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United States v. Tervort

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA


December 17, 2008

UNITED STATES OF AMERICA, ET AL., PETITIONERS,
v.
ALLAN D. TERVORT, RESPONDENT.

The opinion of the court was delivered by: Judge: Oliver W. Wanger

CERTIFICATION OF FACTS CONCERNING PETITION RE: CONTEMPT OF ORDER FILED JANUARY 11, 2008 (DOCS. 27, 28, 30) ORDER SETTING THE MATTER FOR HEARING AND JUDGMENT OF CONTEMPT BEFORE THE DISTRICT JUDGE PURSUANT TO 28 U.S.C. § 636(e)(6)(B)

Date: March 9, 2009

Petitioners are proceeding with a civil action in this Court. The matter has been referred to the Magistrate Judge pursuant to 28 U.S.C. § 636(b) and Local Rules 72-302(c)(9) and 72-303.

Pending before the Court is the petition of Petitioners United States of America and Mike Goode, Revenue Agent of the Internal Revenue Service (IRS), filed on July 2, 3, and 22, 2008, regarding alleged contempt by Respondent Allan D. Tervort of the Court's order dated January 11, 2008. In the order of January 11, 2008, the Court directed Respondent to appear personally in obedience to the summons. (Order at 2.) The summons directed Petitioner to appear before the revenue officer to provide testimony and to bring books, records, papers, and other data relating to his investigation of Respondent's income tax liability for tax years ending in 2001 through 2004, and a penalty concerning tax year ending December 31, 2003. (Decl. of Goode, Doc. 1-3 p. 2, Ex. A.)

Petitioners requested that the Magistrate Judge hold a hearing and certify the facts of the contempt to the District Judge and set the matter before the District Judge for hearing and judgment pursuant to 28 U.S.C. § 636(e)(6)(B).

On July 22, 2008, the Court issued an order to Respondent to show cause why, for his failure to comply with the Court's order, he should not be held in civil contempt of this Court, be incarcerated until he complies with the order, and be ordered to pay a daily fine until he complies with the order along with compensatory fines for the resources the government has spent issuing and enforcing the summons. (Doc. 30.) The OSC was served on the Respondent by mail on July 22, 2008. Respondent filed a response on September 23, 2008, along with the declarations of Alan Tervort and Matthew Mark. Petitioner served and filed a reply on October 7, 2008.

The hearing on the order to show cause was held on November 7, 2008. Stephanie Hamilton Borchers appeared on behalf of the Petitioner, along with Revenue Agent Mike Goode. Respondent Allan Tervort appeared personally at the hearing. The parties were given an opportunity to file supplemental briefs, and the Petitioner filed a supplemental brief on November 21, 2008; Respondent filed on December 9, 2008, a supplemental brief that was due no later than December 5, 2008. The brief was untimely and is therefore DISREGARDED.

I. Background

On January 11, 2008, the Court adopted the undersigned Magistrate Judge's findings and recommendations to grant the petition of Petitioners United States of America and Revenue Officer Mike Goode to enforce an IRS summons. (Doc. 25). The district court's order specifically provided the following:

Respondent shall personally appear in obedience to the IRS summons on February 21, 2008, at 10:00 a.m., at the IRS office located at 4825 Coffee Road, Bakersfield, CA, 93308. (Emphasis added.) (Order p. 2.)

The summons was described in the declaration of Petitioner Goode submitted in support of the petition to enforce the summons. (Doc. 1-3, p. 2.) Further, a copy of it was attached to Petitioner Goode's declaration, (Doc. 1-3, Ex. A). The summons stated that it was for periods described as follows:

Form 1040 for the calendar periods ending December 31, 2001, December 31, 2002, December 31, 2003, December 31, 2004 and December 31, 2005 and Civil Penalty for the quarterly period ending December 31, 2003. (Doc. 1-3, Ex. A, p. 5.) The summons directed the following:

