United States v. Zhong H. Chen ( 2016 )

United States Court of Appeals
For the First Circuit
No. 14-2003
UNITED STATES OF AMERICA,
Petitioner, Appellee,
v.
ZHONG H. CHEN,
Respondent, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Lynch, Circuit Judge,
Souter,* Associate Justice,
and Stahl, Circuit Judge.
William J. Lovett, with whom Melissa S. Baldwin and Collora
LLP were on brief, for appellant.
Alexander P. Robbins, Attorney, Tax Division, Department of
Justice, with whom Robert J. Branman, Attorney, Tax Division,
Department of Justice, Caroline D. Ciraolo, Acting Assistant
Attorney General, Diana L. Erbsen, Deputy Assistant Attorney
General, Gilbert S. Rothenberg, Robert W. Metzler, Attorneys, Tax
Division, Department of Justice, and Carmen M. Ortiz, United States
Attorney, were on brief, for appellee.
* Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
February 29, 2016
LYNCH, Circuit Judge. Tensions between taxpayers and
the Internal Revenue Service ("IRS") over forced disclosure of
foreign bank account information implicate both statutory and
constitutional rights. Taxpayers have Fifth Amendment rights not
to be forced to incriminate themselves by the compelled act of
production. But where the documents are required to be kept under
the regulatory scheme of the Bank Secrecy Act ("BSA" or "the Act"),
see Currency and Foreign Transactions Reporting Act, Pub. L. No.
91-508, tit. II, 84 Stat. 1118 (1970) (codified as amended at 31
U.S.C. § 5311 et seq.), the question arises whether the Required
Records Doctrine under the Fifth Amendment trumps those Fifth
Amendment rights. The Supreme Court has not directly answered
this question.
We now join the unanimous view of the circuit courts
that have faced the question, all of which hold that the taxpayer
must comply with an IRS summons for documents he or she is required
to keep under the Act, where the IRS is investigating civilly the
failure to pay taxes and the matter has not been referred for
criminal prosecution. And so we affirm the district court's
enforcement of the summons as to documents required to be kept
under the BSA. See United States v. Chen, 952 F. Supp. 2d 321,
333 (D. Mass. 2013). As to enforcement of the summons for
documents not subject to the BSA, we vacate and remand to the
district court for further explanation.
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I.
As part of an investigation into the 2008 tax liability
of Zhong H. Chen and his wife, Chu H. Ng, the IRS served a summons
on Chen on September 12, 2011, requiring him to appear for an
interview with an IRS revenue agent and to produce various
financial and banking records. Chen appeared for the interview,
but he refused to answer any questions -- invoking the Fifth
Amendment -- and did not provide the requested documents. On May
31, 2012, the government filed in the Massachusetts federal
district court a petition to enforce the portion of the summons
seeking the production of documents. In support of its petition,
the government submitted an affidavit executed by an IRS revenue
agent stating that "[i]t is necessary to obtain the records sought
by the Summons in order to determine the federal tax liabilities
of Chu H. Ng and Zhong H. Chen for the taxable period ending
December 31, 2008." Importantly, it also stated that "[t]here is
no 'Justice Department referral[]' . . . in effect with respect to
Chu H. Ng and Zhong H. Chen for the year under examination."1 In
1 This statement meant that the taxpayers were not then
referred for criminal prosecution by the Department of Justice.
"A Justice Department referral is in effect with respect to any
person if -- (i) the Secretary has recommended to the Attorney
General a grand jury investigation of, or the criminal prosecution
of, such person for any offense connected with the administration
or enforcement of the internal revenue laws, or (ii) any request
is made under section 6103(h)(3)(B) for the disclosure of any
return or return information (within the meaning of section
6103(b)) relating to such person." 26 U.S.C. § 7602(d)(2)(A).
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response, Chen asserted a Fifth Amendment claim of privilege, not
over the documents themselves, but over his compelled act of
producing the documents. See Fisher v. United States, 425 U.S.
391, 410 (1976) (describing compelled act of production
privilege); see also In re Grand Jury Subpoena (Mr. S.), 662 F.3d
65, 72–73 (1st Cir. 2011).
