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U.S. v. FLOOD

United States District Court, Southern District of California


January 17, 2003

UNITED STATES OF AMERICA, PETITIONER, VS. JAMES L. FLOOD, RESPONDENT.

The opinion of the court was delivered by: Marilyn L. Huff, Chief Judge United States District Court

ORDER GRANTING PETITION ENFORCE IRS SUMMONSES
On November 20, 2002, Petitioner United States of America filed a petition to enforce two Internal Revenue Service ("IRS") summonses. On January 3, 2003, Respondent James Flood filed an opposition. On January 10, 2003, Petitioner filed a reply. An order to show cause hearing was held on January 17, 2003. Mr. Flood appeared pro se. Ms. Norma Schrock appeared telephonically on behalf of Petitioner. After thoroughly reviewing the matter, the Court finds that Petitioner has satisfied the Powell factors. Therefore, the Court GRANTS the petition to enforce the summonses.

BACKGROUND

The IRS is conducting an investigation into the federal tax liabilities of Mr. Flood for the tax years 1996 through 2001 and an investigation to determine Mr. Flood's ability to pay assessed and accrued income tax liabilities for the years 1992 through 1994.

In furtherance of these investigations, on April 25, 2002, Revenue Officer John Black, a commissioned Revenue Officer in the Compliance section of the Small Business/Self-Employed division, issued two IRS summonses. One summons issued by Revenue Officer Black sought documents and information relating to the determination of Mr. Flood's taxable income for the tax periods 1996 through 2001. The other summons relating to the tax periods 1992 through 1994, sought documents and information relating to the determination of Mr. Flood's current income and net worth. Both summonses directed the respondent to appear on May 23, 2002, to give testimony and produce for examination certain books, papers, records, or other data described in the summonses. A copy of the summonses was served on Mr. Flood by Revenue Officer Black on April 25, 2002. By agreement, the summonses' appearance dates were changed to June 6, 2002.

On June 6, 2002, Mr. Flood appeared in response to the summonses. He was accompanied by two individuals. According to the declaration of Revenue Officer Black, Mr. Flood refused to answer any questions and refused to provide the summoned documents. Additionally, Mr. Flood requested that Revenue Officer Black be put under oath and that Revenue Officer Black state whether the information Mr. Flood may produce could be used against him in a criminal mater. Mr. Flood also asserted that Officer Black had not provided evidence that he was a Revenue Officer with the IRS. To date, Mr. Flood has not complied with the summonses.

DISCUSSION

To obtain judicial enforcement of the summonses, the IRS must satisfy the factors set forth in United States v. Powell, 379 U.S. 48 (1964). The IRS must show: "the investigation has a legitimate purpose, that the inquiry is relevant to that purpose, that the information sought is not already in the possession of the IRS, and that it followed all requisite administrative steps." United States v. Blackman, 72 F.3d 1418, 1422 (9th Cir. 1995).

The IRS must make only a "minimal showing" on these elements. Id. The "statute must be read broadly in order to ensure that the enforcement powers of the IRS are not unduly restricted." Liberty Fin. Servs. v. United States, 778 F.2d 1390, 1392 (9th Cir. 1985); see also United States v. Tanoue, 94 F.3d 1342, 1345 (9th Cir. 1996). Assertions in a declaration by an investigating officer can satisfy the IRS's burden. Blackman, 72 F.3d at 1422; Liberty Fin., 778 F.2d at 1392.

If the IRS makes such a showing, the taxpayer then has a "heavy" burden to disprove the elements or to demonstrate an abuse of process or bad faith. Blackman, 72 F.3d at 1422; Liberty Fin., 778 F.2d at 1392. The taxpayer must present "specific facts and evidence" to support any allegations. Liberty Fin., 778 F.2d at 1392.

The Court finds that the government has satisfied the Powell factors. The requested books, documents, records, and other data, as well as the testimony of Mr. Flood, may be relevant to the investigation and the investigation has a legitimate purpose. In his declaration, Revenue Officer Black states that the purpose of the investigation is determine the correct federal tax liabilities of Mr. Flood for the tax years 1996 through 2001 and to determine Mr. Flood's ability to pay tax liabilities that have been assessed and have accrued interest for the years 1992 through 1994. Revenue Officer Black further states in his declaration that the requested documents and information will be relevant to determining Mr. Flood's taxable income as well as his current income and net worth. Additionally, Revenue Officer Black states that the documents and information sought by the summonses are not in the possession of the IRS*fn1 and all administrative procedures have been followed.

Mr. Flood argues that his Fourth and Fifth Amendment rights constitute a complete bar to having to furnish testimony and documents to the government. Mr. Flood's Fourth Amendment argument is without merit. As to Mr. Flood's Fifth Amendment claim, the Fifth Amendment may apply to the production of documents and testimony before the IRS in response to a summons. United States v. Drollinger, 80 F.3d 389, 392 (9th Cir. 1996). In Drollinger, the Ninth Circuit stated that "[a] claim of Fifth Amendment privilege may be asserted if there are `substantial hazards of self-incrimination that are real and appreciable, not merely imaginary and unsubstantial,' that information sought in an IRS summons might be used to establish criminal liability." Drollinger, 80 F.3d at 392 (quoting United States v. Rendahl, 746 F.2d 553, 555 (9th Cir. 1984)). However, Mr. Flood may not make a "blanket assertion" of his Fifth Amendment rights. United States v. Brown, 918 F.2d 82, 84 (9th Cir. 1990). Instead, Mr. Flood must assert the Fifth Amendment privilege on a question-by-question or document-by-document basis. United States v. Bodwell, 66 F.3d 1000, 1001 (9th Cir. 1995); Brown, 918 F.2d at 84. Only after an invocation of the privilege with respect to specific questions can a reviewing court determine whether a responsive answer might lead to "injurious disclosures." Drollinger, 80 F.3d at 392. Thus, Mr. Flood's blanket assertion of his Fifth Amendment rights does not stand as a bar to the enforcement of the IRS summonses.

Mr. Flood also argues that Revenue Officer Black has no authority to issue an IRS summons; that Revenue Officer Black inappropriately refused to be put under oath; that Mr. Flood is not liable for the taxes at issue; and that Revenue Officer Black's declaration contains a number of false statements. The Court finds these arguments to be without merit.

In sum, the Court finds the government has satisfied the Powell factors and that Mr. Flood has not demonstrated bad faith or abuse of process. The Court, therefore, grants the petition to enforce the IRS summonses. Failure to comply with the summonses, in the absence of good cause, may result in a finding of contempt of court, which may lead to incarceration and/or monetary penalty.

IT IS SO ORDERED.


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