           Case: 12-13929   Date Filed: 07/01/2013   Page: 1 of 19


                                                         [DO NOT PUBLISH]



            IN THE UNITED STATES COURT OF APPEALS

                     FOR THE ELEVENTH CIRCUIT
                       ________________________

                             No. 12-13929
                         Non-Argument Calendar
                       ________________________

                   D.C. Docket No. 9:11-cv-80360-DTKH



JEFFREY A. AZIS,
                                                            Plaintiff-Appellant,
JEFFREY A. AZIS, CPA, PA,

                                                                      Plaintiffs,

                                  versus

UNITED STATES INTERNAL REVENUE SERVICE,

                                                           Defendant-Appellee.

                       ________________________

                Appeal from the United States District Court
                    for the Southern District of Florida
                      ________________________

                               (July 1, 2013)

Before CARNES, BARKETT and ANDERSON, Circuit Judges.

PER CURIAM:
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       Jeffrey Azis, proceeding pro se, appeals the district court’s order denying his

petition to quash three Internal Revenue Service (“IRS”) summonses issued to

third-party banks. 1

       In April 2010, Azis, the owner of a small accounting and consulting

business, received notice from the IRS that he was being audited. As part of its

investigation, the IRS issued summonses to two banks where Azis and his

corporation held accounts. Azis sought to quash the summonses, and argued,

among other things, that they were issued to harass him because of his political

beliefs and associations. Because the summonses were issued for an improper

purpose, he argued, they did not meet the criteria for lawful summonses found in

United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964). The

district court referred the matter to a magistrate judge, who held an evidentiary

hearing. During the hearing, the magistrate judge heard testimony from IRS agents

Tilo Alexander and Heather Cole, who testified that Azis was selected for audit

because (1) he was a non-filer with unreported income; (2) he had purchased a

product from Robert Schultz, an individual who promoted and sold tax avoidance

schemes; and (3) he had participated in a lawsuit, with Schultz and the nonprofit

organization We The People, against the government in which he had stated that he

       1
          Azis originally filed his appeal on behalf of his corporation, Jeffrey A. Azis, CPA, PA,
as well as himself. We dismissed the appeal as to the corporation for want of prosecution after it
failed to retain counsel. Accordingly, the only petitioner on appeal is Azis in his individual
capacity.
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would violate the law by not paying income taxes. Agent Cole further testified

that, based on her investigation, she saw no reason to believe that Azis was

selected for audit because of his political beliefs. The magistrate judge issued a

report and recommendation (“R&R”), credited the testimony of the IRS agents,

and found that Azis was audited for the reasons stated by Agent Cole. Azis filed

22 pages of objections to the R&R, including an objection to the magistrate judge’s

adoption of Agent Cole’s testimony. The next day, the district court fully adopted

the R&R and denied Azis’s motion to quash.

      On appeal, Azis argues that the district court failed to make the required de

novo review of the R&R. The evidentiary hearing transcript that the district court

referred to in its adoption of the R&R was not filed until a week after the court

adopted the R&R. The district court thus could not have conducted a de novo

review.

      The government responds that, after the transcript was entered on the docket,

Azis brought the matter to the district court’s attention in his motion for

reconsideration. When the district court denied that motion, it implicitly

determined that nothing in the transcript changed the outcome of the case.

      We review a district court’s treatment of a magistrate judge’s report and

recommendation for abuse of discretion. Williams v. McNeil, 557 F.3d 1287, 1290

(11th Cir. 2009).


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      A district court judge may designate a magistrate judge to conduct hearings,

including evidentiary hearings, and, for certain motions, to submit proposed

findings of fact and recommendations to the judge of the court. 28 U.S.C.

§ 636(b)(1)(B). When a party objects to the findings contained in a magistrate

judge’s R&R, the district court must conduct a de novo review of those findings.

28 U.S.C. § 636(b)(1). “The de novo requirement is essential to the

constitutionality of section 636.” Jeffrey S. v. State Bd. of Educ., 896 F.2d 507,

512 (11th Cir. 1990). De novo review does not require a new hearing of witness

testimony, but “does require independent consideration of factual issues based on

the record.” Id. at 513.

