In re SPECIAL FEBRUARY 2011-1 GRAND JURY
SUBPOENA DATED SEPTEMBER 12, 2011.
No. 11 GJ 792
UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS, EASTERN DIVISION
852 F. Supp. 2d 1020; 2011 U.S. Dist. LEXIS
152055
November 22, 2011, Decided
SUBSEQUENT HISTORY: Reversed by
In re Special February 2011-1 Grand Jury Subpoena Dated September 12, 2011, 691
F.3d 903, 2012 U.S. App. LEXIS 18354 (7th Cir. Ill., 2012)
Related proceeding at
United States v. Warner, 2015 U.S. App. LEXIS 11938 (7th Cir. Ill., July 10,
2015)
CASE SUMMARY:
OVERVIEW: Any
foreign financial account records retained by movant under the Bank Secrecy
Act, 31 U.S.C.S. §§ 5311-5332, were privileged under the Fifth Amendment and
not subject to a government subpoena; the required records exception did not
apply because production would have compelled movant to admit that he had an
interest in one or more foreign bank accounts, a fact that could have
incriminated him if he failed to report such accounts to the IRS.
OUTCOME: Motion
granted.
CORE TERMS: foreign bank,
compelled, regulated, subpoena, producing, subpoenaed, incriminating, admit,
testimonial, privacy, grand jury, regulatory program, dealer, grand jury,
public documents, citation omitted, self-incrimination, applicability,
incriminate, wholesaler, inspection, compulsion, fruit, prong, law requires,
illegal act, price controls, regulatory scheme, private property, public market
LexisNexis(R)
Headnotes
Banking Law > Federal
Acts > Bank Secrecy Act
[HN1] Under the
regulations authorized by the Bank Secrecy Act, 31 U.S.C.S. §§ 5311-5332, any
foreign financial account holder is required to keep records of his foreign
financial accounts and to file annual reports with the Internal Revenue
Service.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
[HN2] See U.S. Const.
amend. V.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
[HN3] An individual's
act of producing documents in response to a subpoena may have a compelled
testimonial aspect, if producing the documents would require the individual to
admit that the papers existed, were in the individual's possession or control,
and were authentic.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
Evidence > Privileges
> Self-Incrimination Privilege > Exceptions
[HN4] The required
records doctrine provides an exception to the Fifth Amendment privilege for records which are required to be kept by law.
Evidence > Privileges
> Self-Incrimination Privilege > Exceptions
[HN5] There is a
three-part test for the application of the required records doctrine: first,
the purpose of the compulsion must be essentially regulatory; second, the
records sought must contain the type of information that the regulated party
would customarily keep; and third, the records must have public aspects making
them at least comparable to public documents.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process > Scope
of Protection
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
[HN6] The Boyd principle
no longer defines the parameters of the United States Supreme Court's
application of the Fifth Amendment. Instead of focusing on an individual's
right to shield his private property from government inquiry, the Fifth
Amendment protects a person only against being incriminated by his own
compelled testimonial communications. The Court cannot cut the Fifth Amendment
completely loose from the moorings of its language, and make it serve as a
general protector of privacy--a word not mentioned in its text and a concept
directly addressed in the Fourth Amendment. The Fifth Amendment protects
against compelled self-incrimination, not the disclosure of private information.
The Supreme Court's focus on whether a communication is "testimonial"
has led it to abandon the Boyd rule and to recognize that there is no privilege
protecting the contents of documents, so long as their creation was the author's
voluntary choice. In other words, when a person has already made an
incriminating statement in a document, the mere production of the document does
not require the producing person to restate the document's contents.
Nonetheless, a document may still be protected from compelled production
because the act of producing the document may have testimonial aspects, such as
an admission that the document is authentic.
