Miami Review
Tuesday, April 2, 1991
Vol. 65 No. 201

Taxpayers need not incriminate themselves

Documents sought as part of audit can be withheld

Just in time for tax day on April 15, the 11th U.S. Circuit Court of Appeals in Atlanta has cleared the way for taxpayers to refuse to produce documents for Internal Revenue Service audits if they fear the documents might incriminate them criminally.

In its ruling, the appeals court found that Miami resident Alberto E. Argomaniz had a legitimate fear that he might be prosecuted when he invoked his Fifth Amendment right and refused to turn over documents relating to a three-year period in which he failed to file federal income tax returns.
The court sent the matter back to the trial level, where a judge will review the documents and exempt from production any that might incriminate Argomaniz.
When IRS computers first picked up on Argomaniz in 1988, tax officials quickly discovered that he had failed to file federal returns since 1984, and issued a summons in June 1988 for all relevant tax documents to determine Argomaniz’s liability.
He appeared twice before the tax revenue officer assigned to his case, and both times refused to produce any documents. Argomaniz claimed that turned them over would violate his right not to incriminate himself.
The case was referred to the U.S. attorney’s office, which filed a petition in February 1989 with the U.S. District Court in Miami for an enforcement order against Argomaniz.
U.S. Magistrate William C. Turnoff held a hearing the next month to determine why the documents were not being produced.
Argomaniz, along with his counsel, David Garvin of the Miami firm Weinstein and Garvin, showed up in court wheeling several large brown boxes, according to Garvin. Argomaniz again refused to turn over the documents or to answer Turnoff’s questions concerning their contents or authenticity, according to the 11th Circuit opinion.
Turnoff ordered Argomaniz to comply with the summons. But when he appeared before a tax revenue officer in April, Argomaniz once again refused to produce the documents on Fifth Amendment grounds.
Again Argomaniz was ordered to produce the documents, this time by the U.S. District Court. The order was appealed to the Atlanta court.
In its March 11 opinion remanding the case, the appeals court rejected the government’s argument that civil procedures do not provide sufficient fear of prosecution to legitimize a Fifth Amendment privilege claim.
“[The] structure of the IRS, the nature of an IRS summons procedure and the facts of this case compel the conclusion that the government’s position is incorrect,” Judge Stanley F. Birch wrote for the panel.
A 1978 Supreme Court examination of the IRS investigatory system found that the “system’s criminal and civil elements are inherently intertwined,” Birch noted. In the current case, the civil proceedings against Argomaniz presented a clear “recognized potential” that the investigation would lead to criminal prosecution, Birch wrote.
The court also found that, contrary to the government’s contention, Argomaniz hd properly invoked his constitutional privilege when he refused to answer Magistrate Turnoff’s questions regarding the documents.
“It is true that a blanket refusal to produce records or to testify will not support a fifth amendment claim,” Birch stated in the order. However, because Argomaniz presented himself for questioning and responded to each question individually (by refusing to answer), no blanket invocation occurred, Birch concluded.
“The document itself does not have a Fifth Amendment privilege,” said attorney Garvin. “It’s the act of producing the document, thereby implicitly authenticating the document, that has communicative aspects” of self-incrimination.
The 1984 U.S. Supreme Court case, U.S. v. Doe, cited by the Atlanta appeals court, has established, that the act of producing documents whose contents are not privileged could be sufficiently incriminating to invoke Fifth Amendment privileges, according to Garvin. However, “there are very, very few [federal] cases in this area” that support the appellate court’s decision on this point.
“We see these [kinds of cases] all of the time,” said Charles Brookhart, senior trial attorney with the U.S. Justice Department and one of the attorneys representing the government on the case.
“Everyone has a right to assert a claim of privilege whenever the government seeks documents.” The question is whether or not the privilege applies to the documents in question, according to Brookhart.
The trial judge will decide that issue when he privately reviews the documents Argomaniz has thus far refused to produce.
Garvin has moved for rehearing on whether that judicial review is necessary, as he believes both the trial and appellate courts already have determined the documents to be incriminating.