks a year which is how many clear their makers banks in this country every year is restrained.
Even if we assume that every bank in the country pays the extra money to sort out the checks that are under a hundred dollars and not copy them.
By the Government’s own statistic, that reduces the number by 90% down to 2 billion checks every year.
We do not think that is restrained either, but we do not think that if the constitution permits the copying of checks over a hundred dollars simply because they're over a hundred dollars then that makes (Voice Overlap) --
Chief Justice Warren E. Burger: Mr. Marson, (Voice Overlap) more terrifying 20 or 30 years ago, but after the advent of social security, Medicare, to say nothing of enlargement of the reach of tax laws, those numbers when you add them up would produce numbers very much like the ones you're talking about.
Mr. Charles C. Marson: They do but not in the enforcement of the criminal law.
Chief Justice Warren E. Burger: But often used for that purpose?
Mr. Charles C. Marson: Often used, yes. And this Court has had an occasion to deal with the difficult problem where the tax law and the criminal law meet in a grey area and it becomes a bleeder's option in the hands of the IRS.
This is not such a case.
The Government began this case.
It's opening brief crossed with ours in the mail.
Both briefs claimed that the purpose of the Act was the enforcement of the criminal law.
Apparently when --
Justice Lewis F. Powell: Mr. Marson, I just want to be sure of your position, your client’s position.
You attack the recording of foreign currency transactions on the same grounds essentially as you do domestic currency transaction?
Mr. Charles C. Marson: Yes we do.
We think that the analogy to our customs declaration is slightly ridiculous.
The form on which these transactions have to be reported requires such things as agency if a -- if an instrument is transported not physically across the border, but through the first class mails, it still has to be reported and if you do it for someone else, you have to name him, give this address and give his business or occupation.
That’s not like a customs declaration.
I can bring a bottle of Scotch from Heathrow Airport and I may have to declare it but I don’t have to say, who I’m giving it to.
There's a great deal more information --
Chief Justice Warren E. Burger: But if you carry a gift from London for the accommodation of a friend in London to some young lady who is getting married in New York, you must report that on the customs declaration.
Mr. Charles C. Marson: That I do it for the purpose of giving it to someone else?
Chief Justice Warren E. Burger: That you do it for the accommodation of someone else that carrying it for the accommodation of another person?
Mr. Charles C. Marson: I was unaware of that Your Honor.
Do I have to list the other persons profession and business, I doubt that.
The Government says in its own brief that the purpose of these reports is to supply leads to see which record should be subpoenaed or summoned which I think has a slightly different cast on it.
The Government and we all claim that criminal law enforcement was the central purpose of this legislation in our opening briefs.
Then in its appellee’s brief the Government as it does here takes a slightly different provision -- position that this is being done pursuant to the regulatory power of Congress over banks.
Now everywhere, the legislative history of course does not support that and the Government doesn’t claim that it does, everywhere the Act exempts transactions that have to do with banks.
An intra bank transaction is nowhere required to be reported or recorded.
Transactions between two banks, unless there are customers involved do not have to be recorded or reported.
A good illustration of how little this has to do with the regulation of banks is this.
My client, Security National Bank could tomorrow give Mr. Anderson’s client the Bank of America $15 billion dollars in used hundred dollar bills and as far the Bank Secrecy Act is concerned they wouldn’t even have to write it down let alone --
Chief Justice Warren E. Burger: That is Federal Reserves Act?
Justice Thurgood Marshall: We have to report somebody in the Government.
Mr. Charles C. Marson: Well, their own ledger sheets has between them would disclose the transaction, but they would not have to report that under the Bank Secrecy Act and I don’t know that they would have to report it under --
Justice Thurgood Marshall: They would not report it under any Act?
Mr. Charles C. Marson: Not to my knowledge.
Justice Thurgood Marshall: Well, you better look up some more.
Bank transfers are reported to the Government, I am sure as I’m sitting here.
Mr. Charles C. Marson: (Voice Overlap)
Justice Thurgood Marshall: Not under the Secrecy Act, of course not?
Mr. Charles C. Marson: No, not under this Act.
My point is the Bank Secrecy Act as opposed to some other Act of Congress has nothing to do with those kinds of transactions.
It has nothing to do with the regulation of banks.
