Argued: June 8, 2015.
[Copyrighted Material Omitted]
On Appeal from the United States District Court for the District of New Jersey. (D.C. No. 3-14-cv-03055). District Judge: Honorable Freda L. Wolfson.
Vivek Chandrasekhar, Esq., Richard A. Levine, Esq. (Argued), Roberts & Holland LLP, New York, NY, for Appellants.
Robert J. Branman, I, Esq. (Argued), Robert W. Metzler, Esq., United States Department of Justice, Tax Division, Washington, DC, for Appellee.
Before: AMBRO and COWEN, Circuit Judges, and RESTANI,[*] Judge.
Eli and Renee Chabot (" the Chabots" ) appeal the District Court's grant of the Internal Revenue Service's (" IRS" ) petition to enforce summonses for foreign bank account records that 31 C.F.R. § 1010.420 requires the Chabots to keep. Today we join six other circuits in holding that these records fall within the required records exception to the Fifth Amendment privilege. Accordingly, we will affirm the District Court's grant of the IRS's petition.
In April 2010, the IRS received information from French authorities concerning United States persons with undisclosed bank accounts at HSBC Bank. The IRS alleges that it has information regarding accounts held by Pelsa Business Inc. (" Pelsa" ) for the years 2005 through 2007. According to the information provided to the IRS, Eli Chabot is the beneficial owner of Pelsa.
On June 20, 2012, the IRS issued summonses to Eli and Renee Chabot requesting that they appear on July 13, 2012, to give testimony and produce documents about their foreign bank accounts for the period from January 1, 2006, to December 31, 2009. The Chabots' attorney notified the IRS that the Chabots would not appear, were asserting their Fifth Amendment privilege against self-incrimination, and would not produce the requested documents. The IRS amended the two summonses on November 16, 2012, limiting their scope to only those documents required to be maintained under 31 C.F.R. § 1010.420. The Chabots continued to claim the Fifth Amendment privilege, and the IRS filed a petition to enforce the amended summonses on May 14, 2014.
Before the District Court, the Chabots claimed that, although the contents of the records sought might not be protected by the Fifth Amendment, their act of producing the documents was protected. The Chabots specifically claimed that responding to the summonses might subject them to prosecution for their failure to file the same information in an annual Report of Foreign Bank and Financial Accounts. The Chabots also claimed that any exception to the Fifth Amendment privilege based on the required records exception should not apply in this case. The District Court held that the required records exception applied and thus the Fifth Amendment did not prohibit production of the documents sought. The District Court therefore granted the petition to enforce the summonses.
II. Jurisdiction and Standard of Review
The District Court had jurisdiction pursuant to 26 U.S.C. § 7402(b) and 26 U.S.C. § 7604(a) (2012). We exercise jurisdiction pursuant to 28 U.S.C. § 1291. Whether enforcement of a summons violates the Fifth Amendment privilege is a mixed question of law and fact. United States v. Ins. Consultants of Knox, Inc., 187 F.3d 755, 759 (7th Cir. 1999). Here, the question before us is purely one of law,
and we review de novo the District Court's application of the Fifth Amendment privilege and the required records exception to the present facts. In re Grand Jury Proceedings, 707 F.3d 1262, 1266 n.4 (11th Cir. 2013).
On appeal, the Chabots' arguments can be summarized as follows: (1) allowing the government to rely on the required records exception to enforce the summonses in this case will lead to general governmental abrogation of the Fifth Amendment privilege for any " failure to report" crime; (2) the information that would be gleaned from compliance with the summonses is almost identical to what the government needs to charge the Chabots with the felony of willful failure to report an overseas account in the Report of Foreign Bank and Financial Accounts, thus requiring the Chabots to incriminate themselves; and (3) the records that 31 C.F.R. § 1010.420 requires accountholders to keep do not satisfy the three-pronged test for applying the required records exception to the Fifth Amendment privilege. The government's response to these arguments is simple. It argues that the Chabots' records fall within the required records exception to the Fifth Amendment privilege. Therefore, the questions before the panel are whether the Chabots' account records fall within the required records exception to the Fifth Amendment privilege and, if so, whether the Chabots' policy concerns are insurmountable barriers to our ...