      The district court wholly adopted the R&R, which included reference to

Agent Cole’s testimony, the day after Azis filed 22 pages of objections to its

findings. Although the district court filed its order before the transcript was

entered in the record, and arguably erred, Azis filed a motion for reconsideration,

which gave the district court the opportunity to review the transcript. Thus any

error would be harmless because the district court has now had the opportunity to

review the transcript.

      Next, Azis argues that the district court erred when it did not quash the

summonses because the summonses failed to meet all four prongs of Powell.

First, he asserts the investigation was not conducted for a legitimate purpose


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because it was based on Azis’s political beliefs and membership in We the People.

Second, the summonses sought irrelevant client-identifying information. Third,

the summonses sought documents already in the IRS’s possession. Finally, correct

administrative procedures were not followed with regard to the issuance of the

summonses

      The government responds that the district court properly denied Azis’s

petition to quash the IRS summonses because: (1) the IRS has broad summons

authority; (2) the government established a prima facie case that the summonses

were valid; (3) Azis’s assertion that the IRS already possessed the information

sought is incorrect; (4) Agent Alexander served attested copies of the summonses

on the third parties; (5) Agent Alexander’s failure to provide Azis with the

attachment to the summons was inadvertent, and caused Azis no prejudice; (6)

Agent Alexander possessed authority to issue summonses; and (7) client-

identifying information was relevant to the investigation.

      This Court reviews an order enforcing an IRS summons for clear error.

Nero Trading, LLC v. U.S. Dep’t of Treasury, 570 F.3d 1244, 1248 (11th Cir.

2009). Section 7602 of the Internal Revenue Code permits the IRS to “examine

any books, papers, records, or other data which may be relevant or material to”

determine the correctness of a tax return or the liability of a taxpayer. 26 U.S.C. §

7602(a)(1). The IRS may summon either the person liable for the tax or “any


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person having possession, custody, or care of books of account containing entries

relating to the business of the person liable for” the tax. 26 U.S.C. § 7602(a)(2).

      Section 7609(b) grants a person entitled to notice of a summons the right to

petition to quash the summons. 26 U.S.C. § 7609(b). If the summons is

challenged:

              the IRS must demonstrate (1) that the investigation
              will be conducted pursuant to a legitimate purpose, (2)
              that the inquiry will be relevant to that purpose, (3)
              that the information sought is not already in the IRS’
              possession and, (4) that it has taken the administrative
              steps necessary to the issuance of a summons.

La Mura v. United States, 765 F.2d 974, 979 (11th Cir. 1985) (citing Powell, 379

U.S. at 57-58, 85 S. Ct. at 255). The IRS may satisfy its minimal burden merely by

presenting the sworn affidavit of the agent who issued the summons attesting to

these facts. La Mura, 765 F.2d at 979. If the IRS makes the necessary showing,

the “burden shifts to the party contesting the summons to disprove one of the four

elements of the government’s prima facie showing.” Id. at 979-80. The taxpayer’s

burden to disprove the actual existence of a valid civil tax determination or

collection purpose by the IRS is “a heavy one.” United States v. LaSalle Nat.

Bank, 437 U.S. 298, 316, 98 S. Ct. 2357, 2367 (1978). Indeed, the contesting

party must allege specific facts and introduce evidence. United States v. Leventhal,

961 F.2d 936, 940 (11th Cir. 1992).



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      Here, the government established a prima facie case for enforcement of the

summonses. As detailed below, the declaration and testimony of Agents

Alexander and Cole were sufficient to establish that (1) the purpose of the

summonses was to obtain records relevant to determining Azis’s tax liability for

2007 and 2008; (2) the records were relevant to Azis’s tax liability; (3) the IRS did

not already possess the requested records; and (4) the IRS complied with the

administrative steps necessary to issue the summonses. See La Mura, 765 F.2d at

979. Accordingly, Azis had the “heavy” burden to disprove one of the four

elements of the prima facie case to show that enforcement of the summonses

would constitute an abuse of discretion. See LaSalle Nat. Bank, 437 U.S. at 316,

98 S. Ct. at 2367; La Mura, 765 F.2d at 979-80.

      A. Legitimate Purpose

      The district court’s finding with respect to the purpose for which an IRS

summons has been issued is one of fact, and this Court will not overturn it unless it

is clearly erroneous. La Mura, 765 F.2d at 981 n.10.