The district court granted, in part, the government's
petition to enforce the summons on July 3, 2013. See Chen, 952 F.
Supp. 2d at 334. It granted the petition "insofar as it relates
to those documents implicated by the recordkeeping requirements of
the Bank Secrecy Act" because it concluded that those documents
fall within the scope of the Required Records Doctrine. Id. at
333. On September 11, 2014, after reviewing in camera the
documents not covered by the BSA's recordkeeping provision, as
well as an in camera argumentative submission in support of Chen's
privilege claim, the district court issued a brief order directing
Chen, without explanation, also to produce the documents not
covered by the BSA. This appeal followed.2
II.
Our holding requires an understanding of the Bank
Secrecy Act and its purposes.
2 We need not address the contempt issue raised in Chen's
original brief because that issue has since been disposed of. See
Judgment, United States v. Chen, No. 14-2339 (1st Cir. Nov. 2,
2015).
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The BSA was first enacted in 1970. Its preamble states
its four purposes as follows: "to require certain reports or
records where they have a high degree of usefulness in criminal,
tax, or regulatory investigations or proceedings, or in the conduct
of intelligence or counterintelligence activities, including
analysis, to protect against international terrorism."3 31 U.S.C.
§ 5311. Enforcement of criminal laws is a direct purpose, but not
the sole purpose.
The Act requires individuals engaged in foreign banking
to maintain certain records:
[T]he Secretary of the Treasury shall require
a resident or citizen of the United States or
a person in, and doing business in, the United
States, to keep records, file reports, or keep
records and file reports, when the resident,
citizen, or person makes a transaction or
maintains a relation for any person with a
foreign financial agency.
Id. § 5314(a).
The Secretary of the Treasury has promulgated
regulations specifying reporting and recordkeeping requirements.
The reporting requirement provides:
Each United States person having a financial
interest in, or signature or other authority
over, a bank, securities, or other financial
account in a foreign country shall report such
3 The phrase "or in the conduct of intelligence or
counterintelligence activities, including analysis, to protect
against international terrorism" was added in 2001 by the USA
PATRIOT Act, Pub. L. No. 107-56, § 358(a), 115 Stat. 272, 326
(2001).
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relationship to the Commissioner of Internal
Revenue for each year in which such
relationship exists and shall provide such
information as shall be specified in a
reporting form prescribed under 31 U.S.C. 5314
to be filed by such persons.
31 C.F.R. § 1010.350(a). Those individuals who are subject to the
§ 1010.350 reporting requirement are also subject to recordkeeping
requirements:
Records of accounts required by § 1010.350 to
be reported to the Commissioner of Internal
Revenue shall be retained by each person
having a financial interest in or signature or
other authority over any such account. Such
records shall contain [1] the name in which
each such account is maintained, [2] the
number or other designation of such account,
[3] the name and address of the foreign bank
or other person with whom such account is
maintained, [4] the type of such account, and
[5] the maximum value of each such account
during the reporting period. Such records
shall be retained for a period of 5 years and
shall be kept at all times available for
inspection as authorized by law.
Id. § 1010.420. This recordkeeping regulation is at the heart of
this appeal.
Congress, when it adopted the BSA, was deeply concerned
about the proliferation of white-collar criminals using secret
foreign bank accounts, and Congress emphasized the benefits that
the reporting and recordkeeping requirements of the BSA would have
for criminal investigations. The Senate Committee on Banking and
Currency noted that "[t]estimony before the committee and other
evidence indicates that secret foreign bank accounts have been put
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to a number of illegal purposes." S. Rep. No. 91-1139, at 3
(1970). It stated that "[t]he purpose of the bill is to provide
law enforcement authorities with greater evidence of financial
transactions in order to reduce the incidence of white-collar
crime." Id. at 1; see id. at 1–4, 8–9; H.R. Rep. No. 91-975, at
10, 12–13, 19–20 (1970), reprinted in 1970 U.S.C.C.A.N. 4394, 4395,
4397–98, 4404. Nonetheless, rooting out criminal activity was not
Congress's only interest, and the justifications for the BSA's
reporting and recordkeeping requirements extend far beyond the
criminal context. Merely looking at the text of the statute proves
that its purposes are diverse. The text itself points to the
utility of the required records in the tax, regulatory, and
counterterrorism contexts. See 31 U.S.C. § 5311. And to the
extent one looks at legislative history, it confirms this view.
