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United States v. Degrosa

decided: January 6, 1969.


Hastie, Chief Judge, Seitz and Aldisert, Circuit Judges.

Author: Seitz


SEITZ, Circuit Judge.

This is an appeal from an order made pursuant to 26 U.S.C.A. § 7604, enforcing an internal revenue summons issued by Internal Revenue Service Special Agent Edward Ader on August 8, 1967, pursuant to 26 U.S.C.A. § 7602. The summons directed Anthony DeGrosa, as President of DeGrosa Trucking, Inc., to produce certain specified records of DeGrosa Trucking, Inc., whose tax liability was under investigation. Appellant, DeGrosa, appeared before Special Agent Ader with the materials demanded in the summons; however, the appellant refused to surrender the materials claiming that the summons was being used for an unauthorized purpose. An action for enforcement was brought in the district court against DeGrosa only, at which time appellant urged that enforcement of the summons would violate his constitutional rights and those of the corporation and that enforcement would permit an unauthorized use of the summons. After argument the court granted the petition for enforcement without filing a written opinion. DeGrosa ("appellant") now appeals.

Appellant contends (1) that the use of the § 7602 summons to obtain evidence for possible use in a criminal proceeding is an improper, or ultra vires, use of the summons, (2) that compelling production of the records sought would violate his Fourth Amendment rights and those of the corporation,*fn1 and (3) that permitting Agent Ader to conduct a criminal investigation using the § 7602 summons deprives the appellant of his Fifth Amendment right to have the Grand Jury conduct the investigation.

In support of his first contention appellant, citing Reisman v. Caplin, 375 U.S. 440, 449, 84 S. Ct. 508, 11 L. Ed. 2d 459 (1964), argues that the investigation by Special Agent Ader is "principally" a criminal investigation and that it is improper to employ the § 7602 summons for the purpose of obtaining evidence for use in a criminal prosecution. Appellant does not contend -- as, indeed, he could not on the record here*fn2 -- that the investigation lacked a civil purpose.

Appellant's reliance on Reisman, supra, is misplaced. This is made clear when the language of the Supreme Court, upon which appellant relies,*fn3 is considered in connection with the court's citation to Boren v. Tucker, 239 F.2d 767 (9th Cir., 1956), which follows immediately after the critical language. In Boren, supra, the Ninth Circuit held that a § 7602 summons may properly be issued in aid of internal revenue investigations which have a civil purpose, notwithstanding the fact that the information might also be used in a criminal prosecution.*fn4 See also Wild v. United States, 362 F.2d 206 (9th Cir., 1966); In Re Magnus et al., 311 F.2d 12 (2nd Cir., 1962), cert. den. 373 U.S. 902, 83 S. Ct. 1289, 10 L. Ed. 2d 198 (1963). Assuming, as the appellant urges, that the investigation by Agent Ader is "principally" criminal, the authority cited by the appellant does not support the conclusion that this summons is being used for an improper purpose, inasmuch as his contention does not negative the existence of a proper civil purpose.*fn5

We turn next to appellant's Fourth Amendment contention. Although the materials sought are corporate records we assume that the appellant has standing to assert the claim on his own behalf*fn6 and on behalf of the corporation.*fn7 Appellant's contention that the use of a § 7602 summons constitutes an unreasonable search and seizure where, as here, the investigation has both civil and criminal aspects, has often been advanced as a ground for requesting that enforcement of the summons be denied. In fact, within the past year, the Supreme Court had occasion to consider such an attack on § 7602 and § 7604. Justice v. United States, 390 U.S. 199, 88 S. Ct. 901, 19 L. Ed. 2d 1038 (1968), aff'g, United States v. First National Bank of Pikeville, et al., 274 F. Supp. 283 (E.D. Ky., 1967). The court, in a per curiam opinion, affirmed a three judge district court which, inter alia, upheld the constitutionality of the § 7602 summons procedure against a Fourth Amendment challenge by the intervening taxpayers.

It has long been established that an administrative summons authorized by Congress in aid of an agency's investigative function need not be supported by ad hoc showings of probable cause. Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 216-217, 66 S. Ct. 494, 90 L. Ed. 614 (1946). The Constitution only requires that the summons not be employed in excess of the statutory purpose, that it be specific in directive so that compliance will not be unreasonably burdensome and that an ample opportunity be afforded to obtain judicial review of the demand prior to suffering penalties for a refusal to comply. Oklahoma Press Publishing Co. v. Walling, supra; See v. City of Seattle, 387 U.S. 541, 544-545, 87 S. Ct. 1737, 18 L. Ed. 2d 943 (1967).*fn8

In the instant case, there is no question but that the summons will not unreasonably burden the appellant. In point of fact, the appellant was able to gather the materials requested and bring them before Agent Ader at the time and place directed in the summons. Further, enforcement of the summons is not left to the discretion of the agent issuing it, but is delegated to the district court where the reasonableness of the demand may be reviewed. Finally, as decided above, the summons here is not being used for a purpose in excess of that authorized by Congress.

Accordingly, appellant's second contention that the summons issued by Agent Ader suffers a fatal constitutional infirmity is without merit.

Lastly, appellant contends that Agent Ader's use of the § 7602 summons is an impermissible intrusion on his Fifth Amendment right to have the Grand Jury conduct the investigation. A reading of the Fifth Amendment in itself disposes of this contention. The right conferred in the Fifth Amendment is that no person can be held to answer for an "infamous crime" except upon an indictment returned by the Grand Jury. Clearly the procedure contemplated in 26 U.S.C.A. §§ 7602, 7604 does not at all impinge on this right of the appellant.

The order of the District Court enforcing the ...

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