You are hereby summoned and required to appear before MIKE GOODE, an Internal Revenue Service (IRS) officer, and/or his or her designee, to give testimony and to bring for examination the following information related to the collection of the tax liability of the person identified above for the periods shown: Form 1040 for the calendar periods ending December 31, 2001, December 31, 2002, December 31, 2003, December 31, 2004 and December 31, 2005 and Civil Penalty for the quarterly period ending December 31, 2003 All documents and records you possess or control regarding assets, liabilities, or accounts held in the taxpayer's name or for the taxpayer's benefit which the taxpayer wholly or partially owns, or in which the taxpayer has a security interest. These records and documents include but are not limited to: all bank statements, checkbooks, canceled checks, saving account passbooks, records or certificates of deposit for the period:

From 06/30/2006 To 01/20/2007

Also include all current vehicle registration certificates, deeds or contracts regarding real property, stocks and bonds, accounts, notes and judgments receivable, and all life or health insurance policies.

IRS will use this information to prepare a Collection Information Statement. We have attached a blank statement to guide you in producing the necessary documents and records. (Id.)

In support of the request for issuance of an order to show cause, Petitioners served and filed on July 2, 2008, the declaration of Revenue Officer Goode (Doc. 27-2), in which Officer Goode stated that in connection with Respondent's tax liabilities for years ending December 31, 2001 through December 13, 2004, he had issued the summons; the summons had been delivered to Respondent; Respondent had appeared on February 21, 2008, as summoned; however, Respondent refused to produce any documents or records as had been demanded in the summons, and he refused to answer questions propounded by Officer Goode regarding where Respondent worked and banked, and Respondent's address. (Goode Decl., p. 2.) Goode stated that Respondent stated that his house in Rosamond was vacant and that he was living with different friends, and he claimed that he had no current offers on the sale of this home. (Decl. of Goode dated June 27, 2008, ¶ 4.) Further, Goode declared that Respondent's failure to comply with the order continues to the present. (Id. at p. 2.)

Respondent's declaration submitted in response to the petition is not declared to be true under penalty of perjury; rather, it is declared to be "true and correct to the best of my recollection." (Doc. 36, p. 2.)

Respondent Tervort asserts in his declaration that he fully complied with the order. (Doc. 36.) He declares that he appeared, brought unspecified "all related documents" on February 21, 2008, and when asked to produce the documents, he asked if they could be used against him in a court of law and if he was required by law to turn over information that might be used against him. Officer Goode said it was possible but highly unlikely. Respondent asked if since it was possible, he was required by law to turn over the documents; Goode stated he did not know but that the subpoena required the documents to be turned over. Respondent said that he needed to know if he was required by law to turn over the documents before he would turn them over; he did not turn over the documents.

Respondent also states that when asked if he had a bank account, he asked the same question about that information being used against him. Respondent asserts that he answered Goode's question about any offers on a house at 6275 Holiday Avenue, which Respondent states that he does not own; Respondent said he did not know of any offers. Respondent alleges that when asked where he was living, he told Goode he was living with friends and relatives and did not have a permanent address at the time. When asked where he was currently employed, Respondent asked if the information could be used against him in a court of law. When Goode then stated that the interview was a waste of time and that he was going to let his lawyers know that Respondent had failed to comply, Respondent said he was not refusing to comply, but he needed to know if he was required by law to give the information that could be used against him. Id.

A purported declaration with an identical jurat was submitted by Matthew Mark, a friend of Respondent who was present on February 21, 2008, when Respondent appeared before Goode. Mark's declaration confirms the substance of Respondent's declaration.

II. Jurisdiction

The Court has subject matter jurisdiction pursuant to 26 U.S.C. §§ 7402 (a)-(b), 7604(a), and 28 U.S.C. §§ 1340, 1345. The Court has the inherent power to impose sanctions for contempt in order to provide a fair, effective, and orderly judicial process. See, United States v. Asay, 614 F.2d 655, 658-59 (9th Cir. 1980).

