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Судебные дела / Зарубежная практика  / XELAN, INC., et al., Plaintiffs v. UNITED STATES of America, Defendant, United States District Court, D. Maryland., 361 F.Supp.2d 459, No. RWT 04CV1863., March 14, 2005

XELAN, INC., et al., Plaintiffs v. UNITED STATES of America, Defendant, United States District Court, D. Maryland., 361 F.Supp.2d 459, No. RWT 04CV1863., March 14, 2005


XELAN, INC., et al., Plaintiffs v. UNITED STATES of America, Defendant

United States District Court, D. Maryland.

361 F.Supp.2d 459

No. RWT 04CV1863.

March 14, 2005.

Darrell Hallet, Esquire, Seattle, WA, James Greenan, Esquire, Christopher Hamlin, Esquire, Geenbelt, MD, for Plain╜tiffs.

Stuart Gibson, Esquire, Washington, D.C., for Defendants.


TITUS, District Judge.

On May 24, 2004, the Internal Revenue Service ("IRS") issued an administrative summons directed to Johnson Lambert and Company ("Johnson Lambert") in con╜nection with its investigation of Petitioner, xelan, Inc ("xelan"). In response, xelan filed a Petition to Quash the IRS adminis╜trative summons, pursuant to 26 U.S.C. ╖ 7609(b)(2). Respondent, the United States, filed a Motion for Summary En╜forcement of the administrative summons. Pursuant to 26 U.S.C. ╖ 7609(h), this Court is granted jurisdiction to resolve the dispute.


This case involves an IRS investigation of xelan. Xelan is a membership organiza╜tion comprised of doctors and dentists. Xelan's goal is to provide these profession╜als with financial and tax planning. An IRS agent, Jay Higgins, began investigat╜ing xelan to determine whether any of the purportedly "deductible savings plans" in xelan's repertoire violate provisions of the tax code, including 26 U.S.C. ╖╖ 6677, 6700, 6701, 6707, and 6708. Higgins Decl. ╤ 16. 1 The specific summons issued in this case was directed to Johnson Lambert as part of an investigation under 26 U.S.C. ╖ 6700. This provision imposes a penalty on


1. ═ As stated by Agent Higgins, these plans in╜clude the Disability Insurance Program, the 419 Welfare Benefit Trust Program, the Sup╜plemental Disability Equity Plan, the Long-Term Care Equity Plan, the Supplemental Malpractice Equity Plan, and the Medical Savings Equity Plan. Higgins Decl. ╤ 20-34.


any person who . . . makes or furnishes or causes another person to make or furnish . . . a statement with respect to the allowability of any deduction or credit, the excludability of income, or the securing of any other tax benefit by reason of holding an interest in the enti╜ty or participating in the plan or ar╜rangement which the person knows or has reason to know is false or fraudulent as to any material matter[.]

26 U.S.C. ╖ 6700(a)(2)(A). Johnson Lam╜bert was retained by xelan to provide pre╜mium accounting and statement prepara╜tion services for xelan's Doctors Benefit Insurance Company. The summons sought information from Johnson Lambert about xelan, other individuals related to xelan, and the products that xelan markets and offers to doctors. Xelan resists the summons, making both broad arguments as to why the IRS has overreached its ostensible purpose and specific arguments relating to the IRS's alleged failure to provide adequate notice and improper ser╜vice.

Before considering xelan's position, the Court notes that this is not the first in╜stance in which xelan has resisted an IRS summons. On February 10, 2004, Judge Dalzell in the Eastern District of Pennsyl╜vania issued a Memorandum and Order, which is currently on appeal to the Third Circuit, denying David Cohen's Petition to Quash an IRS summons. In that instance, the IRS was investigating Dr. David Co╜hen, and his wife Dr. Margaret Cohen, pursuant to its investigation of xelan. Part of the investigation led the IRS to issue a subpoena to SEI Private Trust Company in Oaks, Pennsylvania. The Co╜hens and xelan opposed the subpoena, raising very similar arguments to those made in this case. Judge Dalzell rejected xelan's arguments and granted the IRS's motion for summary enforcement in a pub╜lished opinion. Cohen v. United States, 306 F.Supp.2d 495 (E.D.Pa.2004). 2