The Supreme Court, in reviewing a series of
constitutional challenges to the BSA, stated that while "concern
for the enforcement of the criminal law was undoubtedly prominent
in the minds of the legislators who considered the Act," "Congress
seems to have been equally concerned with civil liability which
might go undetected by reason of transactions of the type required
to be recorded or reported." California Bankers Ass'n v. Shultz,
416 U.S. 21, 76–77 (1974). Indeed, the Court emphasized that "the
fact that a legislative enactment manifests a concern for the
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enforcement of the criminal law does not cast any generalized pall
of constitutional suspicion over it." Id. at 77.4
The BSA manifestly has non-criminal purposes. A
properly functioning system of foreign commerce cannot operate
without reporting and recordkeeping of the kind mandated by the
BSA and its implementing regulations. As the House Report
explains:
The debilitating effects of the use of
. . . secret institutions [in foreign
jurisdictions] on Americans and the American
economy are vast. It has been estimated that
hundreds of millions in tax revenues have been
lost. Unwarranted and unwanted credit is
being pumped into our markets. There have
been some cases of corporation directors,
officers and employees who, through deceit and
violation of law, enriched themselves or
endangered the financial soundness of their
companies to the detriment of their
stockholders. . . .
One of the most damaging effects of an
American's use of secret foreign financial
facilities is its undermining of the fairness
of our tax laws. Secret foreign financial
facilities, particularly in Switzerland, are
available only to the wealthy. . . . [I]t is
grossly unfair to leave the secret foreign
bank account open as a convenient avenue of
tax evasion.
4 While the plaintiffs in Shultz had brought a Fifth
Amendment self-incrimination challenge to the foreign reporting
requirements in the BSA, the Court did not reach the merits of the
issue and dismissed their claims as premature. See Shultz, 416
U.S. at 71–75.
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H.R. Rep. No. 91-975, at 12–13, reprinted in 1970 U.S.C.C.A.N. at
4397–98.5
To that end, information collected pursuant to the BSA's
reporting and recordkeeping requirements is shared with other
agencies, "including the Office of the Comptroller of the Currency,
the Consumer Financial Protection Bureau, the Federal Reserve
Board, the Federal Deposit Insurance Corporation, the National
Credit Union Administration, and the Office of Thrift
Supervision." United States v. Under Seal, 737 F.3d 330, 335 (4th
Cir. 2013); see 31 U.S.C. § 5319 (requiring the Secretary of the
Treasury to "make information in a report filed under this
subchapter available to an agency, including any State financial
institutions supervisory agency, United States intelligence agency
or self-regulatory organization registered with the Securities and
Exchange Commission or the Commodity Futures Trading Commission,
upon request of the head of the agency or organization"); 31 C.F.R.
§ 1010.950.
Congress was keenly aware that it cannot "abridge or
challenge the right of any country to follow its own banking
5 The House Report also notes that while the reporting and
recordkeeping requirements help "aid duly constituted authorities
in lawful investigations," they also "facilitate the supervision
of financial institutions properly subject to Federal
supervision," and "provide for the collection of statistics
necessary for the formulation of monetary and economic policy."
H.R. Rep. No. 91-975, at 20, reprinted in 1970 U.S.C.C.A.N. at
4405.
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practices," and that it "cannot legitimately expect its laws to be
given extraterritorial application when they conflict with the
laws of another country." S. Rep. No. 91-1139, at 3. Some
diplomatic channels exist to assist the government in obtaining
foreign bank records, such as letters rogatory or mutual legal
assistance treaties, but in the face of foreign bank secrecy laws,
these processes are lengthy, cumbersome, and far from foolproof.
