
USCA1 Opinion

	




        July 14, 1992       UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                       --------        No. 92-1012                                RAYMOND H. COPP, JR.,                                Petitioner, Appellant,                                          v.                              UNITED STATES OF AMERICA,                                Respondent, Appellee.                                       -------                                     ERRATA SHEET             The opinion of this Court issued  on July 14, 1992, is amended as        follows:             On page 2 remove the hyphen from the word "authorized."             On  page 4  remove  the  hyphen  from the  words  "interrelated",        "investigation", "potential."             On  page  5  remove  the  hyphen  from  the  words  "overturned",        "disproving."             On page 7 remove the hyphen from the word "conditionally."        July 14, 1992       UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 92-1012                                RAYMOND H. COPP, JR.,                                Petitioner, Appellant,                                          v.                              UNITED STATES OF AMERICA,                                Respondent, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. A. David Mazzone, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                  Cyr, Circuit Judge,                                       _____________                            Roney,* Senior Circuit Judge,                                    ____________________                            and Pieras,** District Judge.                                          ______________                                 ____________________            Alfred D. Ellis with whom Loren  Rosenzweig and Cherwin & Glickman            _______________           _________________     __________________        were on brief for appellant.            Sally  J. Schornstheimer,  Attorney, Tax  Division, Department  of            ________________________        Justice, with whom James A. Bruton, Acting Assistant Attorney General,                           _______________        Gary  R.  Allen,  Charles   E.  Brookhart,  Attorneys,  Tax  Division,        _______________   _______________________        Department of Justice, and Wayne A. Budd, United States Attorney, were                                   _____________        on brief for appellee.                                  ____________________                                 ____________________        _____________________        *  Of the Eleventh Circuit, sitting by designation.        ** Of the District of Puerto Rico, sitting by designation.                       PIERAS,  District Judge.   This appeal  stems from                                ______________             the issuance  of an  administrative summons by  the Internal             Revenue  Service in  the  course of  investigation into  the             income tax liability  of appellant Raymond  H. Copp for  the             years  1985 through 1989.  The district court granted an IRS             motion for summary enforcement of the summons.  We affirm.                       The summons,  which the IRS issued  pursuant to 26             U.S.C.   7602, directed Goldman  Sachs & Co., a  third-party             recordholder,   to  appear,   give  testimony   and  produce             documents.  Appellant filed  a motion to quash  the summons,             contending primarily that it was improperly served after the             IRS had  referred the matter  to the Justice  Department for             criminal  investigation.     The  district  court   rejected             appellant's  contention and granted  the Government's motion             for  summary enforcement.  Judge Mazzone  found, based on an             affidavit   filed   by   the   IRS   agent   directing   the             investigation, that  no criminal referral had  been made and             that  the summons was  issued in good faith  to make a civil             determination of Copp's federal income tax liability.                       Prior to its  amendment in 1982, 26 U.S.C.    7602             authorized the IRS to issue  summonses "[f]or the purpose of             ascertaining the correctness of  any return, making a return             where none has  been made, determining the  liability of any                                          2             persons for any  internal revenue tax . . .  , or collecting             any such liability."   In United States v.  LaSalle National                                       _____________     ________________             Bank, 437 U.S. 298 (1978),  the Supreme Court considered the             ____             limits of this  authorization.  The  Court noted that  since             Congress created a tax enforcement  system with interrelated             criminal and civil elements, in enacting Section 7602 it did             not  intend  that  the  IRS's  subpoena  power  in  a  given             investigation be limited merely because of the presence of a             criminal  purpose.  Id. at 310-11.  The Court held, however,                                 ___             that   the  IRS's   subpoena   power  did   not  extend   to             investigations  in which  it  had abandoned  the good  faith             pursuit  of  all  of  its congressionally  authorized  civil                          ___             purposes.  437 U.S. at 316-17.                         As  a  result,  after  LaSalle  a  summonee  could                                              _______             effectively block  the enforcement of  an IRS summons  if he             could show  that it  was issued  during an investigation  in             which  the  IRS had  abandoned the  pursuit  of a  civil tax             determination or  collection.  In setting forth the reach of             its  holding, the  LaSalle Court  found that  an abandonment                                _______             clearly occurs (and a  summons may not be issued)  after the             IRS refers an investigation to the Department of Justice for             criminal prosecution.   Id. at 311.  In addition, aware of a                                     ___             potential for abuse where the IRS delays its referral to the                                          3             Justice  Department  in  order  to  gather  evidence  for  a             subsequent  criminal prosecution,  the Court  found  that an             abandonment   also  occurs   where  the   IRS  has   "in  an             institutional sense"  abandoned its  pursuit of a  civil tax             liability  determination  and  is  instead   conducting  its             investigation for  "solely criminal purposes."   Id. at 316.                                                              ___             On this  appeal, Copp  seeks to  invoke this "sole  criminal             purpose" defense,  which  he  contends  the  district  court             incorrectly found  was overturned by the  1982 amendments to             Section 7602.                       