2. ═ There are other published and unpublished federal cases concerning xelan's disputes with the IRS and its financial difficulties manifest╜ed by proceedings in federal bankruptcy court. The parties have furnished the Court with decisions in these various cases, some more relevant than others as a result of the different posture of the cases. Xelan v. United States, No. M-04-83, slip op. (S.D.Iowa Dec. 23, 2004); United States v. Guess, No. 04-CV-2184, slip . op. (S.D.Cal. Dec. 15, 2004); Guess, No. 04-CV-2184, slip op. (S.D.Cal. Dec. 6, 2004); Xelan, No. M-03-83, slip op. (S.D.Iowa Nov.18, 2004); Xelan v. United States, No. 04-2289, slip op. (E.D.Pa. Nov. 3, 2004); Xelan v. United States, 2004 WL 1047721 (E.D.Pa. May 6, 2004); Cohen v. United States, 2004 WL 792373 (E.D.Pa. April 9, 2004); Cohen v. United States, 306 F.Supp.2d 495 (E.D.Pa.2004). Cohen, 306 F.Supp.2d 495 is the most relevant, as it is most similar to the current situation. The Court has given appropriate consideration to these cases from other jurisdictions.




Just as in Cohen, xelan resists the en╜forcement of the IRS administrative sum╜mons. However, before turning to xelan's arguments in support of its Motion to Quash, the Court must address xe1an's sta╜tus in bankruptcy court. On August 31, 2004 xelan filed, in this Court, a Notice of Chapter 11 Proceeding in the United States Bankruptcy Court for the Southern District of California. The bare-bones no╜tice did not argue that the proceedings in this court should be stayed, but, as the United States did, it is reasonable to as╜sume that the possibility of a stay was precisely the purpose of the Notice. Given xelan's presumptive motive, the United States filed a Response to Notice of Chap╜ter 11 Proceedings on September 2, 2004.

11 U.S.C. ╖ 362 is the automatic stay provision of the bankruptcy code. 11 U.S.C. ╖ 362(a) states, inter atia, that the filing of a bankruptcy proceeding operates as a stay of judicial proceedings against the debtor except as provided in subsec╜tion (b) of this same section. Subsection (b) has numerous sub-subsections which delineate the situations when the filing of a bankruptcy petition does not operate as a stay. The relevant provision in this case is 11 U.S.C. ╖ 362(b)(9) which states that there is no stay "under subsection (a) of (A) an audit by a governmental unit to determine tax liability; (B) the issuance to the debtor by a governmental unit of a notice of tax deficiency; (C) a demand for tax returns ...."

This exception to the automatic stay provision of the bankruptcy code is directly on point. Cases from the First Circuit and the Southern District of New York buttress the conclusion that a plain reading of the automatic stay provision should not prevent the IRS from enforcing its summons. See United States v. Arthur Andersen & Co., 623 F.2d 725, 727-28 (1st Cir.), cert. denied, 449 U.S. 1021, 101 S.Ct. 588, 66 L.Ed.2d 483 (1980); In Re Greene, 50 B.R. 785, 787 (S.D.N.Y.1985); but see In re Spencer, 123 B.R. 858, 862-63 (Bkrtcy.N.D.Cal.1991) (disagreeing with In Re Greene's conclusion). This Court reads 11 U.S.C. ╖ 362(b)(9)(A) to allow this proceeding to continue, notwithstanding the concurrent proceeding in the United States Bankruptcy Court for the Southern District of California.


Because this case does not come before this Court in the form of a ubiquitous summary judgment or 12(b)(6) motion, a relatively detailed discussion regarding the appropriate standard is required.

In order to make out a prima facie case for enforcement of an IRS ad╜ministrative summons the IRS must satis╜fy a four part test; it must "show [1] that the investigation will be conducted pursu╜ant to a legitimate purpose, [2] that the inquiry may be relevant to the purpose, [3] that the information sought is not already within the Commissioner's possession, and [4] that the administrative steps required by the code have been followed[.]" United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964). The Government's burden under this regime is not onerous; in fact the IRS "need not meet any standard of probable cause to obtain enforcement of [the] summons[.]" Id. at 57, 85 S.Ct. 248. Although the Government's burden is easily met, this does not mean that taxpayers are ren╜dered helpless and unable to dispute the validity of the summons.

The taxpayer retains the right to challenge the summons on any appropriate ground. The teaching of subsequent decisions is that an appropriate ground for challenging the summons exists when the taxpayer disproves one of the four elements of the government's Powell showing, or otherwise demonstrates that enforcement of the summons will result in an abuse of the court's process.

