Prosecutor's Disclosure of Tax Records; of Section 6103 and Rule 6(e) (4/23/11)

In Lampton v. Diaz, 639 F.3d 223 (5th Cir. 2011), decided 4/18/11, the Fifth Circuit succinctly stated the issue addressed and holding in its opening paragraph:

In Imbler v. Pachtman, 424 U.S. 409, 430 (1976), the Court held that prosecutors retain common-law immunity from suit for all actions "intimately associated with the judicial phase of the criminal process." This appeal raises the issue of whether that absolute immunity extends to a prosecutor's post-trial transfer of private federal tax records to a state ethics commission. Concluding that it does not, we affirm the denial of a motion to dismiss.

In order to understand the issues I want to discuss in this blog, it is important to have a clear fix on the facts. I will quote the Fifth Circuit's summary of the facts and procedural history, but the facts and procedural history are more nuanced. For more detail, see the district court's opinion, Lampton v. Diaz, 2010 U.S. Dist. LEXIS 44738 (SD Miss. 2010). The Fifth Circuit's statement of facts is:
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Even More on DOJ Authority to Investigate Tax Crimes

I have previously blogged this issue here to address DOJ Tax's claims that it has authority to investigate tax crimes. I had cited the Webster Report to the effect that the IRS was the only federal agency authorized to investigate tax crimes. I was reading a new TIGTA Report today titled The Criminal Investigation Division Can Take Steps to Ensure Its Seizure Opportunities Are Maximized, No. 2010-30-058 (6/18/10). The report also says (Background, p. 1):  "The CI Division is the only Federal agency that can investigate potential criminal violations of the Internal Revenue Code."

Well, I thought, perhaps TIGTA is just not as smart or savvy as DOJ Tax and was just talking off the reservation (as was, presumably Judge Webster in the Webster report). So, I just did the trusty Google search and I find that the following sources, among many others, also repeat this notion, perhaps rotely (maybe cloning it from Judge Webster or whoever he cloned it from).

IRS CI

Treasury

Wikipedia

Facebook

You know, I guess if it is said often enough by somewhat credible sources (I am not among them, but can repeat what I read on the internet), someone may begin to believe this stuff.

More on HSBC Initiative and DOJ Tax Division Authority to Conduct Criminal Tax Investigations

The Wall Street Journal has an article today here with further discussion of the new HSBC initiative which I discussed earlier here. I just want to focus on one picky point in the article. The article quotes the DOJ Tax Division letter (signed by himself, Kevin Downing) as concluding with the following: "You are further advised, that you are the subject of a criminal investigation being conducted by the Tax Division."

As I discussed in a prior blog here, I question the authority of the Tax Division to conduct a criminal tax investigation. A grand jury can certainly conduct a criminal tax investigation, but I presume that, if Mr. Downing were acting as a designated attorney for the grand jury, he would have had to identify himself as doing so and stated that the investigation was a grand jury investigation. That is not what he says. So I guess he is acting, as he says, under some authority that he assumes the Tax Division has to conduct criminal tax investigations. If he is right, then I am wrong.

One other thing I do note with respect to these supposed DOJ Tax criminal tax investigations -- there seems to be a glitch in the secrecy safeguards around tax matters.  Criminal tax investigations conducted by the IRS are covered by Section 6103; criminal tax investigations conducted by the grand jury are covered by Rule 6(e); criminal tax investigations conducted by the Tax Division are not covered, meaning, I suppose, that information and documents gathered in such investigations may be disseminated as DOJ Tax and its attorneys see fit.  I don't think that is the right result if one considers the spirit of Section 6103 and Rule 6(e) in the context of criminal tax investigations.  Which may be a good reason to question DOJ Tax's claim of authority to conduct such investigations.

DOJ Tax Division Criminal Tax Investigation Authority

In the KPMG-related criminal case in the Southern District of New York, two issues arose regarding the scope of the authority of the Department of Justice Tax Division ("DOJ Tax") with respect to criminal tax matters. The issues were:

1. Does DOJ Tax have authority to conduct a criminal tax investigation independent of a grand jury investigation?

2. Does DOJ Tax have authority to prosecute or authorize prosecution of a federal tax crime if the IRS does not agree with the prosecution?

Each of these questions have a context that I shall discuss. Suffice it to say at this point that I made a FOIA request to DOJ Tax (here) to try to obtain answers to these questions. The DOJ Tax FOIA response (here) is quite cryptic and simply refers to the provisions of 28 CFR Section 0.70 (online version here). (Actually, the copy of the CFR provision enclosed with DOJ Tax's response is an earlier version than the current one I link to, but I don't think there were any changes in the later version, other than that redesignating the provision as subpart M rather than subpart N in the earlier version provided by DOJ Tax.) The DOJ Tax response also refers generally to the IRS Internal Revenue Manual ("IRM") (access here) without specific citation; I have been unable to discern how the IRM could possibly establish DOJ Tax authority in the subject areas, since the IRM deals with internal IRS procedures.
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