United States v. Gippetti

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
11-8-2005
USA v. Gippetti
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-4122
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-4122
UNITED STATES OF AMERICA
v.
JEROME GIPPETTI,
Appellant
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
D.C. Civil 04-cv-00522
District Judge: The Honorable Katharine S. Hayden
Argued: September 13, 2005
Before: SLOVITER, BARRY, and SMITH, Circuit Judges
(Opinion Filed: November 8, 2005)
Richard J. Sapinski, Esq. (Argued)
Steven R. Rowland, Esq.
Sills, Cummis, Epstein & Gross
One Riverfront Plaza
Newark, NJ 07102
Counsel for Appellant
Randolph L. Hutter, Esq. (Argued)
Gilbert S. Rothenberg, Esq.
Paula K. Speck, Esq.
Frank P. Cihlar, Esq.
United States Department of Justice
Tax Division
P.O. Box 502
Washington, D.C. 20044
Counsel for Appellee
OPINION
BARRY, Circuit Judge
A civil investigation was commenced by the Internal Revenue Service (“IRS”) into
the 1999 and 2000 federal income tax liabilities of appellant Jerome Gippetti and his late
wife. On February 6, 2003, the IRS issued a summons demanding that Mr. Gippetti
appear before an IRS agent to provide testimony and produce records pertaining to his
bank and credit card accounts with the Cayman National Bank, Ltd (“CNB”).1 After
Gippetti failed to comply, the IRS initiated this action to enforce the summons.
1
Among other things, the summons required him to produce, for the years 1999 and
2000, account applications, loan applications, monthly or periodic bank statements,
passbooks, and cancelled checks for the CNB account, as well as the card application,
monthly or periodic charge statements, charge receipts, and cash advance confirmations
for, but not limited to, a CNB issued Master Card. Initially, the IRS was aware of only
one CNB Master Card, but later discovered a second CNB Master Card.
2
Gippetti had reported interest income from the CNB account on the 1999 and 2000
federal income tax returns, and had disclosed the existence of the account on forms
entitled “Reports of Foreign Bank and Financial Accounts” filed with the IRS. The IRS
became aware of Gippetti’s two CNB credit card accounts as a result of its Offshore
Credit Card Project.2 While Gippetti did not dispute the existence of these accounts, he
denied that he possessed or had control over the records sought by the IRS. Moreover, in
a somewhat inconsistent argument, Gippetti argued that any compelled production by him
(of records he claimed he could not, in any event, produce) would constitute a testimonial
“act of production” which would infringe upon his Fifth Amendment rights.
The District Court heard argument on April 19, 2004, and, on August 2, 2004,
issued an order requiring Gippetti to “produce the documents relating to those bank and
credit card accounts at the [CNB] that the parties do not dispute are [Gippetti]’s
accounts.” App. 2. The Court ordered that Gippetti make this production “by whatever
2
See Internal Revenue Service, http://www.irs.gov/privacy/article/ 0,,id=131233,00.
html (last visited Sept. 19, 2005). “OCCP is an initiative aimed at bringing back into
compliance with U.S. tax laws participants who used ‘offshore’ payment cards or other
offshore financial arrangements to mask or shelter their income. The IRS used judicial
John Doe summonses to request information from three credit card companies (VISA,
MasterCard, and American Express) regarding individuals who may have participated in
offshore credit card scams. The IRS also summoned information from a Florida credit
card processor, Credomatic, that services banks located in Caribbean tax haven countries.
The goal is to identify US persons from offshore card transactions. A vendor queries the
data and compares it against Name Search Facility (NSF) and Information Return Master
File (IRMF) data. If a Taxpayer Identification Number (TIN) is found, the data is sent in
an Excel spreadsheet through encrypted email to the Philadelphia campus, OCCP Unit.
The spreadsheet is printed out and used by OCCP Unit personnel.”
3
means.” Id. It further noted, in a somewhat cryptic remark, that “[t]here is no issue for
the Court to resolve regarding petitioner’s Fifth Amendment rights.” App. 3. On August
6, 2004, the Court issued a detailed final order.3 This appeal followed.4
Subsequent to the issuance of the District Court’s final order, Gippetti voluntarily
executed and sent to CNB a written “consent directive” in which he requested copies of
the CNB records the government was seeking; there is no suggestion that the consent
directive was compelled. In his letter of August 16, 2004, Gippetti stated that he was
making the request in order to comply with the August 2, 2004 order of the District Court
that he produce those records. He added that he “currently” did not have any of the
records in his possession and did not have them in his possession any time since the
summons was served on him. App. 204. By letter dated August 27, 2004, CNB refused
Gippetti’s request on the ground that a “‘consent’ under pain of penal sanction(s) does not
constitute consent within the meaning of” Cayman Islands law. App. 205-06.5
DISCUSSION
3
For reasons that are unclear, the August 6 order was not entered onto the docket until
August 27.
4
Although the District Court also denied certain relief requested by the government,
the government has not cross-appealed.
5
This response was apparently anticipated by the government, and likely by Gippetti as
well. During the April 19 argument, the government noted that “we do not want a
consent directive . . . The bank is under no compulsion to respond. We don’t want it
because the bank – because we don’t have any jurisdiction over the offshore bank.” App.
30.