III. Legal Standards

A. Participation by a Magistrate Judge

Title 28 U.S.C. § 636(e)(6) provides:

(6) Certification of other contempts to the district court.--Upon the commission of any such act--

(A) in any case in which a United States magistrate judge presides with the consent of the parties under subsection (c) of this section, or in any misdemeanor case proceeding before a magistrate judge under section 3401 of title 18, that may, in the opinion of the magistrate judge, constitute a serious criminal contempt punishable by penalties exceeding those set forth in paragraph (5) of this subsection, or

(B) in any other case or proceeding under subsection (a) or (b) of this section, or any other statute, where--

(i) the act committed in the magistrate judge's presence may, in the opinion of the magistrate judge, constitute a serious criminal contempt punishable by penalties exceeding those set forth in paragraph (5) of this subsection,

(ii) the act that constitutes a criminal contempt occurs outside the presence of the magistrate judge, or (iii) the act constitutes a civil contempt, the magistrate judge shall forthwith certify the facts to a district judge and may serve or cause to be served, upon any person whose behavior is brought into question under this paragraph, an order requiring such person to appear before a district judge upon a day certain to show cause why that person should not be adjudged in contempt by reason of the facts so certified. The district judge shall thereupon hear the evidence as to the act or conduct complained of and, if it is such as to warrant punishment, punish such person in the same manner and to the same extent as for a contempt committed before a district judge.

B. Civil Contempt

Petitioners seek a judgment of civil contempt. The civil nature of the proceeding is based on the character and purpose of the relief sought. Where the relief sought involves not punitive or criminal contempt undertaken to punish or vindicate the Court, but rather compulsory and compensatory sanctions, including conditional confinement, employed to compel the Respondent to comply or to compensate the Petitioners for the refusal to comply, then the proceeding is for civil contempt. See, United States v. Asay, 614 F.2d 655, 659 (9th Cir. 1980); Shillitani v. United States, 384 U.S. 364, 369-70 (1966).

The elements required to be shown in order to adjudge one in civil contempt include a specific and definite court order and a failure to comply with the order, which consists of not taking all the reasonable steps within one's power to insure compliance with the order. McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949); Balla v. Idaho State Bd. of Corrections, 869 F.2d 461, 465 (9th Cir. 1989). Willfulness is not a required element of civil contempt, and the absence of willfulness does not relieve one from a civil contempt. McComb, 336 U.S. at 191; United States v. Asay, 614 F.2d at 661. A petitioner for contempt has the burden of proving a prima facie case by clear and convincing proof, which is higher than a preponderance of the evidence but less than beyond a reasonable doubt. Balla v. Idaho State Bd. of Corrections, 869 F.2d 461, 466 (9th Cir. 1989).

Legal defenses to civil contempt include substantial compliance with the order, defined as having taken all reasonable steps to comply with the court order. Balla, 869 F.2d at 466. However, at the present stage of the proceedings, a respondent may not assert error in the order with which he failed to comply. United States v. Rylander, 460 U.S. 752, 756-57 (1983). A contempt proceeding does not open to reconsideration the legal or factual basis of the order alleged to have been disobeyed; it does not permit a retrial of the original controversy or an assertion of lack of possession at the time the order was made. Id. This is because the initial proceeding to enforce the summons was an adversary proceeding in which the defendant might contest the summons on any appropriate ground, including lack of possession or control; thus, such issues may not be raised for the first time in a contempt proceeding. Rylander, 460 U.S. at 757.

A respondent may defend against contempt on the ground that he presently lacks possession or control, but the respondent bears the burden of production. Id. at 757-58, 760-61.

C. Fifth Amendment Privilege against Self-Incrimination

The Fifth Amendment provides that no person shall be compelled in any criminal case to be a witness against himself. The Fifth Amendment applies when the accused is compelled to make a testimonial communication that is incriminating. Fisher v. United States, 425 U.S. 391, 408 (1976). The privilege protects against any disclosures that the witness reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used. Kastigar v. United States, 406 U.S. 441, 444-45 (1972). The claimant of the privilege has the burden to submit sufficient evidence to make it evident, in view of the implications of the question in the setting in which it is asked and in light of the peculiarities of the case, that a responsive answer to a question might be dangerous because injurious disclosure could result. Hoffman v. United States, 341 U.S. 479, 486-87 (1951); United States v. Drollinger, 80 F.3d 389, 392 (9th Cir. 1996). It must be shown that the testimony or matter would support a conviction under a federal criminal statute or furnish a link in the chain of evidence needed to prosecute a claimant for a federal crime. Hoffman v. United States, 341 U.S. at 486. The privilege is validly invoked only where there are substantial hazards of self-incrimination that are real and appreciable, not merely imaginary and unsubstantial. United States v. Brown, 918 F.2d 82, 84 (9th Cir. 1990). It has been held that a reasonable belief that information concerning income or assets might be used to establish criminal failure to file a tax return can be within the privilege. See, United States v. Bodwell, 66 F.3d 1000, 1001 (9th Cir. 1995) (citing United States v. Rendahl, 746 F.2d 553, 555-56 (9th Cir. 1984) [concluding that a risk of incrimination had been shown by taxpayers who were asked to testify in connection with an investigation regarding a third party's tax liability but who also showed that questions asked them would require answers concerning income that could be used to help prove that they had received sufficient income to be required to file a return]).

