From Gumshoe To Gavel

From Gumshoe To Gavel: The Required Records Doctrine And The Fifth Amendment Act-of-production Privilege Against Self-incrimination for Documents Relating to Foreign Accounts

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Although it didn’t have the panache of Dark Justice, a vastly underrated drama, in my humble opinion, the Law & Order franchise was once almost as ubiquitous as stars in the sky or grains of sand on the seashore. These shows featured solid writing and good acting, along with a half cop show/half lawyer show format that resonated with audiences, at least until the CSI-esque programs took control of prime time.

As the FBAR crackdown enters its final phase, it’s almost like we’re halfway through a Law & Order episode. The setting is migrating from hard-boiled detectives tracking down leads generated by cooperative foreign governments, or tips from “concerned citizens,” to a courtroom showdown between the heroic district attorney and sleazy lawyers who rely on “technicalities,” such as the United States Constitution, to open the cell doors of their guilty-as-the-day-is-long clients. You can probably tell that I’m a criminal defense attorney.

The Case

United States v. Chabot involved a fact pattern that is all too familiar to my loyal readers. The case comes from our own Third Circuit in New Jersey, although it could have just as easily come from anywhere else, because all the other circuit courts have used a similar approach and reached similar conclusions.

Acting on a tip, the IRS issued summonses to Eli and Renee Chabot, which required them to produce four years of records from a French bank account. After their lawyer cried “Fifth Amendment,” the IRS limited its subpoena to documents which are “required to be maintained” under Section 1010.420 of the Bank Secrecy Act. That provision basically lists name, rank, and serial number-type documents. Once again, the Chabots asserted their Constitutional right not to testify against themselves. But this time, the IRS pushed back.

After losing in the trial court, the Chabots basically advanced three arguments to the Third Circuit panel:

(1) The exception swallows the rule, meaning that the government could ask for almost anything under a required-records provision,

(2) Any information obtained would be a critical component of a criminal indictment, so the IRS basically wanted the Chabots to dig their own grave, and

(3) 1010.420 does not meet the legal qualifications for a Fifth Amendment exception that the Supreme Court articulated in Grosso v. United States: the recordkeeping scheme must have a regulatory purpose, the records must have “public aspects,” and the person must actually keep the required records.

Rather unsurprisingly, given the holdings in all the other circuits, the panel essentially dismissed all three of these seemingly valid arguments. Of particular interest is the panel’s insistence that, even though the required records exception has changed significantly since 1976, it still applied to this situation.

“Unsettled”

That’s the phrase the panel used to describe the law in the light of 1976’s Fisher v. United States. This case crystallized the notion that the Fifth Amendment is a “testimonial” privilege that doesn’t apply to circumstantial evidence. The late, great Justice Byron White found examples in previous cases when the Court refused to extend the Fifth Amendment privilege, including things like handwriting samples, blood samples, and voice exemplars.

Backing up a bit, the Fifth Amendment says that people cannot be compelled to testify against themselves in criminal cases, and the required records exception is just one of a long list of situations when the privilege doesn’t apply, for one reason or another. This area has been a vexing question for a number of years. Federal cases recognize competing interests: the desire to protect individual citizens from excessive governmental intrusion versus the government’s need to properly enforce the laws by using evidence independently obtained through skillful investigation. For our purposes, required records include things like tax returns and financial account records.

Justice White basically analogized these documents to circumstantial evidence in a standard criminal case. The privilege against self-incrimination doesn’t apply because, although it is most certainly damaging, to say the least, a bloody shirt is not Fifth Amendment testimony.

But the distinction is that, in an FBAR case, the account records are the entire case, not just part of it. Moreover, the fact that the Third Circuit appeared somewhat hesitant on this issue is extremely good news. Given the unanimity of the circuits, it’s doubtful that the Supremes will consider the issue anytime soon. So, the Third Circuit may be the one place in the country where you have a fighting chance in these cases.

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