      Here, the district court’s finding that the IRS issued the summonses for a

legitimate purpose was not clearly erroneous. Agent Alexander attested that the

summonses were issued as part of an investigation to determine Azis’s tax liability

for 2007 and 2008 because the IRS suspected that Azis had unreported income. In

June 2009, the Classification Group selected Azis’s personal return for 2007


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because, at that time, he had yet to file his return. Agent Cole testified that Azis

was selected for audit because: (1) he was a non-filer with unreported income; (2)

he had purchased a product from Schultz and WTP, which were known to sell

products promoting tax evasion; and (3) he had identified himself in a lawsuit

against the government which stated that he would violate the law by not paying

income taxes.

      Azis attempted to show, through his testimony, that the IRS audited him

because of his involvement in WTP. He testified that, instead of calling him on his

business phone, Agent Alexander called him at a phone number that he believed

was only listed on the WTP website. However, Agent Cole explained that field

agents must find the audited taxpayers on their own because the agents are only

given taxpayers’ addresses, and Agent Alexander testified that he found Azis’s

phone number after searching on Google. Thus, there is no indication that, by

finding his phone number on the WTP website, Agent Alexander sought to harass

Azis for his involvement in the organization, rather than as a regular method of

searching for a contact phone number. Further, Azis had already been selected for

audit when Agent Alexander searched for his phone number. Thus, the fact that

Agent Alexander found Azis’s phone number on the WTP website after he had

been selected for an audit does not show that he was audited because of his

involvement in WTP or for any improper purpose.


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      Azis also testified that Agent Alexander questioned him about his

involvement in WTP, and asked him whether he believed that the income tax was

illegal. However, asking Azis whether he believed the income tax was unlawful

when, at the time, he had not filed an income tax return for a previous year, was a

legitimate question, and did not reveal any improper purpose. As the magistrate

judge stated, and the district court adopted, Azis “was not selected for an audit in

retaliation for his involvement in We the People; rather, he was scrutinized as

someone who affirmatively disavowed his taxpayer obligations and ultimately

selected for audit when he revealed himself to be a non-filer.” Azis did not

introduce any evidence to the contrary, and thus failed to meet his “heavy” burden

of showing that the summonses were issued for an improper purpose. See LaSalle

Nat. Bank, 437 U.S. at 316, 98 S. Ct. at 2367; Leventhal, 961 F.2d at 940.

Accordingly, the court’s conclusion that the IRS summonses were issued for a

legitimate purpose was not clearly erroneous. See La Mura, 765 F.2d at 981 n.10.

      B. Relevance

      This Court will not overturn the district court’s determination that

information sought was relevant to the IRS’s investigation unless clearly

erroneous. Id. at 982 n.13. The government’s burden of showing relevance is

light. Id. at 981. If the information sought by an IRS summons might throw light

upon the correctness of the taxpayer’s return, then it is relevant. Id. The Supreme


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Court has held that the IRS may collect names of third-party licensees who

purchased items from the party being audited, because the names “may be

relevant” to the IRS’s investigation. See Tiffany Fine Arts, Inc. v. United States,