The LaSalle Court stated that taxpayers seeking to                           _______             avail themselves of the  sole criminal purpose defense "bear             the burden to disprove the actual existence of a valid civil             tax  determination or  collection  purpose by  the Service."             Id.    As  a result,  even  if  the  defense has  continuing             ___             vitality, Copp  has the  burden of  disproving that in  this             case  the   IRS   is  not   pursuing  a   valid  civil   tax             determination.    The  first  hurdle  which  appellant  must             therefore clear is the district court's finding that the IRS             has not abandoned the pursuit of Copp's civil tax liability.                 ___             Copp  must show  that  this finding  was clearly  erroneous.             See, e.g., Hintze v. IRS, 879 F.2d 121, 125 (4th Cir. 1989),             ___  ____  ______    ___             reh'd denied  en banc,  1989 U.S.  App. LEXIS  13075; United             _____________________                                 ______                                          4             States v. Claes, 747 F.2d 491, 495 (8th Cir. 1984).  We find             ______    _____             that this burden has  not been met.  In  seeking enforcement             of an administrative summons, the IRS must meet the standard             of good faith set forth in United States v. Powell, 379 U.S.                                        _____________    ______             48 (1964).   It "must  show that the  investigation will  be             conducted pursuant to a legitimate purpose, that the inquiry             may be relevant to that purpose, that the information sought             is not  already within  the  Commissioner's possession,  and             that the administrative steps required by the Code have been             followed."   Id. at 57-58.   In this case, the  IRS filed an                          ___             affidavit  signed by Revenue Agent Ernest Van Loan which was             uncontroverted and established each  of these elements.  The             district  court relied  on  this affidavit  in finding  that             "there is  no criminal referral,  the summons was  issued in             good  faith   to  make   a  correct  determination   of  the             petitioner's federal income tax liabilities, if any, for the             taxable years  under investigation, and all  of the required             procedures of the Internal Revenue Code have been followed."             Implicit in the district  court's ruling was a  finding that             in  issuing its  summons to  Goldman Sachs  the IRS  was not             seeking  information solely  for a  criminal purpose.   Even             under  LaSalle, the  IRS is entitled  to enforcement  of its                    _______                                          5             summons  where determination  of civil  tax liability  is at             least one of its purposes.  Accord 437 U.S. at 310-11.                                         ______                       Copp's  effort  to  establish  that  the  district             court's ruling was clearly erroneous is limited.  He alleges             that several facts -- including the alleged expansion of the             audit to include tax  years outside of 1988 and  the refusal             of the IRS  to conditionally accept  a portion of  requested             additional documents --  constitute evidence of  an improper             purpose  on the  part  of the  IRS.   He  has not,  however,             demonstrated how these facts, none of which are inconsistent             with  a civil audit, suggest an improper purpose.  Copp also             relies on the fact that in a related case before Judge Stahl             in  the   District  of  New  Hampshire,   based  on  similar             allegations made by Copp in  response to summonses issued in             New Hampshire  against other third-party  recordkeepers, the             court concluded  that sufficient  showing had been  made for             Copp to pursue a sole criminal purpose defense.  Judge Stahl             directed the IRS agent  to appear at an evidentiary  hearing             at which Copp would  be afforded the opportunity  to examine             the agent  regarding his purposes in  issuing the summonses.             Judge  Stahl's  ruling is  not  before  this Court  on  this             appeal,  however.    And the  fact  that  Judge  Stahl in  a                                          6             separate  proceeding  has  allowed  Copp to  proceed  to  an             evidentiary hearing on this claim does not establish that              Judge  Mazzone's   finding   in  this   case   was   clearly             erroneous.1                       The district court order of summary enforcement of             the summons is therefore affirmed.                                      ________                       So ordered.                                              ____________________             1 Copp also  contends that Judge Mazzone  erred in enforcing             the IRS  summons without conducting an  evidentiary hearing.             In order  to proceed to  an evidentiary hearing  to question             the  propriety of  an IRS  summons, a  taxpayer must  make a             sufficient  threshold  showing  that there  was  an improper             purpose behind an IRS summons.  United States v. Salter, 432                                             _____________    ______             F.2d  697 (1st  Cir.  1970).   To  make this  show-ing,  the             taxpayer must do  more than allege  an improper purpose;  he             must  introduce evidence  to support  his allegations.   Id.                                                                      ___             District  court decisions  to  enforce a  summons without  a             hearing  are  review-able  under  the  abuse  of  discretion             standard.  Accord Tiffany Fine Arts, Inc. v.  United States,                        ______ _______________________     _____________             469 U.S. 310,  324 n.7  (1985); Hintze, supra,  879 F.2d  at                                             ______  _____             126;  United States v. Samuels, Kramer & Co., 712 F.2d 1342,                   _____________    _____________________             1345 (9th Cir.  1983).  Appellant again  relies primarily on             Judge Stahl's  conclusion that the allegations  made by Copp             were sufficient to  proceed to an  evidentiary hearing.   As             with  his  substantive  claim,  the fact  that  Judge  Stahl             reached a  contrary conclusion  does not  yield an  abuse of             discretion on the part of Judge Mazzone.                                           7                                          8