Evidence > Privileges
> Self-Incrimination Privilege > Exceptions
[HN7] The distinction
between public and private documents that formed the foundation of Shapiro can
no longer be the dominant rationale for the required records doctrine.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
Evidence > Privileges
> Self-Incrimination Privilege > Exceptions
[HN8] The United States
Court of Appeals for the Seventh Circuit has tied the required records doctrine
to Doe's emphasis on the testimonial aspects of production, noting that if the
law requires an individual to keep documents, the only acknowledgment conveyed
by producing them would be of the existence and applicability of the regulatory
program that required him to maintain the records, an acknowledgment that is
not incriminating. Because required records must have taken on a "public
aspect" and because the law requires that they be kept, an individual
admits little of significance by producing them. The Seventh Circuit has
thereby established that in general, the production of required records will
lack the testimonial significance that protects a subpoenaed witness's refusal
to produce some documents under Fisher and Doe.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
Evidence > Privileges
> Self-Incrimination Privilege > Exceptions
[HN9] One might assume
that the maintenance and production of all "required" records would
by definition be compelled and thus not voluntary. However, so long as the
individual has voluntarily chosen to enter a regulated field, the maintenance
or production of any records under the compulsion of government regulation of
that field is also voluntary. The voluntariness requirement is met by the
individual who enters upon a regulated activity knowing that the maintenance of
extensive records available for inspection by the regulatory agency is one of
the conditions of engaging in the activity. If an individual chooses to begin
or continue to do business in an area in which the government requires record
keeping, he may be deemed to have waived any Fifth Amendment protection.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
Evidence > Privileges
> Self-Incrimination Privilege > Exceptions
[HN10] Although the
Shapiro three-part test remains viable after Fisher and Doe, one can discern
from the United States Court of Appeals for the Seventh Circuit's new
rationales for the required records doctrine two additional factors that may
make the required records exception inapplicable even when the three-part test
is met. The first factor is whether the individual's compelled production of
the subpoenaed records causes him to admit any incriminating fact beyond the
mere existence and applicability of the regulatory program that requires the
records' maintenance and production. The second factor is whether the
individual claiming Fifth Amendment protection has voluntarily entered the
field of regulation by the government so as to waive Fifth Amendment protection
from any production that the government's regulatory scheme may require.
Banking Law > Federal
Acts > Bank Secrecy Act
[HN11] The purpose of
the Bank Secrecy Act (BSA), according to its statutory declaration of purpose,
is not to regulate a public market or to protect consumers, but rather to
advance the government's criminal, tax, or regulatory investigations or
proceedings, or to protect against international terrorism. 31
U.S.C.S. § 5311. The people subject to BSA regulation have not necessarily
engaged in activities with the public or in the public sphere. An individual's
voluntary decision to obtain a foreign bank account is private, unlike the
voluntary decision to conduct business with the public in a regulated area.
Without some disclosure by the individual such as the Report of Foreign Bank
and Financial Accounts, the government has no direct way to discover the
individual's participation in the regulated activity.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
[HN12] The government's
difficulty in otherwise obtaining subpoenaed information is not a reason to
eviscerate an individual's Fifth Amendment protection.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
Evidence > Privileges
> Self-Incrimination Privilege > Exceptions
[HN13] Records have
"public aspects" for purposes of the required records exception to
the Fifth Amendment privilege if they are usually known to
the public in general rather than records which are essentially personal
to the individual.
Constitutional Law >
Bill of Rights > Fundamental Rights > Procedural Due Process >
Self-Incrimination Privilege
Evidence > Privileges
> Self-Incrimination Privilege > Exceptions
[HN14] A bedrock
principle of Fifth Amendment jurisprudence is that the government cannot obtain
access to information merely by expressing its anxiety to obtain information
known to a private individual, or even by formalizing its demands in the attire
of a statute. Thus, a statute that required all Americans to keep a diary in
which they recorded every arguably illegal act that they committed, or make a
tape-recorded confession whenever they committed an illegal act, would not
empower the authorities to compel the production of the diary or the tape. The
required records doctrine establishes a limited exception to that principle by
allowing the government to compel the production of certain information merely
by formally demanding the information in a statute. The required records
doctrine only applies, however, in the limited case in which the individual's
decision to participate in a regulated activity has already revealed the information
that he seeks to protect under the Fifth Amendment.
JUDGES: [**1] JAMES F. HOLDERMAN, Chief
United States District Judge.
OPINION BY: JAMES F.
HOLDERMAN
OPINION
[*1020] MEMORANDUM OPINION AND ORDER
JAMES F.