United States v. Rockwell Int'l, 897 F.2d 1255, 1262 (3d Cir.1990).

Upon proper motion, as made in this case, a Court is required to examine the validity of the summons because "it is the court's process which is invoked to enforce the administrative summons and a court may not permit its process to be abused." Powell, 379 U.S. at 58, 85 S.Ct. 248. As set forth by the case law inter╜preting these provisions of the tax code, taxpayers can petition a court to quash an administrative summons in one of two overlapping ways. The taxpayer can ei╜ther convince a court that the IRS has not met one of the four elements of its prima facie case for enforcement, or the taxpayer can argue that the issuance of this sum╜mons is an abuse of the court's process. This latter showing can be accomplished by indicating a weakness in the Govern╜ment's prima facie case, see Cohen, 306 F.Supp.2d at 499, or by pointing to some aspect of the situation which is inequitable or in some way an abuse of the court's process. In this case, as will be discussed in more detail below, besides disputing the Government's contention that it has met Powell's requirements, xelan argues that the administrative summons should be quashed because there is already a Justice Department referral regarding xelan. 26 U.S.C. ╖ 7602(d)(1) provides that "[n]o summons may be issued under this title, and the Secretary may not begin any ac╜tion under section 7604 to enforce any summons, with respect to any person if a Justice Department referral is in effect with respect to such person." See supra at 468-69. The starting point is a consid╜eration of the four requirements for a pri╜m a facie case enumerated by Powell.

Legitimate Purpose

In an attempt to prove that the IRS is pursuing this summons for an illegitimate purpose, xelan contends that the IRS's actual motive is discovering the names of doctors who participate in xelan's services in order to engage in future examinations of those doctors' federal tax returns. 3 Standing in the way of xelan's argument is the Supreme Court's decision in Tiffany Fine Arts, Inc. v. United States, 469 U.S. 310, 105 S.Ct. 725, 83 L.Ed.2d 678 (1985), which held that


3. ═ Xelan's first argument highlights the over╜lapping nature of a taxpayer's attempt to quash an administrative summons. Xelan ar╜gues that the IRS is seeking a summons of Johnson Lambert in order to obtain the names of the individual doctors, without following the proper procedures. This circum╜vention of the required procedures would constitute an improper purpose, thus refuting the validity of the first element under Powell . This subterfuge, however, would also clearly be an abuse of the court's process.


where, pursuant to 26 U.S.C. ╖ 7602, the IRS serves a summons on a known tax╜payer with the dual purpose of investi╜gating both the tax liability of that tax╜payer and the tax liabilities of unnamed parties, it need not comply with the requirements for John Doe summonses set out in ╖ 7609(f), as long as all the information sought is relevant to a legiti╜mate investigation of the summoned tax╜payer.

Id. at 324, 105 S.Ct. 725. The IRS argues that Tiffany Fine Arts is d irectly on point and therefore controlling.

Rather than disputing the applica╜bility of Tiffany Fine Arts, xelan argues that the positions taken by the IRS in this case and in previous cases are inconsistent and contrived to be as onerous as possible, thus evincing bad faith. Man further contends that bad faith equals an improper purpose, relying on United States v. Har╜ris , 628 F.2d 875 (5th Cir.1980). See also Powell, 379 U.S. at 58, 85 S.Ct. 248 ("[A]n abuse would take place if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investi╜gation."). As evidence of bad faith, xelan points out that the IRS requested the names of participants in prior proceedings in order to determine whether xelan's in╜surance program was in compliance with the law, while presently the IRS seems to have already concluded that the insurance program was not actually "insurance" yet still seeks the names of the participants, only this time to determine whether xelan made fraudulent statements in violation of ╖ 6700. According to xelan, this consti╜tutes bad faith because it is a "complete turnabout on the most critical issue raised in the prior proceedings[.]" Opp. to Summ. Enf. at 11. The difficulty with accepting xelan's argument that this con╜stitutes bad faith is that it requires the Court to adopt what is purely conjecture: that the IRS had intended, from the begin╜ning of its investigation into xelan, to bring a ╖ 6700 audit. Xelan's theory is guess╜work because it is just as plausible that the IRS determined that xelan's program was not "insurance" when it obtained informa╜tion from earlier summonses, and that finding, unbeknownst to the IRS at that time, led them to issue this ╖ 6700 sum╜mons.