See Shultz, 416 U.S. at 29 (noting that efforts to obtain
information from foreign banks are subject to "time consuming and
ofttimes fruitless foreign legal process" (quoting H.R. Rep. No.
91-975, at 12, reprinted in 1970 U.S.C.C.A.N. at 4397)).
Accordingly, "Congress enacted the BSA so as to
ameliorate the difficulties and challenges associated with
obtaining records by means of a foreign treaty." In re Grand Jury
Subpoena Dated Feb. 2, 2012, 908 F. Supp. 2d 348, 357 (E.D.N.Y.
2012), aff'd, 741 F.3d 339 (2d Cir. 2013). It was reasonable for
Congress, faced with these obstacles, to impose reporting and
recordkeeping requirements on United States citizens and residents
engaged in foreign banking. "[T]he United States can legitimately
require its own citizens or financial institutions to keep records
and file reports on transactions with foreign financial
institutions and that is the approach taken by the bill." S. Rep.
No. 91-1139, at 3. The BSA's recordkeeping provision and its
implementing regulation are "central to the legislative scheme in
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that compliance with [them] furnishes the government with the
information necessary to effective regulation." Varitimos v.
United States, 404 F.2d 1030, 1032 n.4 (1st Cir. 1968) (emphasis
added).
III.
There is extensive discussion elsewhere in the case law
as to the evolution of the law of Fifth Amendment privilege and
why Chen's Fifth Amendment claim fails, which we need not
articulate again. We agree with seven of our sister circuits that
the claim fails on the grounds that BSA records are subject to the
Required Records Doctrine. See United States v. Chabot, 793 F.3d
338 (3d Cir.), cert. denied, 136 S. Ct. 559 (2015); In re Grand
Jury Subpoena Dated Feb. 2, 2012, 741 F.3d 339 (2d Cir. 2013);
United States v. Under Seal, 737 F.3d 330 (4th Cir. 2013); In re
Grand Jury Proceedings, No. 4-10, 707 F.3d 1262 (11th Cir.), cert.
denied, 134 S. Ct. 129 (2013); In re Grand Jury Subpoena, 696 F.3d
428 (5th Cir. 2012); In re Special Feb. 2011-1 Grand Jury Subpoena
Dated Sept. 12, 2011, 691 F.3d 903 (7th Cir. 2012), cert. denied,
133 S. Ct. 2338 (2013); In re Grand Jury Investigation M.H., 648
F.3d 1067 (9th Cir. 2011), cert. denied, 133 S. Ct. 26 (2012).
The Required Records Doctrine prevents an individual
from resisting, in the name of the Fifth Amendment, the production
of records whose creation and maintenance is required as a
condition of voluntarily engaging in a highly regulated activity.
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See Baltimore City Dep't of Soc. Servs. v. Bouknight, 493 U.S.
549, 556 (1990); see also In re Special Feb. 2011-1 Grand Jury
Subpoena Dated Sept. 12, 2011, 691 F.3d at 908–09. In a nutshell,
it is commonly accepted that courts should apply the following
three-part test for determining whether the Required Records
Doctrine applies to a particular recordkeeping scheme. "[F]irst,
the purposes of the United States' inquiry must be essentially
regulatory[.]"6 Grosso v. United States, 390 U.S. 62, 67–68 (1968)
(citing Shapiro v. United States, 335 U.S. 1 (1948)). "[S]econd,
information is to be obtained by requiring the preservation of
records of a kind which the regulated party has customarily
kept[.]" Id. at 68. "[T]hird, the records themselves must have
assumed 'public aspects' which render them at least analogous to
public documents." Id.; see Marchetti v. United States, 390 U.S.
