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United States v. Mahady & Mahady

decided: March 7, 1975.

UNITED STATES OF AMERICA AND JAMES W. BLUM, SPECIAL AGENT, INTERNAL REVENUE SERVICE,
v.
MAHADY & MAHADY, A PARTNERSHIP, AND HENRY J. MAHADY, AS A PARTNER OF MAHADY AND MAHADY, APPELLANTS



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA D.C. Civil Action No. 73-1049.

Kalodner, Gibbons and Weis, Circuit Judges.

Author: Kalodner

Opinion OF THE COURT

KALODNER, Circuit Judge.

Were the Fifth Amendment rights of the appellant Henry J. Mahady ("Mahady") violated when the district court ordered him to comply with an Internal Revenue Service summons directing him to give testimony and produce records with respect to all financial transactions of his law partnership with a corporate client under investigation as to its tax liabilities?

The instant appeal presents the stated question. Its background facts may be summarized as follows:

On October 12, 1973, Special Agent James W. Blum of the Internal Revenue Service, in the course of his investigation of the tax liabilities of Euthenics Systems Corporation ("Euthenics"), issued a summons*fn1 on the law partnership of Mahady & Mahady, and its surviving partner Mahady to appear October 26, 1973 and

"Give Testimony and Produce Records Regarding All Financial Transactions with Euthenics Systems Corporation and/or its Officers or Agents. The Records are To Include But Are Not Limited To: (a) Details of Work Performed (b) Books of Original Entry Regarding the Recording of Monies Received (c) Correspondence with the Company, Its Agents or Officers." (Appendix, at 6A).

On December 7, 1973, Blum filed a petition for enforcement of the summons in the district court*fn2 alleging its noncompliance.

On December 10, 1973, the district court issued a rule to show cause ordering appellants to appear December 21, 1973. Mahady appeared before Blum on December 21, 1973. He then failed to provide Blum with the summoned records and further refused to answer Blum's questions relating to his or his partnership's dealings with Euthenics and/or its predecessor Michael J. Baker, Inc., asserting his Fifth Amendment privilege against self-incrimination and the attorney-client privilege.

The questions which Mahady refused to answer are set forth in the margin.*fn3 They dealt in particular with (1) the receipt by the Mahady partnership of a $2,000.00 personal check of Michael Baker, Jr., dated April 13, 1971, for "services rendered," which was accompanied by Baker's written request that he be sent a bill for his "records"; (2) the Mahady partnership's April 15, 1971 billing of Baker for $2,000.00 for "legal services"; and (3) the deposit by the Mahady partnership of the Baker check in the account of "Citizens for Paul Mahady."

On March 19, 1974, the district court held a hearing on its rule to show cause why the summons should not be enforced. It was developed at this hearing that Euthenics had by letter advised Mahady that it did not desire him to assert the attorney-client relationship. Mahady, however, adhered to his Fifth Amendment ground for his refusal to answer Blum's questions respecting his or his partnership's dealings with Euthenics and its predecessor Baker, Inc.

On July 3, 1974, the district court filed an Order directing Mahady to produce his partnership's records in accordance with the Internal Revenue Service summons, and to "testify fully in all matters relevant thereto." The instant appeal followed on July 18, 1974.

On review of the record we are of the opinion that the Order of the district court must be affirmed insofar as it directs production of the partnership records, and reversed as to its command to Mahady ...


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