Sylvestre v. U.S.A.

• Court: Court of Appeals for the First Circuit
• Decided: November 3, 1992
• Docket: 92-1636
• Status: Published

Opinion

USCA1 Opinion

November 3, 1992  UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                 ___________________

No.  92-1636

ROGER SYLVESTRE,
                                Petitioner, Appellant,

                                          v.

                          UNITED STATES OF AMERICA, ET AL.,
                               Respondents, Appellees.

                                 ____________________

ERRATA SHEET

The  cover  sheet of  the opinion  of  this court  issued on
          October 30, 1992 amended as follows:

               Last line after the word "appellee" delete "." add ", United
          States."

               Page 3, line 9:  change the word "citing"  in parenthesis to
          "quoting."
           
               Page 3, line 3 of   4 of indented material: insert "," after
          the word Sylvestre.

               Page 8, line 1: insert "," after the word quash.

October 30, 1992
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

___________________

          No. 92-1636

ROGER SYLVESTRE,
                                Petitioner, Appellant,

                                          v.

                          UNITED STATES OF AMERICA, ET AL.,
                               Respondents, Appellees.

__________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

[Hon. Raymond J. Pettine, Senior U.S. District Judge]
                                          __________________________

                                 ___________________

                                        Before

                                 Breyer, Chief Judge,
                                         ___________
                                 Torruella and Selya,
                                   Circuit Judges.
                                   ______________

                                 ___________________

               Roger Sylvestre on brief pro se.
               _______________
               James A. Bruton, Acting  Assistant Attorney General, Gary R.
               _______________                                      _______
          Allen,  Charles  E. Brookhart,  S.  Robert  Lyons, Tax  Division,
          _____   _____________________   _________________
          Department of Justice, Lincoln C. Almond, United States Attorney,
                                 _________________
          and  Everett  C.  Sammartino,  Senior   Assistant  United  States
               _______________________
          Attorney, on brief for appellee, United States.

__________________

                                 __________________ 

Per Curiam.  On April 14, 1992, the IRS  issued and served
                 __________

          a  summons to  each  of 3  banks  as third  party  recordkeepers,

          seeking records  of savings accounts, checking  accounts, and the

          like, pertaining to  Roger Sylvestre.   Pursuant to  26 U.S.C.   

          7609,  Sylvestre is entitled to  notice of a  third party summons

          and may petition  to quash such a  summons.  Sylvestre was  given

          notice  and did, in fact, seek to  quash each of the 3 summonses.

          The  IRS objected to the petition to quash and sought enforcement

          of the summonses.  After a hearing, the district court denied the

          petition  to  quash and  granted  enforcement  of the  summonses.

          Sylvestre has appealed.  We affirm.1

                 To obtain enforcement of a summons, the IRS

                      must  show that the investigation will be
                      conducted   pursuant   to  a   legitimate
                      purpose, that the inquiry may be relevant
                      to  the  purpose,  that  the  information
                      sought   is   not   already  within   the
                      Commissioner's  possession, and  that the
                      administrative steps required by the Code
                      have been followed....

          United States v. Powell, 379 U.S. 48, 57-58 (1964).  In addition,
          _____________    ______

          enforcement of an IRS summons  is precluded if a referral  to the

____________________

          1.  Shortly  after the  IRS issued  a summons  to each  of the  3
          banks,  it  also  issued a  4th  summons  to  the Home  Insurance
          Company,  seeking records  of financial  transactions with  or on
          behalf of Sylvestre, including  a list of payments and  copies of
          checks.   The dates of service and  notice and the date fixed for
          examination  of  records  for  this  later,  4th,  summons,  were
          different from those relating to the earlier summonses.  Although
          Sylvestre  sought to quash this summons in the district court, we
          read  his arguments on appeal, in particular his contention as to
          statutorily  inadequate  notice,  as   directed  to  the  3  bank
          summonses.    Insofar  as he  may  be  challenging  the order  of
          enforcement as to this 4th  summons, however, we summarily reject
          it and affirm the district court as to this summons as well.

Justice Department for criminal prosecution is in effect.  United
                                                                     ______

          States v. LaSalle Nat'l Bank, 437 U.S. 298, 318 (1978).
          ______    __________________

                 "'Assertions by affidavit of the investigating agent  that

          the requirements  are satisfied are sufficient to  make the prima

          facie case.'"   United States  v. Lawn Builders  of New  England,
                          _____________     _______________________________

          Inc.,  856  F.2d  388,  392  (1st  Cir.  1988)  (quoting  Liberty
          ____                                                      _______

          Financial Services  v. United  States, 778  F.2d 1390, 1392  (9th
          __________________     ______________

          Cir. 1985)).   In this  case, the IRS  submitted an affidavit  of

          Revenue  Agent Paul H. McGunagle.  In it, McGunagle stated, inter

          alia,

                      1.   He is reviewing the  possible income
                      tax  liability  of   Sylvestre,  who   is
                      engaged in the occupation of chiropractic
                      physician.