However, it is established that a person claiming the privilege must present himself for questioning with the records and must specifically claim the privilege with respect to each question and each record. United States v. Drollinger, 80 F.3d 389, 392 (9th Cir. 1996); see, United States v. Brown, 918 F.2d 82, 84 (9th Cir. 1990).

A Fifth Amendment privilege generally cannot be invoked as a means to justify the mere refusal to produce documents in a summons enforcement proceeding. See, United States v. Rylander, 460 U.S. 752, 757-58 (1983) (holding it was not unfair to put the burden of showing impossibility of compliance on a taxpayer who claimed a privilege against self-incrimination with respect to answering questions).

Further, it is established that to be privileged under the Fifth Amendment, an accused's communication must be testimonial, i.e., it must itself explicitly or implicitly relate a factual assertion or disclose information. Doe v. United States, 487 U.S. 201, 209-10 (1988). Thus, the privilege typically does not protect the production of documents or records voluntarily prepared, even if the contents are incriminatory. United States v. Doe, 465 U.S. 605, 610 (1984) (noting that a subpoena that demands production of documents generally does not compel oral testimony or compel the restating, repetition of, or affirmance of the truth of the contents of documents sought); Fisher v. United States, 425 U.S. 391, 408-13 (1976).

IV. Analysis

Here, the Court finds that the order of January 11, 2008, in which the Court compelled compliance with the summons, was in existence and was specific. The terms of the summons were not in dispute.

With respect to the purported declarations submitted by Respondent, the qualification of truth "to the best of my recollection" in the declarations is not in compliance with 28 U.S.C. § 1746, which requires that a declaration be subscribed as true under penalty of perjury, and be executed substantially in the statutory form, which in turn requires a declaration "under penalty of perjury that the foregoing is true and correct." 28 U.S.C. § 1746. Although a lack of swearing is not a fatal defect, the declaration must be made under penalty of perjury and must be attested to be true. Cobell v. Norton, 310 F.Supp.2d 77, 84 (D.D.C. 2004) (statement of truth based on "knowledge, information, and belief" insufficient); Kersting v. United States, 865 F.Supp. 669, 776-77 (D. Hawaii 1994) (necessary elements are that the unsworn declaration contains the phrase "under penalty of perjury" and states that the document is true).

Here, the statement is only that it is true and correct as far as Respondent recalls. The nature and extent of that qualification is uncertain and is subject to being clarified only by Respondent. The Court concludes that the declarations submitted by Respondent fail to comply with the requirements of § 1746.

However, even if the declarations were considered, then the Court concludes that nevertheless, no issue of fact has been presented to the Court concerning Respondent's compliance with the summons.

Respondent admits that when he appeared before Agent Goode, Respondent failed to turn over any of the documents after in turn admitting that pertinent documents existed and were in his possession at the time. Respondent's question concerning the possibility of use of the documents against him in any court, and apparently for any purpose or type of liability, was too broad to constitute a specific invocation of the privilege against self-incrimination with respect to prosecution in federal court. Use of documents against one in any court of law includes the possibility of use that would risk civil liability as well as criminal liability. However, it is established that the privilege may be invoked only to protect against compelled testimony that could subject one to criminal liability, not merely civil liability. United States v. Balsys, 524 U.S. 666, 671-72 (1998) (not sufficient to raise a risk of being subjected to deportation proceedings because such proceedings were civil in character). Respondent thus never specifically invoked the Fifth Amendment privilege.