HOLDERMAN, Chief Judge:
The movant in
this matter was personally subpoenaed to testify and produce records before the
grand jury. He was told by the Government that he is a
target of the grand jury's investigation (hereinafter referred to as
"T.C." for Target Citizen).
[*1021] T.C. has
moved to quash the subpoena based on his Fifth Amendment privilege against
incrimination. The Government has opposed the motion. For the following
reasons, the motion to quash is granted.
BACKGROUND
The grand
jury as a part of its investigation of T.C. issued the subpoena dated September
12, 2011 that is the subject of T.C.'s motion. That subpoena in addition to
seeking T.C.'s testimony FN1 compels him to produce "any and
all" of his foreign financial account records covering the time period
from October 1, 2006, to the present.
[HN1] Under the regulations authorized by the Bank Secrecy Act (BSA), 31
U.S.C. §§ 5311-5332, any foreign financial account holder is required to keep
records of his foreign financial accounts and to file annual reports with the
IRS. The subpoena at issue specifically commands T.C. to [**2] appear and testify before
the grand jury and bring with him the following:
FN1. The
Government in its Response stated it extended the date for T.C.'s compliance
and stated, "His [T.C.'s] personal appearance was also tentatively excused
in the event documents were produced assuming the documents were properly
authenticated." (Govt.Resp.1, fn.1.)
any and all
records required to be maintained pursuant to 31 C .F.R. § 103.32 [subsequently
relocated to 31 C.F.R. § 1010.420] relating to foreign financial accounts that
you had/have a financial interest in, or signature authority over, including
records reflecting the name in which each such account is maintained, the
number or other designation of such account, the name and address of the
foreign bank or other person with whom such account is maintained, the type of
such account, and the maximum value of each such account during each specified
year. The records that the subpoena compels contain information T.C. was
required to report concerning his foreign financial accounts to the IRS
annually for the years he held such accounts by filing Form TD F 90-22.1, the
"Report of Foreign Bank and Financial Accounts" (FBAR). T.C.
declined to provide [**3]
that information on his 2009 and 2010 FBAR forms, citing his Fifth Amendment
privilege against self-incrimination. It appears that T.C. did not file the
form in 2006, 2007, or 2008. Transcript of Nov. 8, 2011
Hearing at 8:13-9:1 (under seal).
ANALYSIS
The Fifth
Amendment to the United States Constitution states that [HN2] "[n]o
person ... shall be compelled in any criminal case to be a witness against
himself." There is no dispute here that the contents of the subpoenaed
documents enjoy no Fifth Amendment privilege. Because the foreign banks holding
T.C.'s accounts created the documents that the government seeks, the documents
do not include T.C.'s testimony, much less his compelled testimony. See United
States v. Hubbell, 530 U.S. 27, 36, 120 S. Ct. 2037, 147 L. Ed. 2d 24
(2000). Nonetheless, [HN3] T.C.'s
"act of producing documents in response to a subpoena may have a compelled
testimonial aspect," if producing the documents would require T.C. to
"admit that the papers existed, were in [T.C.'s] possession or control,
and were authentic." Id. Here, T.C. contends, and the Government
does not dispute, that producing the requested records would be an admission by
T.C. that he has one or more foreign bank accounts and that he had
knowledge [**4] of the account
or accounts that he held during the period covered by the subpoena. That
information incriminates T.C. if he failed to report those foreign accounts
properly to the IRS or failed to pay the proper amount of tax due from the
income generated by those foreign [*1022] accounts. See 26 U.S.C. § 7206(1); 31 U.S.C. § 5322; 31 C.F.R. §
1010.350(a).
Even though
T.C.'s act of production may be incriminating, the Government contends that the
Fifth Amendment does not apply in this instance under [HN4] the required records doctrine.
That doctrine provides an exception to the Fifth Amendment privilege for "records which are required to be kept by law." United States v. Lehman, 887 F.2d 1328, 1332 (1989).