                      2.   A review of IRS records indicated no
                      federal   tax   returns  were   filed  by
                      Sylvestre for 1985 through 1990.

                      3.   During  his  review, he  had learned
                      that certain accounts in Sylvestre's name
                      may or do  exist in the 3  banks to which
                      summonses were issued.

                      4.   Service and notice of  the summonses
                      were  made as required  by law, including
                      notification   to   Sylvestre,  and   all
                      procedures   required  by   the  Internal
                      Revenue Code were  followed with  respect
                      to the summonses.

                      5.   The  bank  records are  relevant for
                      the  purpose   of  reconstructing  income
                      received and said records are not already
                      in the possession of the IRS.

                      6.   No   previous  examination   of  the
                      records  has taken place  for the periods
                      under review and this matter has not been

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referred  to the criminal tax division of
                      the Justice Department.

                 It is evident  that these averments  by the revenue  agent

          satisfy  a  prima  facie  case  for  the   enforcement  of  these

          summonses.   A  review  for  possible  income  tax  liability  is

          certainly   a  legitimate  purpose   and  records   of  financial

          institutions  are relevant to  that purpose.   These bank records

          would not be expected to be already in the possession of the IRS.

          And, the  agent stated that the  matter had not been  referred to

          the  criminal division of the Justice Department and that all the

          required administrative steps were followed.

                 Once  a  prima facie  case  for enforcement  was  made, it

          became  Sylvestre's burden to  refute the  elements of  the prima

          facie  case or  to present  sufficient evidence that  the court's

          process, invoked to  enforce these summonses,  was abused -  that

          is, that the summonses had been issued for an improper purpose or

          for  any  other  purpose reflecting  on  the  good  faith of  the

          investigation.  United States v. Powell, 379 U.S. at 58.   We see
                          _____________    ______

          no  need for  a  lengthy  discourse as  to  the merits,  and  our

          corresponding rejection,  of  each of  the  numerous  unsupported

          grounds Sylvestre listed in his attempt to quash these summonses.

          We address  only Sylvestre's most potentially  viable challenge -

          his claim concerning the  IRS' failure to comply with  the notice

          provisions of   7609(a)(1).

                 Section 7609(a)(1)  provides that notice of  a third party

          summons  shall  be   given  to  any  person   identified  in  the

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description  of  the records  contained in  the summons  [in this

          case,  Sylvestre] within  3 days of  the day on  which service is

          made, "but no later than the 23rd day before the day fixed in the

          summons as  the day upon which such  records are to be examined."

          The  third  party summonses  were served  on  April 14,  1992 and

          directed the  banks to produce the  records on May 8,  1992.  The

          IRS gave Sylvestre notice  of these summonses on April  17, 1992.

          Notice,  therefore, was given to  Sylvestre within 3  days of the

          April  14th service on  the banks,2 but  21, not  23, days before
                                                   21

          the (May 8th) day for examination of the records.

                 That  the notice to Sylvestre  fell two days  short of the

          statutory provision,  however, does not, as  Sylvestre would have

          it, bar the enforcement of these summonses.  As the Fifth Circuit

          has stated, in affirming the enforcement of a third party summons

          despite the premature disclosure of information about the records

          sought,

____________________

          2.  Sylvestre argues that the provision for notice within 3  days
          of the  service on the banks  was also violated.   The banks were
          served  on April 14th  at 2:55 p.m.   Notice was  given to him on
          April  17th at  4:00 p.m.   Sylvestre says  that 3  days means 72
          hours, but that he was given  notice 73 hours and 5 minutes after
          service.  The IRS responds that the statute does not require that
          notice  be given  within  72  hours  and  there  is  no  language
          suggesting that  notice be given  by the 72nd  hour on  the third
          day.   The IRS  contends that the  statute permits  notice to  be
          served at any time on the third day.
                 While we  believe that  the IRS  has  the better  argument
          here,  we need  not definitively  resolve it.   Even  were we  to
          assume  that the  3 day  requirement was  violated, for  the same
          reason that we  conclude that the  23 day violation does  not bar
          enforcement  of   the  summonses,  so  too   would  the  argument
          concerning the 3 day violation fail.

                                         -5-

[w]e, too, decline  to elevate form  over
                      substance and reject the  suggestion that
                      every  infringement  of a  requirement of
                      the  Internal   Revenue  Code  absolutely
                      precludes enforcement of an  IRS summons.
                      Nothing  in  the  language  of  the  Code
                      itself   mandates   this   sanction   for
                      infringement.  The  correct approach  for
                      determining whether to enforce  a summons
                      requires  the  court   to  evaluate   the
                      seriousness  of  the violation  under all
                      the    circumstances,    including    the
                      government's good faith and the degree of
                      harm imposed by the unlawful conduct.