4
Gippetti calls this an “act of production” case, but says he does not have the
records the government wants him to produce and has no control over getting them from
CNB, as evidenced most recently by CNB’s rejection of the consent directive he
submitted to it. Parenthetically, he does not dispute, nor could he reasonably do so, that
banks, including CNB, generate and, indeed, send to their customers monthly statements
and the like and does not argue that, in 1999 and 2000, he did not, in fact, receive those
statements and some or all of the other records sought by the government.
Gippetti raised the defense of lack of possession and/or control in the enforcement
proceeding. See United States v. Rylander, 460 U.S. 752, 757 (1983) (“[A] proceeding to
enforce an IRS summons is an adversary proceeding in which the defendant may contest
the summons ‘on any appropriate ground.’ [L]ack of possession or control of the records
is surely such a ground . . . .”) (citations omitted). The District Court, however, did not
explicitly decide the issue, although its final order necessarily contained an implied
finding that any defense of lack of possession or control had not been sustained.
More, however, was required. Given the enforcement order, a civil contempt
action can and probably will ensue if Gippetti does not produce the records he was
ordered to produce. He cannot, however, in a contempt proceeding, litigate or relitigate
the issue of whether he possessed or had control over the relevant records at the time of
the order to produce. Rylander, 460 U.S. at 456-57. As the Court of Appeals for the
Second Circuit explained,
5
Issuance of an enforcement order constitutes an adjudication that the
respondent possesses and is able to produce the summoned documents at
the time the order is issued. Thereafter, the respondent must produce the
documents or face contempt proceedings in which he is foreclosed from
claiming nonpossession at the time of the enforcement order. . . Because of
its potentially drastic consequences, however, an enforcement order in a
contested proceeding should not rest on a determination of possession that
is merely implicit. Before ordering production on penalty of contempt, the
district court should expressly determine that the respondent possesses the
summoned documents.
United States v. Barth, 745 F.2d 184, 187 (2d Cir. 1984) (citation omitted). Finding that
the issue of possession is complex and fact-sensitive, the Court vacated the relevant
portion of the enforcement order and remanded the proceeding to enable the District
Court to rule explicitly on the defense of nonpossession.
We, too, believe that an express determination of possession or control is required.
If the District Court determines that Gippetti does not possess or have control over the
records the government is seeking – and it is Gippetti’s burden – enforcement should be
denied. If, however, the Court determines that he does possess or have control over those
records, failure to produce the records will be on pain of contempt.
In anticipation, however, of a renewed “act of production” defense if, on remand,
production is ordered, we offer the following observations. There can be no question –
and Gippetti does not seriously dispute – that most or all of the CNB records at issue here
exist, that the government knows they exist, and that they are located at CNB. Indeed,
Gippetti has acknowledged that he maintains the specific bank account at issue and the
credit cards tied to that account, as evidenced by his reported interest income, forms he
6
filed with the IRS, and the consent directive he voluntarily signed. He also concedes that
the consent directive was non-testimonial because it asked CNB, not him, “to locate,
retrieve and collect” the relevant records. (App. Br. at 26). He argued, however, that
because CNB refused his request and the government cannot obtain the records through
independent sources, requiring him “to locate, retrieve and collect” them would be
testimonial because he would be required to do the IRS’s “leg-work and thinking.” App.
Reply Br. at 23.
It has long been established that “the Fifth Amendment does not independently
proscribe the compelled production of every sort of incriminating evidence but applies
only when the accused is compelled to make a testimonial communication that is
incriminating.” Fisher v. United States, 425 U.S. 391, 408 (1976). This case is much like
Fisher, in which the Court rejected the taxpayer’s claim that working papers prepared by
the taxpayer’s accountant that the IRS knew were in the possession of the taxpayer’s
attorney were protected by the Fifth Amendment.
The papers belong to the accountant, were prepared by him, and are the
kind usually prepared by an accountant working on the tax returns of his
client . . . The existence and location of the papers are a foregone
conclusion and the taxpayer adds little or nothing to the sum total of the
Government’s information by conceding that he in fact has the papers.
425 U.S. at 411.
So, too, here, it will involve no thinking by Gippetti or reveal any contents of his
mind to simply turn over to the government whatever records CNB were to give to him,
7
and mere turnover will surely not authenticate them. See Doe v. United States, 487 U.S.
201, 218 (1988) (“[T]he only factual statement made by anyone will be the bank’s
implicit declaration, by its act of production . . ., that it believes the accounts to be
petitioner’s”) (emphasis in original)); see also Fisher, 425 U.S. at 413 (“[P]roduction
would express nothing more than the taxpayer’s belief that the papers are those described
in the subpoena . . . The taxpayer would [not be] competent to authenticate the
accountant’s work papers or reports . . . The taxpayer did not prepare the papers and could
not vouch for their accuracy”).6 Stated somewhat differently, for Gippetti to produce the
CNB records would have no testimonial significance, and any Fifth Amendment claim
would be without merit.7
CONCLUSION
That part of the order of the District Court entered on August 27, 2004 enforcing
the summons will be vacated and this matter remanded for further proceedings consistent
with this Opinion.
6
Whether the government can otherwise authenticate the records has no bearing on
whether Gippetti has a valid Fifth Amendment claim.
7
Given this conclusion, we need not reach the issue of whether Gippetti waived any
Fifth Amendment claim as to the CNB records.
8