Xelan also points out that by originally asserting that it needed the names of the individual participants to determine wheth╜er xelan's program complied with the law and presently asserting that it needs the names of individual participants to deter╜mine whether xelan gave fraudulent ad╜vice, the IRS has effectively circumvented the ╖ 7609(f) John Doe requirements. Xelan's bad faith argument, once again, requires this Court to make the inferential jump that the IRS's investigation of xelan is a pretext to investigate the individual doctors. Xelan urges this Court to con╜clude that the IRS changes its position in whichever way permits it the greatest ac╜cess to the names of the individual partici╜pants. The Court is unwilling to accept xelan's conspiracy theory, however, be╜cause there is no evidence that it is an accurate version of the facts, and because the Court can envision a patently legiti╜mate reason for obtaining the names of the individual doctors: the IRS needs to figure out how xelan structured its tax saving programs, and the identity of participants in the programs would be helpful in that endeavor. Moreover, the IRS's subpoena power is very broad, see Powell, 379 U.S. at 56-58, 85 S.Ct. 248, and considering that "[t]he burden of showing an abuse of the court's process is on the taxpayer," id. at 58, 85 S.Ct. 248, it is not prudent for this Court to accept these unproven assump╜tions suggested by xelan.

Relevance to the Legitimate Purpose

The second factor of Powell, that the information sought be relevant to the legit╜imate purpose, is not at issue in this case. The IRS is seeking this information pursu╜ant to a ╖ 6700 investigation. As previ╜ously stated, ╖ 6700 prohibits entities from offering fraudulent tax advice. Seeking documents from an undertaking which xe╜lan utilized to offer the advice to its mem╜bers is clearly relevant to this type of investigation.

Whether the IRS Already has the Infor╜mation

To meet this requirement, the IRS relies on the sworn statement submitted by Agent Jay Higgins declaring, under oath, that the information requested from John╜son Lambert is not already in the posses╜sion of the IRS, see Higgins Decl. ╤ 39. Xelan contends that this is not sufficient proof to satisfy this requirement. The minimal burden placed on the IRS, howev╜er, belies xelan's contention that an IRS agent's declaration alone is not sufficient. No case supports xelan's position that the sworn statement of the IRS agent is insuf╜ficient, in and of itself, to satisfy the mini╜mal showing required under Powell . Re╜cently, in Cohen, the court concluded that the IRS has satisfied this prong of Powell by relying on the declaration of the IRS agents, although that court also found rele╜vant further declarations explaining why these documents were required. Cohen, 306 F.Supp.2d at 502.

In this case Agent Higgins de╜clared that the Johnson Lambert docu╜ments are not in the IRS's possession. Although Higgins has not "substantiated [his] assertion by detailing the IRS's diffi╜culty in obtaining information from xe╜lan[,]" id., his declaration that the IRS does not have documents from the ac╜counting firm that was retained by xelan (Johnson Lambert) is adequate because of the reasonable inference that the Court can draw from the fact that the IRS's previous summons were issued to individu╜al doctors, a life insurance company, and xelan itself; not to Johnson Lambert. Moreover, some courts take the position that a court is not required to rely on outside inferences because "[a]ssertions by affidavit of the investigating agent that the requirements are satisfied [is] sufficient to make the prima facie case." Liberty Fi╜nancial Servs. v. United States, 778 F.2d 1390, 1392 (9th Cir.1985) (citations omit╜ted). Other courts have reiterated that all prongs of the prima facie showing are "generally made by the submission of the affidavit of the agent who issued the sum╜mons and who is seeking enforcement." United States v. Will, 671 F.2d 963, 966 (6th Cir.1982) (citing United States v. Gar╜den State Nat'l Bank, 607 F.2d 61, 68 (3d Cir.1979)).

As the IRS has met its burden with regard to this prong of Powell, xelan must offer persuasive competing evidence that the IRS does in fact have these documents already. Xelan cannot make this showing, arguing only that because thousands of pages of documents have already been pro╜duced in the previous cases involving this issue, the IRS should be required, at a minimum, to state what documents it al╜ready has in its possession. No case, how╜ever, has ordered the disclosure currently suggested by xelan. And, as the Fourth Circuit explained, "inconvenience is not harassment and does not make out a req╜uisite defense that the summons was is╜sued in bad faith." United States v. McGuirt, 588 F.2d 419, 421 (4th Cir.1978). See also United States v. Luther, 481 F.2d 429, 433 (9th Cir.1973) ("The fact that the records called for were extensive is not material."). Therefore, xelan has not re╜butted the Government's showing with re╜gard to the third prong of Powell's re╜quirements.