469 U.S. 310, 323, 105 S. Ct. 725, 732, 83 L.Ed.2d 678 (1985).

      The information that Agent Alexander sought from the summonses was

relevant, especially because Azis admitted to having unreported income of $26,677

in 2007. Agent Alexander needed the payor and payee information from Azis’s

bank accounts because he was conducting a “bank deposits method of analysis,”

and Azis could not provide the necessary documents due to a flood and the

accidental deletion of the information. The source of the deposit items could be

independent third-parties or other bank accounts in Azis’s control that he had not

disclosed to the IRS. The deposit items would further detail whether a check that

was deposited was in part cashed, shedding additional light on Azis’s income. The

cancelled checks and the monthly bank statements would help establish whether

Azis controlled undisclosed bank accounts. Although Azis argues that his clients’

identities are irrelevant, their names “may be relevant” to show that he received

unreported income. See Tiffany Fine Arts, 469 U.S. at 323, 105 S. Ct. at 732. Azis

did not introduce any evidence to show that the information sought was irrelevant,

and thus, failed to meet his “heavy” burden. See LaSalle Nat. Bank, 437 U.S. at

316, 98 S. Ct. at 2367; Leventhal, 961 F.2d at 940. Accordingly, the district


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court’s conclusion that the information sought was relevant was not clearly

erroneous. See La Mura, 765 F.2d at 981.

      C. Information Not Already in IRS Possession

      Here, Azis provided Agent Alexander with thousands of documents,

including bank statements, checks, and receipts. Azis conceded, however, that he

did not provide client-identifying information or his personal bank disbursement

information. In his brief, he further concedes the issue by stating that, although he

provided Agent Alexander with monthly account statements and cancelled checks,

he did not provide deposit items, deposit slips, or copies of all checks deposited

into his accounts because he does not maintain such copies, and such information

is unnecessary to compute his tax liabilities. Thus, at least some of the information

requested in the summonses was not already in the possession of the IRS. See La

Mura, 765 F.2d at 979.

      D. Correct Administrative Procedures

      Azis raises three arguments concerning why the summonses should have

been quashed on procedural grounds, which are discussed below.

      i. Attestation

      Azis argues that, during the evidentiary hearings, Agent Alexander failed to

follow the steps required by 26 U.S.C. § 7603 when he was only able to produce a




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blank copy of a summons form, which provided no proof that a proper attestation

had been made on the original summonses forms to the banks.

       A summons issued under 26 U.S.C. § 7602 shall be served by an attested

copy delivered to the person to whom it is directed, and the certificate of service

signed by the person serving the summons shall be evidence of the facts it states on

the hearing of an application for the enforcement of the summons. 26 U.S.C. §

7603(a).

       Agent Alexander’s sworn declaration provided that, on March 18, 2011, he

served the summoned parties with attested copies of the summonses, in accordance

with 26 U.S.C. § 7603. This was sufficient to establish a prima facie case. See La

Mura, 765 F.2d at 979. Furthermore, the certificates of service on the summonses

stated that Agent Alexander sent attested copies of the summons. The certificates

of service provided evidence that Agent Alexander did provide attested copies. 26

U.S.C. § 7603(a). Azis provided no evidence to overcome his “heavy” burden of

disproving that the summoned parties received attested copies of the summonses.

See LaSalle Nat. Bank, 437 U.S. at 316, 98 S. Ct. at 2367; Leventhal, 961 F.2d at

940.

       ii. Time and Manner of Notice

       Next, Azis contends that Agent Alexander did not provide him with

complete copies of the summonses within three days of the day on which service to


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the third parties was made, as required by § 7609. He also argues that faxing is not

a proper method for delivery of notice.

      Notice must be given to any person about whom the IRS has summoned

information from a third-party record keeper. 26 U.S.C. § 7609(a)(1). Such notice

to the taxpayer must be given within three days of the day on which such service is

made to the third party, but no later than the 23rd day before the day fixed in the

summons as the day upon which such records are to be examined. Id. Such notice

shall be sufficient if, on or before the third day, notice is served in the manner

provided in § 7603, or is mailed by certified or registered mail to the last known

address of such person, or left with the person summoned. Id. § 7609(a)(2).

Service under § 7603 requires an attested copy delivered in hand to the person to

whom it is directed, or left at his last and usual place of abode. Id. § 7603(a).