39, 56–57 (1968).7
6 We agree with the United States that it mischaracterizes
the inquiry to say it is a matter of ascertaining the hypothetical
subjective "intent" of Congress. Instead, the focus is on the
nature of the underlying activity. See Grosso v. United States,
390 U.S. 62, 68 (1968).
7 Chen questions whether this test is relevant to an act-
of-production privilege claim, noting that the Required Records
Doctrine was developed before the Supreme Court recognized the
act-of-production privilege in Fisher, 425 U.S. at 410. This
argument is foreclosed by Supreme Court precedent. In 1990, well
after both lines of doctrine had been developed, the Supreme Court
applied the Required Records Doctrine to an act-of-production
privilege claim asserted by a mother, acting as custodian of her
child pursuant to court order, who was resisting an order of a
juvenile court to produce the child. Bouknight, 493 U.S. at 551,
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The government presents the analysis as occurring within
two distinct analytical steps. First, the initial question is
whether the government is authorized to regulate the activity in
question, as the doctrine was originally articulated by the Supreme
Court in Shapiro. There is no doubt that is true here. See U.S.
Const. art. 1, § 8, cl. 3 (granting Congress power "[t]o regulate
commerce with foreign nations"); Shultz, 416 U.S. at 59. But
second, the government recognizes that the Court later narrowed
the doctrine in three criminal cases, where the government was
targeting activity that is criminal or almost always criminal.
See Haynes v. United States, 390 U.S. 85, 95–100 (1968); Grosso,
390 U.S. at 64–69; Marchetti, 390 U.S. at 55–57. Chen
unsuccessfully tries to fit himself into the limitations set by
those cases. The government correctly does not contend that just
because it has the power to regulate in an area that it also has
the power to compel disclosure of required records. It
acknowledges that it is not taking the position that it can simply
criminalize an act and require records to be kept, which would
indicate performance or non-performance of that criminal act, and
that the records would then be admissible over a Fifth Amendment
objection. The government also agrees that it could not by statute
regulate an activity that is essentially or almost entirely
554–61.
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criminal, mandate recordkeeping conditions on the activity, tell
the criminal to self-report, and then prosecute him for failing to
do so. Neither situation is occurring here.
By contrast, Chen's keeping an offshore bank account is
not inherently criminal. The focus of the Required Records
Doctrine is on "the characteristics of the activities about which
information is sought" and "the composition of the group to which
the inquiries are made." Grosso, 390 U.S. at 68. Offshore banking
clearly has inherently civil aspects, and one can comply with the
Act's recordkeeping requirement without being a criminal. In fact,
the Act covers a great many people who are not engaged in any
criminal activity. Simply put, the Act cannot fairly be viewed as
a backdoor attempt to get at a selected group engaged in illegal
activities, through recordkeeping requirements and disclosure, for
criminal prosecution. Compare Haynes, 390 U.S. at 95–97, with
Varitimos, 404 F.2d at 1033–34.
To be sure, Congress contemplated that the records
required to be kept under the BSA would be useful in criminal
prosecutions. Any fair reading of the legislative history reveals
as much. But "[w]hile Congress clearly intended the Act's
disclosure requirements to be of some use in criminal proceedings,
we regard [the] non-prosecutorial interests as substantial."
United States v. Dichne, 612 F.2d 632, 640 (2d Cir. 1979)
(upholding, over a Fifth Amendment challenge, a requirement under
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the BSA that individuals "report[] . . . the transportation of
over $5,000 in monetary instruments into or out of the United
States," id. at 639; see 31 U.S.C. § 5316 (previously codified at
31 U.S.C. § 1101) (now applicable to transportation of over $10,000
in monetary instruments)).
Chen maintains, however, that despite the Act's civil
applications, compliance with its recordkeeping provision has
"criminal implications." That may be so for some people covered
by the Act, but "criminal implications" are not enough to render
the Required Records Doctrine inapplicable. As Chief Justice
Burger, writing for the plurality in California v. Byers, 402 U.S.
424 (1971), explained:
An organized society imposes many burdens
on its constituents. It commands the filing
of tax returns for income; it requires
producers and distributors of consumer goods
to file informational reports on the
manufacturing process and the content of
products, on the wages, hours, and working
conditions of employees. . . . Comparable
examples are legion.