Satisfaction of Administrative Require╜ments

Xelan argues that the IRS failed to pro╜vide notice to all persons identified in the summons as required by 26 U.S.C. ╖ 7609(a)(1). Thus, xelan argues, the IRS has not met the fourth factor of Powell, which requires that the IRS follow "the administrative steps required by the Code[,] ... in particular, that the Secre╜tary or his delegate, after investigation, has determined the further examination to be necessary and has notified the taxpayer in writing to that effect." Powell, 379 U.S. at 58, 85 S.Ct. 248. 26 U.S.C. ╖ 7609(a)(1) provides that

[i]f any summons to which this section applies requires the giving of testimony on or relating to [or] the production of any portion of records made or kept on or relating to . . . any person (other than the person summoned) who is identified in the summons, then notice of the sum╜mons shall be given to any person so identified within 3 days of the day on which such service is made[.]

Xelan's contention is that because the IRS summons issued to Johnson Lambert sought documents and related materials concerning xelan employees and xelan members, notice should have been sent to those individual members and employees. The IRS disagrees, arguing that the stat╜ute does not require notice to be sent to people about whom information is sought but who are not "identified in the sum╜mons."

Man relies on Ip v. Unit ed States, 205 F.3d 1168 (9th Cir.2000) for the proposi╜tion that an unnamed individual in a sum╜mons is entitled to notice when the IRS issues a summons to a third party seeking documents concerning that unnamed indi╜vidual. This reliance is misplaced. First, Ip was decided when the relevant statute was different and the IRS's argument for not notifying the individual was based on an exception to ╖ 7609 that no longer ex╜ists. See id. at 1169-71. Second, in Ip , the IRS summonsed a bank to obtain fi╜nancial records of numerous account hold╜ers, including the named taxpayer Sheila Ann Ip. In the current case, the IRS sum╜monsed an accounting firm to obtain docu╜ments which are relevant to a product offered by a company with whom that accounting firm had a business relation╜ship. The connection between the "indi╜viduals" named in this case is far more attenuated than the relationship between the summons and the bank account hold╜ers in Ip.

The IRS relies on United States v. First Bank, 737 F.2d 269 (2d Cir.1984) and C & J Trust v. United States, 2002 WL 1987417 (E.D.Cal.2002) for its proposition that ╖ 7609 does not require notice to be sent to all xelan employees and members. Just as in Ip , the relevant statute in First Bank was different than the current version. Similarly, C & J Trust concerns the issu╜ance of a summons to a bank as a third-party record keeper and considers the is╜sue of whether the trustees of the account must be given notice. C & J Trust, 2002 WL 1987417 at *1-*2. The court conclud╜ed that the IRS was not required to send notice to the trustees because the IRS "fulfill[ed] section 7609's chief purpose [which is] to notify target taxpayers to allow them to raise defenses." Id . at *3. Although C & J Trust is not directly on point, to the extent that it is relevant, it suggests that the IRS does not have to send notice to the xelan members because it is the corporation that is the "target" of the investigation, not the individual mem╜bers.

None of the cases cited by either party is directly on point because the con╜troversy in all of them arose from the IRS seeking financial records of specified indi╜viduals from those individuals' banks. The current issue is very different. Therefore, the resolution of this case comes down to an interpretation of the statutory language and the general di╜rection to the courts when dealing with IRS summonses. The language of the statute suggests that the individual identi╜fied in the statute must be a "person." Xelan would have this interpreted as "group of people," but that interpretation does not remain true to the language of the statute. Additionally, numerous courts have indicated that the IRS sum╜monsing power is an "expansive informa╜tion-gathering authority[.]" United States v. Arthur Young & Co., 465 U.S. 805, 816, 104 S.Ct. 1495, 79 L.Ed.2d 826 (1984); see also First Bank, 737 F.2d at 273 (explain╜ing that the Supreme Court has directed that "the summons power of the IRS should be construed broadly and that a deferential standard must be applied when construing congressional intent regarding the scope of the IRS's summons power."). To require the IRS to send notice to all of the xelan participants in order to obtain information about xelan's business itself would frustrate the broad power granted to the IRS. Therefore, following the plain reading of the statute and the case law interpreting the statute, the IRS was not required to send notice to all xelan mem╜bers or employees.