      Here, it is undisputed that Agent Alexander served copies of the summonses,

without “Attachment A,” to Azis by certified mail on March 18, 2011.

“Attachment A” listed the specific records sought from the third party banks.

Agent Alexander faxed Azis the missing attachments of the summonses seven days

later, on March 25, 2011. Agent Alexander averred that, although he inadvertently

omitted the attachments, he remedied the omission “by providing the full

summonses with the attachments on March 25, 2011.” Azis contested this

assertion by averring that Agent Alexander only faxed three pages, consisting of


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copies of “Attachment A” for each of the three summonses, and provided evidence

purporting to show this. Agent Alexander testified that the attachments were

delayed because he was out of town for training, and was unable to fax the

documents. Because Azis was not sent full copies of the summonses within three

days of the banks receiving them, Agent Alexander did not comply with the

statutory requirements. See 26 U.S.C. §§ 7603(a), 7609(a)(1), (2).

      However, nothing in the language of the Internal Revenue Code mandates

the non-enforcement of an IRS summons because of an infringement of the Code.

United States v. Bank of Moulton, 614 F.2d 1063, 1066 (5th Cir. 1980). Moreover,

in determining whether to enforce a summons, the district court must evaluate the

seriousness of the violation under all the circumstances, including the

government’s good faith and the degree of harm imposed by the procedural

violation. Id.

      Other Circuits that have addressed the issue have held that violations of the

IRS or tax regulations occurring in the course of a tax investigation do not

necessarily require summonses to be quashed. Those courts have similarly

evaluated whether the taxpayer suffered harm or prejudice, and whether the IRS’s

mistakes were made in good faith. See Adamowicz v. United States, 531 F.3d 151,

161-62 (2d Cir. 2008) (holding that “whether the government’s violation of the

[Internal Revenue Code] or an IRS regulation in connection with the issuance of a


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summons affects the enforceability of that summons depends on the totality of the

circumstances, including the seriousness of the infringement, the harm or

prejudice, if any, caused thereby, and the government’s good faith”); Robert v.

United States, 364 F.3d 988, 996-97 (8th Cir. 2004) (same); Cook v. United States,

104 F.3d 886, 889 (6th Cir. 1997) (applying a harmless error standard to determine

whether summons should be quashed based on IRS’s minor procedural error);

Sylvestre v. United States, 978 F.2d 25, 27-28 (1st Cir. 1992) (same); United States

v. Payne, 648 F.2d 361, 363 (5th Cir. Unit A June 1981) (holding that a summons

was enforceable when “improper service was, at most, technical and not serious,”

the government did not show bad faith, and the taxpayer suffered no harm or

prejudice).

      After evaluating the seriousness of the infraction under all the

circumstances, including the government’s good faith and the degree of harm

imposed, we determine that the district court did not clearly err in finding that

Agent Alexander’s initial failure to provide the full summonses “was quickly cured

and no prejudice resulted.” Bank of Moulton, 614 F.2d at 1066. Agent Alexander

offered a good faith reason for not complying with the statutory requirements when

he testified that he was unable to fax the attachments because he was out of town

for training. Further, the fact that Agent Alexander faxed the attachments instead

of using the methods enumerated in § 7603(a) or § 7609(a)(2) “was, at most,


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technical and not serious.” See Payne, 648 F.2d at 363. Moreover, despite the

delay, Azis had notice of the summonses and was able to timely file his petition to

quash. He has not indicated, much less shown, any other specific harm caused by

the shortened time in which to prepare his petition to quash. Thus, Azis was not

prejudiced by the delay, and suffered no harm as a result. Bank of Moulton, 614

F.2d at 1066.

      iii. Authority to Issue Summons

      Next, Azis argues that, although Agent Alexander made a sworn declaration

that he was authorized to issue summonses, such declarations are subject to

verification. If the summonses are upheld as lawful, the IRS has the burden of

proving that Agent Alexander had the lawful authority to issue summonses.

