to spend thousands of dollars in employees' time in response to a § 7602 summons, the IRS should have some basis to believe that: 1. the records do exist and are in the possession of the bank; 2. the records sought do have some bearing on the customer's income tax liability; 3. the IRS has exhausted all other and less costly alternatives to obtain the same documents.
Perhaps in setting out these standards I am setting up an ideal situation -- for my experience both at the bench and bar convinces me that such a state of affairs can only exist if such standards are imposed by a court of law which has brought to the attention of all concerned the full panoply of both negative and positive inducements which it has at its disposal. Toward that end, in this instance, I feel that the best means to insure compliance with each of the three elements set forth above is to obligate the IRS to pay the bank the actual costs of searching their records. The alternative proposed by the Government in their substituted summonses, that is, a search of banking records by IRS personnel other than bank personnel, is unacceptable. The unavoidable fact is that in conducting such a search, no well-trained IRS agent would be able to ignore or forget the information he found of other criminal violations, real or potential, pertaining to other people. The only means available for maintaining both a minimum of cost and the confidentiality which such records deserve in the normal instance is to obligate the IRS to pay to the bank the actual cost of searching for such records that they wish to have.
My reasoning is obvious. Faced with the obligation to pay the cost of such a search, the IRS will impose upon itself those limitations which will insure that the records sought do exist and are in possession of the third parties upon whom the summonses are issued, that the records do have a bearing on the taxpayer's income tax liability, and that the IRS has exhausted all other and less costly alternatives to obtain the same documents.
If the IRS follows these self-imposed limitations we can be assured that in the future that the summonses will not be overly broad and will be confined to only relevant material. It seems to me that this statute invites hypocrisy and dissimulation on the part of Government
investigators who are required to walk a verbal tightrope before a court which considers the propriety of such a summons and say that they are seeking both criminal and civil penalties at the same time when as a matter of fact they are taking full advantage of a lenient civil procedure for the obtaining of records when a criminal subpoena might be more appropriate. It seems to me that if, in accordance with the standards that have been set out in this case, the IRS is required to proceed fully and in every detail in good faith, that is, to refrain from using these summonses as fishing nets, the negative effects of this statute will be accordingly limited. Only a court, in considering the petition to enforce such a summons will be able to determine whether or not the IRS is proceeding in good faith in any particular instance. As noted before, the standard upon which it must base its judgment is not one of probable cause, but rather one of relevancy and good faith and, more particularly, in accordance with those standards delineated above. Hopefully, if in the future § 7602 summonses are judged according to the standards used in this instance, all parties will be able to proceed harmoniously with the legitimate purposes of each group held in balance.
Therefore, because I have found, in accordance with the case law, that the information sought is relevant to the investigation and, with the strictures and limitations imposed upon the Government in this Opinion, that the investigation is being conducted pursuant to legitimate purposes and that its demands are not violative of the constitutional rights of the respondents or intervenors, I will order the summonses to be enforced.
An appropriate order in accordance with the above Opinion will be entered. The foregoing shall constitute findings of fact and conclusions of law in accordance with F.R.Civ. P. 52(a).
AND NOW, to-wit, this 3rd day of February, 1975, in accordance with the foregoing Opinion in the above-captioned cases, IT IS ORDERED that the six (6) substituted summonses in the above-captioned cases are ordered to be enforced, except for the request for records of entry to safe-deposit boxes.
The Government shall reimburse the banks for the cost to each bank of searching for such records.
The foregoing Opinion shall constitute findings of fact and conclusions of law as per F.R.Civ.P. 52(a). The foregoing is a final judgment as per F.R.Civ.P. 54(b).
Hubert I. Teitelbaum United States District Judge