          United States v.  Bank of Moulton, 614 F.2d 1063,  1066 (5th Cir.
          _____________     _______________

          1980); see also United States v. Texas Heart Inst., 755 F.2d 469,
                 ________ _____________    _________________

          478 (5th  Cir.  1985)  (where  the taxpayer  has  received  every

          benefit  of the administrative steps required by the Code and has

          not  shown any prejudice resulting from the failure to follow the

          strictures  of the notice requirement, such failure by the IRS is

          harmless and enforcement of the summons is not barred), overruled
                                                                  _________

          in part on other grounds, United States v. Barrett, 837 F.2d 1341
          ________________________  _____________    _______

          (5th  Cir. 1988) (en banc)  (per curiam), cert.  denied, 492 U.S.
                                                    _____________

          926 (1989).

                 It  is obvious that the  purpose of notice,  in advance of

          the  date  fixed  for  examination  of  records,  to   one,  like

          Sylvestre, who is  identified in the  description of the  records

          summoned from a third party  recordkeeper, is to allow  Sylvestre

          the  opportunity to  invoke his  right to  intervene and  seek to

          quash  the  summons before  that examination.    See 26  U.S.C.  
                                                           ___

          7609(b).  In this  case, although Sylvestre was given  notice 21,

          rather  than  23,  days  before  the  day  set  for  examination,

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nonetheless he  was able to,  and did, timely  move to  quash the

          summonses.  His objections to the summonses were heard before any

          records were  examined.  In  fact, the third  party recordkeepers

          have yet to  comply with the  summonses, so no records  have been

          examined to this day.

                 We find no  reason to  suspect bad  faith in  the two  day

          shortfall in notice.   Sylvestre has not been  harmed by the IRS'

          failure  to provide him with notice "no  later than the 23rd day"

          before the date set for the examination of  summoned records.  We

          find  neither  error  nor abuse  of  discretion  in the  district

          court's  refusal to quash these  summonses.  See  Rivera v. Chase
                                                       ___  ______    _____

          Manhattan  Bank, No. 83 Civ. 1612,  1984 WL 195 (S.D.N.Y. Mar. 7,
          _______________

          1984)  (absent harm  to petitioner,  summonses, notices  of which

          were given to petitioner 22  and 18 days before the date  set for

          examination, would not be quashed); see also Holifield  v. United
                                              ________ _________     ______

          States,  677 F. Supp. 996, 998 (E.D. Wis. 1987) (although summons
          ______

          required  third party to produce records 11 days after service of

          summons, in view of the fact  that (a) the IRS later extended the

          date for production, (b) the plaintiff was able to move to quash,

          and (c) the records had not yet been  produced, the plaintiff has

          not been harmed and the summons would be enforced).

                 Sylvestre's  complaints on  appeal regarding  the district

          court's refusal to permit him discovery and its refusal to strike

          Agent McGunagle's  affidavit (and  other claims merely  listed in

          his brief's  statement of  issues) do  not rise  to the  level of

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appellate   argument  warranting  consideration  by  this  court.

          United  States v.  Zannino,  895 F.2d  1,  17 (1st  Cir.),  cert.
          ______________     _______                                  _____

          denied, 494 U.S. 1082 (1990).   In any event, Sylvestre needed to
          ______

          do  more  than allege  an  improper purpose  before  discovery is

          ordered in  a summary enforcement  proceeding.  United  States v.
                                                          ______________

          Salter, 432 F.2d 697, 698 (1st  Cir. 1970).  Rather, he needed to
          ______

          introduce some  evidence supporting  his allegations.   Id.   The
                                                                  ___

          arguments  Sylvestre raised at  the district court  did not carry

          his burden in this regard.3

                 The order of  the district court  denying the petition  to

          quash and  granting  the  motion  to  enforce  the  summonses  is

          affirmed.  In  view of  this ruling, the  government's motion  to
          _________

          strike the appellant's statement of issues is denied as moot.

                 Affirmed.
                 _________

____________________

          3.  Sylvestre  claimed a  need for  "pre-hearing discovery."   He
          issued a subpoena to Agent McGunagle commanding his attendance at
          a  deposition.   As  Sylvestre  did  not request  an  evidentiary
          hearing  in the district court  at which he  could question Agent
          McGunagle,  we have  no occasion to  pass on  whether Sylvestre's
          showing  sufficed  to  warrant  such  a  preliminary  evidentiary
          hearing.  Cf. United States v.  Freedom Church, 613 F.2d 316, 323
                    ___ _____________     ______________
          (1st  Cir.  1979)  (threshold  requirements  for  an  evidentiary
          hearing  were not met where, inter  alia, petitioner presented no
          evidence, only a  legal argument, at the enforcement  hearing and
          did not ask permission to question the IRS agent).

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