      As an initial matter, although Azis argues that because he contested Agent

Alexander’s assertions in his declaration, the burden of proof shifted to the IRS,

that argument is unavailing. See United States v. Southeast First Nat. Bank of

Miami Springs, 655 F.2d 661, 664 (5th Cir. Unit B Sept. 1981) (holding that the

taxpayer cannot rebut the IRS’s prima facie case for enforcement of a summons

simply by denying the existence of the Powell elements). Accordingly, the burden

remained on Azis to prove that Agent Alexander did not have lawful authority to

issue summonses. See Leventhal, 961 F.2d at 940.




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      The Secretary of the Treasury, or the IRS as his designee, may issue

summonses to those in possession, custody, or care of books, papers, records, or

other data which may be relevant or material to ascertaining the correctness of any

return. La Mura, 765 F.2d at 978-79 (quoting 26 U.S.C. § 7602). The Secretary of

the Treasury has delegated summons authority to the Commissioner of the IRS. 26

C.F.R. § 301.7602-1(b); 26 C.F.R. § 301.7701-9(b). As authorized by the

Secretary, the IRS Commissioner has re-delegated this authority to the Deputy

Commissioner of the IRS. IRS Delegation Order 1-23, IRM 1.2.40.21 (Nov. 8,

2000). The Deputy Commissioner has re-delegated the authority to issue third-

party summonses to revenue agents, provided that a supervisory official at the level

of the officer’s manager or above has authorized the issuance of the summons. 26

C.F.R. § 301.7701-9(c); 26 C.F.R. § 301.7701-9(b); IRS Delegation Order No. 25-

1, 2007 WL 7300510 (Apr. 30, 2009).

      Here, the summonses were approved and authorized by a supervisory

official, an IRS Group Manager. Thus, Agent Alexander was permitted to issue

the third-party summonses. See 26 C.F.R. § 301.7701-9(c); 26 C.F.R. § 301.7701-

9(b); IRS Delegation Order No. 25-1, 2007 WL 7300510 (Apr. 30, 2009).

Because Azis provided no evidence that Agent Alexander did not have lawful

authority to issue the summonses, he did not meet his “heavy” burden. See LaSalle




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Nat. Bank, 437 U.S. at 316, 98 S. Ct. at 2367; Leventhal, 961 F.2d at 940;

Southeast First Nat. Bank of Miami Springs, 655 F.2d at 664.

      In sum, Azis did not meet his “heavy” burden to disprove any of the four

elements of the government’s prima facie case. See LaSalle Nat. Bank, 437 U.S. at

316, 98 S. Ct. at 2367; La Mura, 765 F.2d at 979-980. Accordingly, the district

court did not clearly err in denying Azis’s petition to quash the summonses. See

Nero Trading, 570 F.3d at 1248.

      Finally, Azis argues that the district court erred in refusing to grant his

requests for discovery. He argues that discovery was necessary to determine the

true purpose and relevancy of the summonses, and that the summonses were issued

for an improper purpose.

      This Court reviews the district court’s denial of discovery for abuse of

discretion. Nero Trading, 570 F.3d at 1248. “Depositions, interrogatories, and the

rest of the panoply of expensive and time-consuming pretrial discovery devices

may not be resorted to as a matter of course and on a mere allegation of improper

purpose.” Id. at 1249 (brackets omitted). “Summons enforcement proceedings

should be summary in nature, and discovery should be limited.” United States v.

Stuart, 489 U.S. 353, 369, 109 S. Ct. 1183, 1193, 103 L.Ed.2d 388 (1989).

      Here, the district court did not abuse its discretion in denying Azis’s requests

for discovery. The court permitted two evidentiary hearings to allow Azis to


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examine the IRS agents to determine whether the summonses were issued for an

improper purpose. Thus, Azis had meaningful opportunities to challenge the IRS’s

allegations. The court also noted that discovery would be expensive and time

consuming. Moreover, summons enforcement proceedings should be summary in

nature.

      Upon review of the record and consideration of the parties’ briefs, we

affirm.

      AFFIRMED.




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