In its initial pleading, xelan raised the additional procedural issue of whether the IRS properly served Johnson Lambert. Xelan did not pursue this argument, how╜ever, in its Brief in Opposition to the IRS's Motion for Summary Enforcement, the only pleading by xelan which discussed cited authority. Nevertheless, this issue warrants a brief discussion.

26 U.S.C. ╖ 7603(b) permits service to be made to "third-party recordkeepers" "by certified or registered mail to the last known address of such recordkeeper." In its initial pleading, xelan contended that the notice was not proper under ╖ 7603 because Johnson Lambert was served by mail in its Bethesda, MD office, rather than its Reston, VA office. This conten╜tion is not supported by the record. Ex╜hibit 4 to the IRS's Motion for Summary Enforcement is a copy of the return re╜ceipt of the mailed summons. This Exhib╜it indicates that the summons was in fact sent to Reston, VA. The summons itself lists 7500 Old Georgetown Rd., Suite 700, Bethesda, MD as the Johnson Lambert address, see IRS's Ex. 3, but 26 U.S.C. ╖ 7603 is not applicable to the address written on the summons. That statute concerns the service of the summons. Therefore, the service of the summons was proper.

Considering the above analysis, the Court determines that the IRS has met its burden of proving a prima facie case for enforcement of the summons. The Court now turns its attention to xelan's alterna╜tive argument-that permitting the sum╜mons to be enforced would constitute an abuse of the Court's process. The pri╜mary argument advanced by xelan in sup╜port of this contention, which is completely divorced from the issues regarding the Government's alleged failure to make out its prima facie case, is an allegation that there is currently a Justice Department referral concerning xelan.

Justice Department Referral

26 U.S.C. ╖ 7602(d)(1) provides that "[n]o summons may be issued under this title . . . with respect to any person if a Justice Department referral is in effect with respect to such person." Subsection (d)(2) of this section of tax code defines "Justice Department referral" as situa╜tions where "the Secretary has recom╜mended to the Attorney General a grand jury investigation of, or the criminal prose╜cution of, such person for any offense con╜nected with the administration or enforce╜ment of the internal revenue laws[.]" 26 U.S.C. ╖ 7602(d)(2). In his declaration, Agent Higgins represented that, as of Au╜gust 17, 2004, the date of his declaration, there was no Justice Department referral with respect to xelan. See Higgins Decl. ╤ 42. Xelan disputes Agent Higgins' state╜ment.

Xelan argues that a grand jury subpoe╜na, issued in the Southern District of Cali╜fornia to the Vanguard Group, seeking rec╜ords of accounts held on behalf of xelan, triggers ╖ 7602(d)(1) and precludes the IRS from issuing this summons. See Ex. D to Colvin Decl. Xelan contends that the grand jury's request for documents relat╜ing to xelan is an indication that there is a criminal investigation involving xelan and the IRS civil enforcement mechanisms should therefore cease.

In response, the IRS explains that there is no evidence that the grand jury subpoena is seeking the Vanguard documents for tax crime purposes. It is just as plausible that the grand jury wants to look at Vanguard's documents pursuant to a criminal antitrust investigation or insur╜ance fraud. Thus, the IRS argues that this lack of specificity of the grand jury subpoena, combined with Agent Higgins' assertion made under penalty of perjury, is sufficient to rebut xelan's contention that ╖ 7602(d)(1) prevents the enforcement of this summons. The Court agrees with the IRS. Once again, xelan's position re╜quires this Court to embrace its supposi╜tions and inferences as to the devious na╜ture of the IRS's methods. This the Court is unwilling to do without more substantial evidence.

