In a recent summons enforcement case (United States v. Bright, 2009 U.S. Dist. LEXIS 84577 (D. Haw. Sept. 15, 2009), and predecessor case, United States v. Bright, 2009 U.S. Dist. LEXIS 70911 (D. Haw. 2009)), the summonsed party (the taxpayer in the case) was held in contempt for failing to make proper efforts to secure information from a tax haven bank for credit card information related to her account. The court seems to have assumed that it had the contempt power to force the taxpayer to gather the records for the IRS.
I was surprised based on my anecdotal experience that the IRS could force the witness to retrieve information for the IRS. Certainly, the witness would have to produce documents within the scope of the summons held by the witness' agent (such as an attorney or an accountant). Any documents constructively in the witness' possession through agents are certainly fair game. So, the issue is whether the summons power includes the power to direct the summonsed party to use his or her best efforts to get the documents from third parties who are not agents simply because they can.
For example, can the IRS issue a summons to me for today's New York Times that I do not possess and thereby force me to go buy one that I can then produce? I do not think so.
Now, let's focus on bank records. At least for U.S. banks, the historical practice that I have encountered is for the IRS to summons the bank and not the a depositor (usually the taxpayer being investigated) to force him to retrieve the bank records and turn them over. Now, of course, for foreign banks -- tax haven banks in particular -- the IRS usually has no way to summons them or otherwise pressure them for the documents. (In countries with some type of exchange of information agreement, such as the standard double tax treaty, the U.S. with the proper information (taxpayer, bank, etc.,) can get the treaty partner to get the documents, but that is a hassle that can be short circuited through the process discussed here.) Should it make a difference whether the bank is a U.S. bank or a foreign bank or a tax haven bank in terms of defining the proper scope of the summons and contempt power?
One aspect of this type of summons that might be explored in particular cases is that the IRS would have to have very specific information about the existence of the bank account (as it did in Bright). Otherwise, if the IRS is just "fishing," the summons would suffer the same Fifth Amendment infirmities as the grand jury subpoena in the infamous Hubbell case (United States v. Hubbell, 530 U.S. 27 (2000)) and would implicate the concerns presented with the consent directive (see Doe v. United States, 487 U.S. 201 (1988)).
Let's consider some examples to test just how far the concept can go. Keep in mind the concept is that the summons power can force the taxpayer to gather documents otherwise not within his possession to deliver to the IRS.
Example 1: The IRS summonses the taxpayer ("T") to produce records that are, in fact, owned, possessed and controlled by a business associate ("BA") in England. T has no right to force BA to give him the documents (or a copy), but the truth is that, if T asked sincerely, BA would probably deliver them to T. Can the IRS use the summons power to force T to make the request?
Example 2: T does not have his cell phone records for the last 3 years (he gets them digitally by email and routinely destroys them after reviewing them). The cell phone company would deliver them to T upon request. The IRS summonses T for the records. Is T required to request them from the cell phone company so that T can respond to the request? Does or should it make a difference if the cell phone company is a foreign company?
Do the readers have any further thoughts? I have not undertaken to research the issue, so if any reader has, I would appreciate receiving their thoughts and, if possible, the authorities addressing the issue.
UPDATE AS OF 10/7/2009
I now think courts would enforce a summons (or other compulsory process) to require a summonsed party to make good faith efforts to obtain the summonsed parties offshore bank account records. I received enought anecdotal feedback from readers (including comments below), that I am convinced that it happens and summonsed parties dance to the tune called by the judge threatening to put the in jail if they don't go get the records. I still have not found any authority directly on point (suspect some may be out there but just have not spent the time looking). Some of the issues are, however, addressed in United States v. Norwood, 420 F.3d 888 (8th Cir. 2005). I provide the pertinent part of the Norwood decision (pp. 895 and 896):
Norwood argues that his Fifth Amendment privilege against self-incrimination would be violated by enforcement of the IRS summons. The Fifth Amendment provides that "no person . . . shall be compelled in any criminal case to be a witness against himself." U.S. Const. Amend. V. This language has been interpreted to prohibit compelled production of evidence where the communicative aspects of such production are testimonial and incriminating. Fisher v. United States, 425 U.S. 391, 408, 48 L. Ed. 2d 39, 96 S. Ct. 1569 (1976); United States v. Teeple, 286 F.3d 1047, 1049 (8th Cir. 2002).
The district court found that because the IRS already knew of the existence of the two Leadenhall cards and a corresponding account, the existence of the documents associated with the cards and account was a "foregone conclusion." The production of documents the existence of which is a foregone conclusion is not testimony for purposes of the Fifth Amendment. Fisher, 425 U.S. at 411. When the existence of documents is a foregone conclusion, the taxpayer's concession that he has the documents would add "little or nothing" to the government's information, and the "the question is not of testimony but of surrender." Id. (internal quotation omitted). Whether the existence of documents is a foregone conclusion is a question of fact, subject to review for clear error. United States v. Doe, 465 U.S. 605, 613-14, 79 L. Ed. 2d 552, 104 S. Ct. 1237 (1984).
Norwood asserts that the summons did not specifically identify documents the existence of which was a foregone conclusion, and that it therefore fell short of the specificity required by United States v. Hubbell, 530 U.S. 27, 44-45, 147 L. Ed. 2d 24, 120 S. Ct. 2037 (2000). In Hubbell, the Court held that the existence of "general business and tax records" possessed by the defendant was not a foregone conclusion for Fifth Amendment purposes where the government could not show that "it had any prior knowledge of either the existence or the whereabouts" of the documents in question. Id. at 45. Here, Norwood does not dispute that the IRS has prior knowledge of two Leadenhall payment cards and one Leadenhall account controlled by him. He contends that the summons includes documents outside the IRS's prior knowledge, however, because the language of the summons is not restricted to Leadenhall cards and account. It is true that the summons as written is not restricted to records associated with Norwood's Leadenhall cards and account, but the government seeks enforcement of the summons only to the extent that the documents requested are a foregone conclusion. (Br. of Appellee at 10 n.2). The district court's memorandum, moreover, relied on the government's knowledge of the Leadenhall cards and account as the basis for its decision that complying with the summons would not implicate the Fifth Amendment. We therefore interpret the district court's order to enforce the summons only to the extent the summoned records pertain to Norwood's Leadenhall cards and account.
The existence of the requested records relating to Norwood's Leadenhall cards and account is a foregone conclusion. The summons seeks records such as account applications, periodic account statements, and charge receipts, all of which are possessed by the owners of financial accounts as a matter of course. Norwood does not [*896] contend that he does not possess any of these documents, and the government knows far more about the documents associated with Norwood's Leadenhall cards and account than it did about the defendant's business records in Hubbell. 530 U.S. at 44. In Hubbell, the government could not show "any prior knowledge of either the existence or whereabouts" of the documents sought. Id. (emphasis added). Here, by contrast, the government knows the name and location of the bank that created the records sought, Norwood's payment card numbers, and even the details of a number of discrete transactions involving the cards and his Leadenhall account. Accordingly, the district court's conclusion that "Norwood's production of the records has no testimonial significance," (Add. at 4), is not clearly erroneous.
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