In each of these situations there is some
possibility of prosecution -- often a very
real one -- for criminal offenses disclosed by
or deriving from the information that the law
compels a person to supply. . . . But under
our holdings the mere possibility of
incrimination is insufficient to defeat the
strong policies in favor of a disclosure
called for by statutes like the one challenged
here.
Id. at 427–28 (plurality opinion) (footnote omitted).
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This is not unusual. In fact, courts have relied on the
Required Records Doctrine to uphold recordkeeping schemes imposed
in a variety of contexts where disclosure carries a very real
chance of "criminal implications." One prime example is in the
securities regulation context. See SEC v. Fehn, 97 F.3d 1276,
1291–93 (9th Cir. 1996) (noting that "[a]lthough disclosure might
have revealed past criminal violations in this case, the disclosure
requirement does not, in general, mandate revelation of
'inherently illegal activity,'" id. at 1293 (quoting Bouknight,
493 U.S. at 557)); United States v. Stirling, 571 F.2d 708, 727–
28 (2d Cir. 1978) (rejecting a similar Fifth Amendment self-
incrimination claim against a securities disclosure requirement).
Other areas include the shipment and sale of firearms,
see United States v. Flores, 753 F.2d 1499, 1500–04 (9th Cir. 1985)
(en banc); United States v. Resnick, 488 F.2d 1165, 1168 (5th Cir.
1974) (noting that "the challenged laws sub judice [were] not
directed at a highly selective group inherently suspect of criminal
acts"); Varitimos, 404 F.2d at 1033–34; the transportation of
articles into the United States, see United States v. Rios-
Gonzalez, 450 F.2d 1213, 1216–17 (2d Cir. 1971) (noting that "the
requirement that all articles be declared and the necessity of
such a declaration shows that the appellant, and those in a similar
position, were not singled out as a select group 'inherently
suspect of criminal activities,'" id. at 1217 (quoting Albertson
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v. Subversive Activities Control Bd., 382 U.S. 70, 79 (1965)));
and the distillation and possession of alcohol, see Henderson v.
Blackwell, 436 F.2d 1081, 1082 (5th Cir. 1971) (per curiam) (citing
Brown v. United States, 401 F.2d 769 (5th Cir. 1968) (per curiam)).
In light of the limits that the government admits exist
on the reach of the Required Records Doctrine, we find under the
circumstances that the documents Chen was required to maintain by
the BSA's recordkeeping requirements are properly subject to the
Required Records Doctrine, and that Chen cannot assert a Fifth
Amendment claim of privilege to resist their production.
IV.
Of course, obtaining enforcement of a summons starts
with the government bearing the burden of making a prima facie
showing as required by United States v. Powell, 379 U.S. 48, 57–
58 (1964).8 "The IRS need only make a 'minimal' showing. An
affidavit of the investigating agent that the Powell requirements
are satisfied is sufficient to make the prima facie case."
Sugarloaf Funding, LLC v. U.S. Dep't of the Treasury, 584 F.3d
8 To obtain enforcement of a summons, "[t]he IRS must first
make a prima facie showing '[1] that the investigation will be
conducted pursuant to a legitimate purpose, [2] that the inquiry
may be relevant to the purpose, [3] that the information sought is
not already within the Commissioner's possession, and [4] that the
administrative steps required by the Code have been followed.'"
Sugarloaf Funding, LLC v. U.S. Dep't of the Treasury, 584 F.3d
340, 345 (1st Cir. 2009) (alterations in original) (quoting Powell,
379 U.S. at 57–58).
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340, 345 (1st Cir. 2009) (citation omitted). Additionally, the
IRS may not issue a summons "with respect to any person if a
Justice Department referral is in effect with respect to such
person." 26 U.S.C. § 7602(d)(1). The government here submitted
an affidavit executed by the IRS revenue agent stating that the
summons was issued for the purpose of determining the 2008 tax
liability of Chen and Ng, and that the IRS had not referred Chen
or Ng to the Department of Justice for criminal prosecution. The
agent acknowledged that the government had some documents pointing
to the existence of Chen's foreign bank accounts, but not enough
documents to know whether there was underpayment of taxes.
