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United States v. Bowman

decided: December 17, 1970.


Biggs, Van Dusen and Rosenn, Circuit Judges.

Author: Rosenn


ROSENN, Circuit Judge.

This is an appeal from an Order of the District Court requiring Appellant Joseph G. Bowman, as president of Joseph G. Bowman, Inc., to comply with an Internal Revenue summons by producing for inspection certain specified records of the corporation. The summons was issued*fn1 by Special Agent Dombrowski after he had received a tip from an informant concerning possible tax violations by the corporation.*fn2 Appellant and his lawyer appeared at the appointed time with the corporate records but refused to make them available for inspection by Agent Dombrowski unless the latter agreed that the information obtained therefrom would be used only to determine civil tax liability and not to instigate any criminal prosecution. Agent Dombrowski refused to accept the records with such qualifications and the records were not submitted. Nine months thereafter, the petition to enforce the summons was filed in the District Court. The District Court entered an order on December 2, 1969 directing the appellant to comply with the summons. On December 19, 1969, the District Court stayed compliance pending this appeal. Notice of appeal was filed on January 20, 1970. Jurisdiction is conferred on this court by 28 U.S.C. § 1291.

Appellant raises five points on appeal.

Appellant first contends that the District Court abused its discretion by denying appellant's oral motion for prehearing discovery pursuant to Rule 81 (a)(3), F.R. Civ. P. Appellant argues that such discovery was necessary in order to enable appellant to elicit proof, through questioning of Agent Dombrowski, that the sole purpose of Agent Dombrowski's investigation was to gather evidence for a criminal prosecution. Counsel for appellant, however, was allowed to question Agent Dombrowski extensively in open court on two separate occasions concerning the purpose of his investigation. This Court held in United States v. Erdner, 422 F.2d 835 (3d Cir. 1970), that it is not an abuse of discretion to deny an oral motion for discovery when the agent is present at the hearing and available for questioning. Appellant's contention is therefore without merit.*fn3

Appellant's contention that the government's nine-month delay in beginning enforcement proceedings should operate as a bar to enforcement of the summons is similarly without merit. 5 U.S.C. § 555(b), relied on by appellant, is inapposite. Furthermore, there are no IRS regulations governing the time allowed for instituting enforcement proceedings. Finally, we find nothing to indicate that appellant's position is prejudiced by such a delay.

Appellant next contends that Special Agent Dombrowski was without statutory power to issue the summons. This contention is predicated on the assumption that the sole purpose of Dombrowski's investigation was criminal. This court, however, stated in United States v. De Grosa, 405 F.2d 926 (3d Cir. 1969), that the burden is on the taxpayer to negate the existence of a proper civil purpose. A careful review of the record leads us to conclude that appellant in the instant case has failed to sustain that burden.

We must also reject appellant's argument that the president of a closelyheld corporation may raise the privilege against self-incrimination as to the production of corporate books and records in his custody. In Wilson v. United States, 221 U.S. 361, 31 S. Ct. 538, 55 L. Ed. 771 (1911), the Supreme Court held that the custodian of corporate records could not invoke the privilege against self-incrimination to avoid producing the corporate records, notwithstanding the contents of those records might incriminate the custodian himself. In Grant v. United States, 227 U.S. 74, 33 S. Ct. 190, 57 L. Ed. 423 (1913), the court extended this doctrine to corporations owned wholly by one individual. The holding in Grant has in recent years been applied in Hair Industry Ltd. v. United States, 340 F.2d 510 (2d Cir. 1965), cert. denied, 381 U.S. 950, 85 S. Ct. 1804, 14 L. Ed. 2d 724 (1965), and Wild v. Brewer, 329 F.2d 924 (9th Cir. 1964), cert. denied, 379 U.S. 914, 85 S. Ct. 262, 13 L. Ed. 2d 185 (1964). Appellant, nonetheless, invites this court to carve out an exception to the rule in Wilson where that rule would make "an artificial distinction between records of a 'corporate' nature and records of a 'personal' nature." Appellant contends that, in cases of this sort, "the proper inquiry should be whether or not the corporation represents the purely personal and private interests of the individual, and if the answer is affirmative the privilege should be permitted." Appellant, however, has cited no relevant authority for this proposition*fn4 and the clear weight of authority is in opposition thereto.

Finally, the contention that the summons is void and unenforceable because of vagueness and indefiniteness in the enumeration of the records demanded is also without merit. Not only is the summons clear on its face,*fn5 but the Record affirmatively indicates that the appellant was quite aware of what materials the summons required him to produce.*fn6

The Order of the District Court enforcing the summons ...

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