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UNITED STATES v. FRIEDMAN

February 3, 1975

UNITED STATES OF AMERICA and WILLIAM L. BIERMAN, Special Agent Internal Revenue Service, Petitioners,
v.
PAUL FRIEDMAN, Respondent, and MORRIS KIRSHENBAUM and JOY KIRSHENBAUM, Intervenors. UNITED STATES OF AMERICA and WILLIAM L. BIERMAN, Special Agent Internal Revenue Service, Petitioners, v. PITTSBURGH NATIONAL BANK, MELLON BANK, N.A. and EQUIBANK, Respondents and MORRIS KIRSHENBAUM and JOY KIRSHENBAUM, Intervenors. UNITED STATES OF AMERICA and WILLIAM L. BIERMAN, Special Agent Internal Revenue Service, Petitioners, v. IVY SCHOOL OF PROFESSIONAL ART, INC. and MORRIS B. KIRSHENBAUM, as president of Ivy School of Professional Art, Inc., Respondents



The opinion of the court was delivered by: TEITELBAUM

 TEITELBAUM, District Judge.

 On December 11, 1973, three Internal Revenue Service (IRS) summonses [Treasury Form 2039] were issued by Special Agent William L. Bierman of the IRS and served upon defendants Pittsburgh National Bank (PNB), Mellon Bank, N.A. (Mellon) and EQUIBANK, under purported authority of 26 U.S.C. § 7602. The summonses requested all records pertaining to Morris and Joy Kirshenbaum and the Ivy School of Professional Art, Inc. for the years 1969 to 1972. The Banks duly notified their taxpayer customers of the IRS summonses. The taxpayers brought suit to enjoin the IRS from seeking compliance with the summonses, but were initially denied standing at Civil Action No. 73-1093 in an Opinion and Order of this Court dated February 4, 1974. The banks, however, refused to comply with the summonses and the IRS brought this action to enforce the summonses. At this point, the taxpayers were permitted to intervene for reasons which will be more fully explained later in this Opinion.

 Several hearings have been held, briefs submitted and with the stipulated consent of all parties, the IRS has substituted six (6) new summonses to replace the original three (3). The substituted summonses basically request the same information as before, but offer the assistance of Government personnel in searching and copying bank records and indicate that all of the information requested does not have to be produced at the same time. The banks still have refused compliance and the cases are before the Court for what will hopefully be a definitive effort as to the rights and responsibilities of the parties with respect to § 7602 IRS summonses.

 INTERVENTION

 At the outset it is necessary to direct attention to the immediate problem presented: whether or not taxpayers have a right to intervene and defend where a § 7602 summons is served upon a third party such as a bank. In the Opinion of February 4, 1974 in this case, I permitted such intervention because of the clear and unique testimony of Special Agent Bierman. As will become clear, the agent's testimony made apparent that this was a fact situation which did not fall within the ambit of those situations covered by existing case law on § 7602. See Reisman v. Caplin, 375 U.S. 440, 84 S. Ct. 508, 11 L. Ed. 2d 459 (1964); U.S. v. Continental Bank & Trust Co., 503 F.2d 45 (10th Cir. 1974); U.S. v. Dauphin Deposit Trust Co., 385 F.2d 129 (3rd Cir. 1967). At the initial hearing on this matter, held on December 27, 1973, I inquired of Agent Bierman as follows:

 
THE COURT: You are investigating it together for the purpose of determining whether or not a recommendation should be made as to criminal prosecution?
 
AGENT BIERMAN: That's right, your Honor. (Transcript at page 18)

 Counsel for Mr. Kirshenbaum then asked Agent Bierman:

 
QUESTION: Is that the prime function of this, to make sure whether or not to determine whether or not a recommendation for criminal prosecution should be made?
 
AGENT BIERMAN: The prime function of the investigation is to determine if a criminal violation has occurred, that is correct. (Transcript at page 18)

 Later, counsel for Mr. Kirshenbaum asked:

 
ANSWER: Yes, I would say that is a fair statement.
 
QUESTION: And is a special agent usually attached to a ...

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