We reject Chen's argument that the government has not
proven that he is in possession of offshore banking records, or
that he even engages in offshore banking. At this stage, the
government does not have to prove that Chen was in possession of
documents subject to the BSA's recordkeeping requirements. Cf. In
re Grand Jury Investigation M.H., 648 F.3d at 1071. The IRS need
not "prove by positive evidence the existence of the records and
their possession by the summonee." United States v. Lawn Builders
of New Eng., Inc., 856 F.2d 388, 392 (1st Cir. 1988) (per curiam).
Chen makes no serious argument that there are no such documents in
his possession or that the government otherwise has access to the
missing documents. Chen must produce the documents.
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V.
We also reject Chen's argument that "if the Court upholds
the District Court's order compelling Chen to produce the records,"
we should impose "a use restriction on the testimonial
communications inherent in the act of producing the records."
First, Chen did not request a use restriction in the
district court, and so the request is waived for this proceeding.
Second, the issue is hypothetical. We have no way of knowing if
the records will even be put to prosecutorial use. The D.C.
Circuit dealt with a similar issue in Office of Thrift Supervision,
Department of the Treasury v. Dobbs, 931 F.2d 956 (D.C. Cir. 1991).
There, the Office of Thrift Supervision ("OTS") had issued a
subpoena duces tecum against Dobbs, requiring him to produce
certain documents and appear for a deposition. Id. at 957. Dobbs
challenged the subpoena, but the district court granted the OTS's
petition to enforce it. Id. Dobbs then complied with the
subpoena. Id. On appeal, Dobbs argued that "[e]ven though he
[had] provided testimony to OTS, . . . [the] Court could grant
relief from the subpoena by sealing the deposition record against
future use." Id. at 958. The D.C. Circuit rejected his request
because "Dobbs [was] seeking [the] Court's protection from future
OTS action that may never occur." Id. The court cited "the well-
established rule that questions of suppression should not be
considered until the time when the Government seeks to use that
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evidence." Id. (quoting United States v. Kis, 658 F.2d 526, 533
(7th Cir. 1981)). The same reasoning applies here.
VI.
Chen also appeals the district court's denial of his
claim of privilege over his act of producing personal and corporate
domestic financial records. The district court provided no
explanation for why it denied Chen's claim or how it analyzed the
claim. In its original order, the district court found that
"Chen's Fifth Amendment privilege [was] engaged," and so it ordered
"in camera review of the summonsed documents which do not fall
within the scope of the recordkeeping requirements of the Bank
Secrecy Act in order to determine, on a document-by-document basis,
whether Chen's assertion of his Fifth Amendment privilege is made
out." Chen, 952 F. Supp. 2d at 334. But after it reviewed the
documents that Chen provided, the district court only issued a
brief order stating: "The Court having carefully reviewed the
documents submitted in camera and revisited the arguments and
briefs heretofore filed, it concludes that there is no occasion to
reconsider any of its prior orders. The IRS summons shall be
enforced in accordance with its terms."
We have noted before that district courts "should take
reasonable steps to ensure that the parties and the appellate
courts will be able to glimpse the foundation on which their
rulings rest," and that in some cases, "such statements are a
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necessary precondition to intelligent appellate review." Grossman
v. Berman, 241 F.3d 65, 68 (1st Cir. 2001). When "faced with the
task of reviewing an inscrutable order," we may either "remand for
a fuller exposition or act, without remanding, if a reasonable
basis supporting the order is made manifest on the record." United
States v. Podolsky, 158 F.3d 12, 16 (1st Cir. 1998); see Bielunas
v. F/V Misty Dawn, Inc., 621 F.3d 72, 77–78 (1st Cir. 2010). Here,
we vacate and remand to the district court for an explanation of
its ruling. If Chen wishes to challenge that order, he should
file a new appeal.
VII.
We affirm the district court's order compelling Chen's
production of those documents required to be kept under the Bank
Secrecy Act. As to the district court's enforcement of the summons
for documents not subject to the BSA, we vacate and remand to the
district court for further proceedings consistent with this
opinion. No costs are awarded.
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