The Supreme Court first recognized the required records doctrine in Shapiro
v. United States, 335 U.S. 1, 68 S. Ct. 1375, 92 L. Ed. 1787 (1948), a case
requiring the production of a fruit wholesaler's price records required by law
to be maintained and open to Government inspection. Because the Government had
a legitimate regulatory interest in the price records (for the enforcement of
emergency war-time price controls), the Supreme Court reasoned, "the
privilege which exists as to private papers cannot be maintained in relation [**5] to 'records required by law
to be kept in order that there may be suitable information of transactions
which are the appropriate subjects of Governmental regulation, and the
enforcement of restrictions validly established.'" Id.
at 33 (footnote omitted). The Supreme Court later interpreted Shapiro
to establish [HN5] a three-part
test for the application of the required records doctrine: "first, the
purpose of the compulsion must be 'essentially regulatory'; second, the records
sought must contain the type of information that the regulated party would
customarily keep; and third, the records must have 'public aspects' making them
at least comparable to public documents." Lehman,
887 F.2d at 1332 (citing Grosso v. United States, 390 U.S. 62, 67-68, 88
S. Ct. 709, 19 L. Ed. 2d 906, 1968-1 C.B. 496 (1968)).
The Ninth
Circuit recently applied the three-part test to enforce a subpoena identical to
the one in this case requesting foreign bank account records maintained under 31 C.F.R. § 1010.420. In re M.H., 648 F.3d
1067, 1070 (9th Cir.2011). The Ninth Circuit applied the required records
doctrine after concluding that all three prongs of the test were met. The Ninth
Circuit reasoned, first, "nothing about having a foreign bank account on
its [**6] own suggests a
person is engaged in illegal activity," so the requirement to maintain
records was "essentially regulatory," rather than criminal. Id. at 1074. Second, investors in foreign banks would
typically keep basic information about their accounts, thus making the records
"customarily kept." Id. at 1076.
Finally, the Ninth Circuit held that "[w]here
personal information is compelled in furtherance of a valid regulatory scheme
..., that information assumes a public aspect," and found the third prong
was met as well. Id. at 1077. Consequently, the
Ninth Circuit affirmed the district court's order requiring M.H.'s compliance
with the subpoena.
The question
here regarding the subpoena to T.C. is not as straightforward as the subpoena
to M.H. The Seventh Circuit, unlike the Ninth, has recognized that the
application of the required records doctrine has become more complex in the
more than half a century since the Supreme Court decided Shapiro. To
understand the complexity, one must recall that Shapiro was decided
under the regime of Boyd v. United States, a nineteenth-century case
which established the now-discredited rule prohibiting all compelled production
of incriminating documents [**7]
in private hands. 116 U.S. 616, 630, 6 S. Ct. 524, 29 L. Ed.
746 (1886). When that rule was the law of the land, there was a concern
that the Government lacked the investigative tools necessary to enforce many of
its legitimate regulatory regimes. See Richard A. Nagareda, Compulsion
"To Be a Witness" and the Resurrection of Boyd, 74 N.Y.U. L.Rev. 1575, 1643-44 (1999).
[*1023] The need for
an exception to Boyd's categorical rule was thus plain. Moreover, the
rationale behind Boyd focused on an owner's right of privacy in his
possessions. FN2 It therefore made sense, at that time, to carve out
the necessary exception by focusing on the attributes that distinguish
"public" documents from "private." And indeed, the Supreme
Court in Shapiro proceeded along precisely those lines when establishing
the required records doctrine, stating that "there is an important
difference in the constitutional protection afforded their possessors between
papers exclusively private and documents having public aspects, a difference
whose essence is that the latter papers, once they have been legally obtained,
are available as evidence." Shapiro, 335 U.S. at
33-34 (quotation marks and citation omitted). The three-part test
distills the Supreme [**8]
Court's reasoning in Shapiro by distinguishing public documents from the
private property protected under Boyd.
FN2. See
Boyd, 116 U.S. at 627-28 ("'Papers are the owner's goods and
chattels; they are his dearest property, and are so far from enduring a
seizure, that they will hardly bear an inspection ....'