Should the Court disagree with the Magistrate's findings, it is noted that in any event, such a blanket invocation of the privilege would have been insufficient. Further, the mere type of documents requested is not sufficient to make out a claim of privilege with respect to any document or class of documents. The summons requested documents and records regarding assets, liabilities, or accounts held in Respondent's name or for his benefit and which he owned in whole or in part, or in which Respondent had a security interest, including but not limited to bank statements, checkbooks, canceled checks, savings account passbooks, records or certificates of deposits, current vehicle registration certificates, deeds or contracts concerning real property, stocks and bonds, accounts, notes and judgments receivable, and all life or health insurance policies. As Petitioner notes, most of these documents are not of a type created by the taxpayer, and thus it is not likely that any testimonial evidence would be sought in the form of these documents. See, Fisher v. United States, 425 U.S. 391, 409. Therefore, although some incriminating assertions of fact or belief might be contained in such documents, it appears likely that production would not constitute testimonial compulsion protected by the Fifth Amendment. United States v. Hubbell, 530 U.S. 27, 35-36 (2000) (production of documents containing incriminating matter not violative of the Fifth Amendment because creation of the documents was not compelled); Doe v. United States, 487 US. 201, 206 (1988) (contents of foreign bank records not privileged because the "statement" was that of another).

Further, there is no apparent testimonial value to any admission of the existence of the requested records or of Respondent's possession of those documents because it is common knowledge that banks and financial institutions keep records and send out statement, vehicle registration agencies issue certificates of ownership and registration, insurance agencies issue policies, etc. See, Kaggen v. IRS, 71 F.3d 1018, 1020 (2nd Cir. 1995) (noting that the existence of such records is not reasonably subject to dispute). Because the records were made or issued by a third party, Respondent's act of production would not amount to authentication. See, Fisher, 425 U.S. at 413.

Finally, here, Respondent appears to have admitted the existence and identity of, and his possession of, the documents requested because in his declaration, he states that he told Goode that he had brought the requested documents in his briefcase. (Decl. ¶ 2.) Thus, the act of production would not appear to have any testimonial value in the present circumstances.

With respect to the questions asked Respondent, the Magistrate finds that Respondent's refusal to answer questions until he was informed whether or not the answers could be used against him in any court of law did not constitute a specific invocation of the privilege. Respondent has not demonstrated a reasonable belief that his testimony would support a conviction under a federal criminal statute or furnish a link in the chain of evidence needed to prosecute the claimant for a federal crime. United States v. Rendahl, 746 F.2d 553, 555 (9th Cri. 1984). Therefore, the claim of Fifth Amendment privilege has not been made out.

V. Certification and Recommendation

Accordingly, the undersigned Magistrate Judge FINDS AND CERTIFIES that a definite, specific order existed that required Respondent to appear before the Petitioner Goode, answer questions, and produce documents; and that Respondent, who was subject to the order, appeared and brought all the requested documents with him in responding to the summons, but he failed to a) answer questions propounded by the revenue agent concerning matters that were pertinent to enforcement of the summons and investigation of the aforementioned tax liabilities of Respondent; b) produce any of the documents; and c) do all that he could reasonably do to comply with the order.

The Magistrate Judge therefore FINDS AND CERTIFIES that pursuant to 28 U.S.C. § 636(e)(6)(B), it is appropriate for Respondent Allan Tervort to appear before a District Judge upon a day certain to show cause why Respondent should not be adjudged in contempt by reason of the facts so certified.

The undersigned Magistrate Judge therefore SETS THE MATTER BEFORE THE DISTRICT JUDGE FOR HEARING AND JUDGMENT pursuant to 28 U.S.C. § 636(e)(6)(B), AND DIRECTS SERVICE UPON RESPONDENT AN ORDER REQUIRING RESPONDENT TO APPEAR BEFORE DISTRICT JUDGE OLIVER W. WANGER ON March 9, 2009, AT 10:00 a.m., AND SHOW CAUSE why Respondent should not be adjudged in contempt by reason of the facts so certified.

IT IS SO ORDERED.

Sandra M. Snyder UNITED STATES MAGISTRATE JUDGE

20081217

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