So to support the Bank Secrecy Act as opposed to the Federal Reserve Act on the theory that is a regulation of commerce is wholly unjustifiable in this case.
Of course, the Federal Reserve Act is a legitimate regulation of commerce and that is not challenged here.
The Bank Secrecy Act has nothing to do with the regulation of banking.
The analogy --
Justice Potter Stewart: Well, it hadn’t been my understanding that you were arguing that this legislation was beyond the constitutional power of Congress to enact under the commerce power, but rather that it violated specific provisions of the Bill of Rights, i.e. the Fourth or Fifth Amendment.
Mr. Charles C. Marson: That’s correct.
Justice Potter Stewart: Isn't that --
Mr. Charles C. Marson: Actually it --
Justice Potter Stewart: I have not misapprehended your argument, have I?
Mr. Charles C. Marson: In terms of its purpose it ought to be comprehended as an exercise as a police power.
It happens to be used as a means its plenary regulatory power over the banks.
Justice William H. Rehnquist: Well, there isn’t any police power in Congress, all of Congress is criminal statutes are based on the commerce power?
Justice Potter Stewart: Well, or the taxing power?
Justice William H. Rehnquist: Or the taxing power.
Congress doesn’t have any police powers.
Mr. Charles C. Marson: Let me offer this analogy of the interplay of these powers to the Fourth Amendment.
The Congress has every bit of the plenary power over the telephone company as it does over the banks.
If tomorrow somebody invented the technology to record all calls and if the day after Congress passed an Act called the Telephone Secrecy Act which required them to do so and then the Solicitor General defended the Act on the ground that the Government had plenary regulatory power over the telephone company and that the parties who were engaged in those calls had no interest in those calls that they were third party business records, that they were not reached under Couch and Donaldson, then that theory which is identical to this theory except the technology isn’t here yet, then that theory would wipe out Katz and Burger and U.S. v. U.S.
Justice William H. Rehnquist: Well, then but the -- it wouldn’t wipe out the Fourth and Fifth Amendment objections, but I don’t see that the telephone notion is particularly objectionable on the commerce clause grounds.
It seems to me that in response to Justice Stewart’s question, you say, you’re arguing Fourth and Fifth Amendment restrictions rather than lack of affirmative authority under commerce? --
Mr. Charles C. Marson: I agree with that, yes sir.
Chief Justice Warren E. Burger: For the purposes of the commerce clause conceivably, the Government want -- might want to find out whether the telephone company is reporting accurately all their long distance calls but by merely measuring them and under the commerce clause that would not be a -- probably would not -- the objection --
Mr. Charles C. Marson: For the purpose that you’ve stated, it would not but nobody claims here except --
Chief Justice Warren E. Burger: As Justice Rehnquist suggested then you get into the taking the commerce, the content of the communication down then something other than the commerce clause comes into play.
Mr. Charles C. Marson: Well, certainly the Fourth Amendment does as this Court has frequently decided.
It is the suggestion of the Government that -- because they serve multiple purposes here that the criminal law aspect of this legislation can be ignored notwithstanding its primacy in the legislative history, in the Act and then Government’s opening brief.
The suggestion is that because this Act serves all legal purposes at once, it therefore can be justified by reference to all regulatory purposes at once.
It seems to us that that constitutes an abandonment of judicial supervision over the scope of the Government’s power to require records.
Take for example, Section 6001 of the Tax Code.
That’s the Section under which the tax authorities already have plenary power to require such records and to require such statements which is the equivalent of reports as are necessary to assess the tax liability of any person.
That was not enough to support what has been enacted here.
This Court in measuring a subpoena under 7602 of the Tax Code could measure the purpose of the subpoena, i.e. the enforcement of tax liability in the specific context of the purpose of taxation against the scope and necessity in showing made for the subpoena because there is a referent, there is a specific purpose to be fulfilled.
When specific purposes are abandoned and the whole of enforceable law becomes the end-product, a piece of legislation, then that means that the referent, the measuring stick for the reasonableness of a search for an order to produce documents is gone.
If Congress can enforce all purposes at once, it is implicit in the Solicitor General’s argument that the enforcement of those purposes knows no limit because they are of purpose.
That we think is an essentially dangerous notion to the Fourth Amendment.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.