"(quoting Entick v. Carrington and Three Other
King's Messengers, (1765) 95 Eng. Rep. 807 (K.B.); 19 How. St. Tr. 1029)); see
also Griswold v. Connecticut, 381 U.S. 479, 484, 85 S. Ct. 1678, 14
L. Ed. 2d 510 (1965) ("The Fourth and Fifth Amendments were described in Boyd
as protection against all Governmental invasions 'of the sanctity of a man's
home and the privacies of life.' " (citation
omitted)); 3 Wayne LeFave et al., Criminal Procedure § 8.12(a) (3d ed.
rev.2010) ("Boyd relied on what has been described as a 'property
oriented' view of the Fourth and Fifth Amendments, built upon the owner's right
of privacy in the control of his lawfully held possessions. It recognized a
special Fifth Amendment interest in the privacy of documents, viewing the
forced production of their contents as equivalent to requiring a subpoenaed
party to reveal that content through his testimony." (footnote
omitted)).
The problem
with [**9] the Shapiro
three-part test today is that [HN6]
the Boyd principle no longer defines the parameters of the Supreme
Court's application of the Fifth Amendment. FN3 Instead of focusing
on an individual's right to shield his private property from Government
inquiry, the Supreme Court has recognized that the Fifth Amendment protects
"a person only against being incriminated by his own compelled testimonial
communications." Fisher v. United States, 425 U.S. 391, 409, 96 S.
Ct. 1569, 48 L. Ed. 2d 39 (1976); see also id. at
401 ("We cannot cut the Fifth Amendment completely loose from the moorings
of its language, and make it serve as a general protector of privacy-a word not
mentioned in its text and a concept directly addressed in the Fourth Amendment.
We adhere to the view that the Fifth Amendment protects against 'compelled
self-incrimination, not (the disclosure of) private information.' "(citation omitted)). The Supreme Court's focus on whether a
communication is "testimonial" led it to abandon the Boyd rule
and to recognize that there is no privilege protecting the contents of
documents, so long as their creation was the author's voluntary choice, Id.
at 407-09. In other words, when a person has already made an incriminating [**10] statement in a document,
the mere production of the document does not require the producing person to
restate the document's contents. Nonetheless, the Supreme Court has recognized
that a document may still be protected from compelled production because the
act of producing the document may [*1024] have testimonial
aspects, such as an admission that the document is authentic. United States
v. Doe, 465 U.S. 605, 612-13, 104 S. Ct. 1237, 79 L. Ed. 2d 552 (1984).
FN3. See
Samuel A. Alito, Jr., Documents and the Privilege Against Self-Incrimination,
48 U. Pitt. L.Rev. 27, 39-40 (1986) ("Boyd's property-based
interpretation of the fourth amendment could not accommodate the needs of
modern law enforcement or modern concepts of privacy."). See generally
1 Sara Sun Beale et al., Grand Jury Law and Practice § 6:14 (2d ed.2008)
(describing the erosion of Boyd).
In that context, [HN7] the
distinction between public and private documents that formed the foundation of Shapiro
can no longer be the dominant rationale for the required records doctrine. See
Alito, supra note 3, at 71-72 ("The
required records rule ... also seems likely to be reexamined in light of
Fisher and Doe, because this rule ... was developed without any
consideration of the [**11]
act of production."). Indeed, the Seventh Circuit in 1989 considered doing
away with the doctrine because of Fisher and Doe. See Lehman,
887 F.2d at 1332. Although the Seventh Circuit retained the required records
doctrine, it did so by articulating two new rationales for its existence in
light of Fisher and Doe.
First, [HN8] the Seventh Circuit in Smith v.
Richert tied the required records doctrine to Doe's emphasis on the
testimonial aspects of production, noting that if the law requires an
individual to keep documents, "the only acknowledgment conveyed by
[producing them] would be of the existence and applicability of the regulatory
program that required him to maintain the records," an acknowledgment that
is not incriminating. 35 F.3d 300, 302 (7th Cir .1994); accord In re
Grand Jury Subpoena Duces Tecum Served Upon Underhill, 781 F.2d 64, 70 (6th
Cir. 1986) ("Because required records must have taken on a 'public aspect'
and because the law requires that they be kept, an individual admits little of
significance by producing them."); see also Lehman, 887 F.2d
at 1332 (adopting the Sixth Circuit's reasoning in Underhill). The
Seventh Circuit thereby established that in general, the production [**12] of required records will lack the testimonial significance that protects a
subpoenaed witness's refusal to produce some documents under Fisher and Doe.