According to ╖ 7602(d)(2), the Secretary of the Treasury must refer the case to the Justice Department in order for the IRS to be precluded from issuing a summons. If a "person" under ╖ 7602(d) is the sub╜ject of a criminal prosecution but not as a result of a Justice Department referral, then the statute does not contemplate the preclusion of an IRS summons. Indeed, case law supports this narrow reading of the statute. As the Supreme Court stat╜ed, "[t]he legislative history of the Code supports the conclusion that Congress in╜tended to design a system with interrelat╜ed criminal and civil elements." United States v. LaSalle National Bank, 437 U.S. 298, 310, 98 S.Ct. 2357, 57 L.Ed.2d 221 (1978). Therefore "the primary limitation on the use of a summons occurs upon the recommendation of criminal prosecution to the Department of Justice [because] [o]nly at that point do the criminal and civil aspects of a tax fraud case begin to di╜verge." Id. at 311, 98 S.Ct. 2357; see also Pickel v. United States, 746 F.2d 176, 184 (3d Cir.1984) (reiterating the Supreme Court's holding that "[i]f the summons was issued before any recommendation, it was the institutional posture of the IRS that determined whether the summons was valid: if the IRS had not institutional╜ly abandoned the pursuit of a civil tax de╜termination or collection, the summons was valid.").

Considering the plain language of the statute, and the relevant case law, xelan's assertion, that the summons should be quashed because of the "criminal investi╜gation whose focus is xelan[,]" should not be accepted. The coincidence of a grand jury subpoena naming xelan should not effectively quash the subpoena. Only the specific instance of a Justice Department referral from the Secretary of the Trea╜sury gives rise to the preclusion of the IRS's ability to enforce a summons.

Finally, on November 4, 2004 the United States filed a Notice of Recent Decision by the Eastern District of Pennsylvania. In this decision, Xelan v. United States, No. 04-2289, 2004 WL 2486268 (E.D.Pa. Nov. 3, 2004), Judge Dalzell analyzed the Powell factors and, after concluding that the Unit╜ed States had made out a prima facie case, considered and rejected xelan's three attempts to show that the summons was issued in bad faith. After rejecting xelan's first two arguments in the same way they were rejected in Cohen , the court turned to the argument that there was a Justice Department referral. Unlike the prior cases in the Eastern District of Pennsylva╜nia, in this recent case, the court required the United States to submit in camera all documents sent to the Criminal Division of the Department of Justice by the IRS. After "[c]arefully reviewing all relevant documents, [the court] conclude[d] that there [was] no Justice Department refer╜ral." Id. at 9-10. Although this review by Judge Dalzell is in no way binding on this Court, the close temporal nature of that court's decision should not be ignored. Thus, the Court considers that review to be further evidence that xelan's argument regarding a Justice Department referral should be rejected.


For the aforementioned reasons the Government has satisfied Powell's re╜quirements and has made out a prima facie case for the enforcement of the IRS summons. Xelan has not sufficiently re╜butted the Government's showing, nor does the Court consider the enforcement of the summons to constitute an abuse of the court's process. Therefore, xelan's Pe╜tition to Quash the Administrative Sum╜mons will, by a separate order, be DE╜NIED and the Government's Motion for Summary Enforcement will, by a separate order, be GRANTED.


Upon consideration of Petitioner's Peti╜tion to Quash the Administrative Summons [Paper No. 1], Respondent's Response in Opposition to Petition and Motion for Summary Enforcement [Paper No. 5], the opposition thereto, the arguments present╜ed by counsel at a hearing held before the undersigned on December 10, 2004, and for the reasons stated on the record, it is this 14th day of March, 2005, by the Unit╜ed States District Court for the District of Maryland

ORDERED , that Petitioner's Petition to Quash the Administrative Summons [Pa╜per No. 1] is DENIED ; and it is further

ORDERED , that Respondent's Re╜sponse in Opposition to Petition and Mo╜tion for Summary Enforcement [Paper No. 5] is GRANTED ; and it is further

ORDERED , that the Clerk is directed to CLOSE THE CASE.


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Электронный документ: вчера, сегодня, завтра

Несколько последних публикаций экспертов Synerdocs были посвящены электронным документам в судах и развитию системы электронного правосудия. В настоящей статье хотелось бы подвести некоторый итог и поднять вопрос о будущем электронного правосудия в России. А оно, как вы понимаете, напрямую связано с электронными документами

Чек-лист для проверки электронного документа на юридическую значимость

В этом году мы много говорили о представлении электронных документов в суд, не скупились на советы и рекомендации. При этом давно не поднимали тему юридической значимости. Пожалуй, с этого стоило начать цикл статей про электронное правосудие. Предлагаю обсудить, из чего же складывается юридическая значимость любого документа, и на что стоит обратить внимание при проверке документа на соответствие требованиям действующего законодательства в области ЭДО. Информация будет полезна всем: кто уже работает с электронными аналогами и тем, кто только открывает для себя новую область знаний.