The second
rationale squares the required records doctrine with Fisher's focus on
the voluntariness of the individual's testimony. [HN9] One might assume that the
maintenance and production of all "required" records would by
definition be compelled and thus not voluntary. The Seventh Circuit reasoned,
however, that so long as the individual has voluntarily chosen to enter a
regulated field, the maintenance or production of any records under the
compulsion of government regulation of that field is also voluntary. See
Smith, 35 F.3d at 302-03 (explaining the voluntariness requirement and
reasoning that it is met by "the individual who enters upon a regulated
activity knowing that the maintenance of extensive records available for
inspection by the regulatory agency is one of the conditions of engaging in the
activity"); Underhill, 781 F.2d at 70 ("[I]f
an individual chooses to begin or continue to do business in an area in which
the government requires record keeping, he may be deemed to have waived any
Fifth Amendment protection.").
[HN10] Although [**13] the Shapiro
three-part test remains viable after Fisher and Doe, see Lehman,
887 F.2d at 1333, one can discern from the Seventh Circuit's new rationales for
the required records doctrine two additional factors that may make the required
records exception inapplicable even when the three-part test is met. The first
factor is whether the individual's compelled production of the subpoenaed
records causes him to admit any incriminating fact beyond the mere existence and
applicability of the regulatory program that requires the records' maintenance
and production. The second factor is whether the individual claiming Fifth
Amendment protection has voluntarily entered the field of regulation by the
government so as to waive Fifth Amendment protection from any production that
the government's regulatory scheme may require.
[*1025] This latter factor is the main rationale
behind the Seventh Circuit's decision that the required records doctrine does
not cover individual taxpayers' domestic tax records. See Smith,
35 F.3d at 303 ("The decision to become a taxpayer cannot be thought
voluntary in the same sense [as the decision to enter upon a regulated
activity]. Almost anyone who works is a taxpayer, [**14] along with many who do
not."). This factor does not present an obstacle to the application
of the required records doctrine here, however. Only about half a million
taxpayers choose to use foreign bank accounts each year, so the activity of
foreign bank account usage lacks the near universality of the decision to earn
sufficient income to become a taxpayer. See In re M.H., 648 F.3d
at 1074. Moreover, T.C.'s counsel conceded at the November 8, 2011 closed
hearing on the motion to quash that T.C.'s decision to put funds in a foreign
bank account was voluntary. Transcript of Nov. 8, 2011
Hearing at 6:6-10 (under seal).
Consequently,
the issue to be decided regarding T.C.'s pending motion is whether T.C.'s
compelled production of the subpoenaed records causes him to admit any incriminating
fact beyond the mere existence and applicability of the regulatory program. On
that point, this court finds that T.C.'s compelled production of the subpoenaed
information would compel him to admit that he has an interest in one or more
foreign bank accounts and that he is thus participating in the regulated
activity. FN4 As described above, that fact may
incriminate him under 26 U.S.C. § 7206(1) and 31 U.S.C. § 5322.
FN4. [**15] The court notes that this
compelled self-incriminating admission is different from a
non-self-incriminating admission that the regulatory program is applicable to
taxpayers who have an interest in foreign bank accounts. The self-incriminating
admission that the Fifth Amendment protects here is a compelled admission by T
.C. to the grand jury that reveals he himself has an interest in a foreign bank
account and is thus one of those taxpayers.
In the
typical required records case, of course, there is no danger that producing the
required records will compel the individual engaging in the regulated activity
to admit his participation in the regulated activity, for that fact is usually
obvious. The individual's participation in the regulated activity is obvious
because in the typical case, the individual engages in the regulated activity
in public. In the Shapiro case itself, for example, the fruit wholesaler
subject to the price controls conducted his business in public and with the
public, so the Government already knew that he was, in fact, a fruit wholesaler
subject to the regulations. The same could be said of all of the typical
entities found to be subject to production under the [**16] required records doctrine.
See, e.g., In re Grand Jury Subpoena, 21 F.3d 226 (8th Cir. 1994)
(regulation of an automobile dealer); Lehman, 887 F.2d at 1330 (cattle
dealer); Underhill, 781 F.2d at 65 (automobile dealer); United States
v. Scherer, 523 F.2d 371 (7th Cir. 1975) (firearms dealer); United
States v. Rosenberg, 515 F.2d 190, 199-200 (9th Cir. 1975) (physician). In
all of those cases, the very purpose of the regulations was to protect
consumers and the public from the individuals engaged in domestic commercial
activity in the public market.
By
contrast, [HN11] the purpose of the
BSA, according to its statutory declaration of purpose, is not to regulate a public
market or to protect consumers, but rather to advance the Government's
"criminal, tax, or regulatory investigations or proceedings," or to
"protect against international terrorism." 31
U.S.C. § 5311. The people subject to BSA regulation have not [*1026]
necessarily engaged in activities with the public or
in the public sphere. An individual's voluntary decision to obtain a foreign
bank account is private, unlike the voluntary decision to conduct business with
the public in a regulated area. Without some disclosure by the individual [**17] such as the FBAR--which
in this case T.C. has declined to fill out--the Government has no direct way to
discover T.C.'s participation in the regulated activity. FN5 Forcing
T.C. to produce the foreign bank account records would compel him to admit that
he has a foreign bank account, a compelled admission that the Fifth Amendment
protects him from having to make.FN6
FN5. If the
Government could discover the information from a third-party or through other
investigation, such as from a foreign bank, if any, in which T.C. has invested.
The Government may argue that it is difficult to obtain the information from a
third-party in this case, given that all of the relevant information is
overseas and protected by foreign banks.
[HN12] The Government's difficulty in otherwise obtaining the subpoenaed
information, however, is not a reason to eviscerate an individual's Fifth
Amendment protection.
FN6. The
private nature of opening a foreign bank account also casts doubt on whether
the account records meet the "public aspects" prong of the Shapiro
three-part test. The Seventh Circuit has stated that [HN13] records have "public
aspects" if they "are usually known to the public in general rather
than records which [**18]
are essentially personal to the individual." United
States v. Campos-Serrano, 430 F.2d 173, 176 (7th Cir.1970). The fact
that an individual maintains a foreign bank account and the records thereof are
not "usually known to the public in general."
[HN14] A bedrock principle of Fifth
Amendment jurisprudence is that the Government cannot obtain access to information
merely by expressing its "anxiety to obtain information known to a private
individual," or even by "formalizing its demands in the attire of a
statute." Marchetti v. United States, 390 U.S.
39, 57, 88 S. Ct. 697, 19 L. Ed. 2d 889, 1968-1 C.B. 500 (1968). Thus,
"a statute that required all Americans to keep a diary in which they
recorded every arguably illegal act that they committed, or make a
tape-recorded confession whenever they committed an illegal act, would not
empower the authorities ... to compel the production of the diary or the
tape." Smith, 35 F.3d at 303. The required
records doctrine establishes a limited exception to that principle by allowing
the government to compel the production of certain information merely by
formally demanding the information in a statute. The required records doctrine
only applies, however, in the limited case in which the individual's
decision [**19] to
participate in a regulated activity has already revealed the information that
he seeks to protect under the Fifth Amendment. To expand the required records
doctrine beyond that restricted class of cases would erode the protection that,
in the words of Justice Joseph Story in his landmark Commentaries on the
Constitution, "is of inestimable value." The origin of that
protection, Justice Story reminded us, is to avoid the fate of countries in
which, "not only are criminals compelled to give evidence against themselves,
but are subjected to the rack or torture in order to procure a confession of
guilt." 3 Joseph Story, Commentaries on the Constitution § 1782 (1833), in
5 The Founders' Constitution 295, 296 (Philip B. Kurland & Ralph Lerner eds., 1987). If such important protection can be eroded
"merely because [records are] required to be kept by law
..., we are indeed living in glass houses." Shapiro,
335 U .S. at 50 (Frankfurter, J., dissenting) (emphasis added). The
Government must do more work than simply requiring T.C. to incriminate himself
by producing his own files if it wishes to find evidence during this grand jury
investigation that T.C. [*1027] has an incriminating interest in [**20] foreign bank accounts.
CONCLUSION
For the
reasons stated above, T.C.'s motion to quash the subpoena is granted.