A little background is necessary to understand the issue. In a 1948 case dealing with the World War II era Emergency Price Control Act, the Supreme Court held that the government can require individuals engaged regulated activity to maintain and produce certain types of records. The Court refined the “required records” doctrine in the 1960s, holding that it did not apply when the government tried to force a bookie to produce records of his gambling operation. In drawing this line, the Court distinguished between (a) inquiries that are essentially regulatory (as opposed to criminal); (b) records that a party would ordinarily keep (as opposed to those that would not be maintained); and (c) records that are deemed to have acquired “public aspects” (as opposed to purely personal documents).
Separately, in a 1976 case, the Supreme Court held that while the Fifth Amendment does not protect the contents of incriminatory documents, it bars the government from proving that the defendant produced such documents in response to a subpoena. This protection stems from the fact that producing documents in response to a subpoena constitutes evidence that (a) the documents exist; (b) the person possesses or controls the documents; (c) the documents are genuine; and (d) the person producing the documents believes they are called for by the subpoena.
In its ongoing battle to eradicate the use of offshore accounts to conceal assets (and evade taxes), the government has served subpoenas on numerous taxpayers who it suspects have (or had) undisclosed offshore accounts. These subpoenas seek information under an obscure requirement that individuals keep records relating to their offshore accounts. Of course, many recipients of these subpoenas face the very quandary the Fifth Amendment was designed to protect against: producing documents in response to the subpoena would concede that they violated the reporting requirements applicable to offshore accounts.
Over the last 18 months, four federal Courts of Appeals (chronologically, the Ninth, Seventh, Fifth and Eleventh Circuits) have considered the issue and all four have rejected the taxpayers’ attempts to invoke the Fifth Amendment, concluding that the “required records” doctrine trumps the “act of production” privilege. As I wrote after the first of these decisions (and at a time when federal courts were split on the issue), this conclusion is principally predicated on the perception that the record-keeping requirement is “essentially regulatory” and that the conduct at issue was not “inherently criminal.”
The Supreme Court reviews less than 2% of the cases presented, so the odds are stacked against the Court taking any one case. However, the taxpayer that lost one of the four appellate decisions has made a compelling presentation for consideration of the issue, arguing that the government should be prohibited from either invoking the “required records” doctrine to override the subsequently developed “act of production” privilege, or using the “required records” doctrine to identify individuals engaged in the conduct covered by a regulatory scheme. This latter argument distinguishes between reporting schemes applicable to conduct engaged in openly (such as selling fruit subject to price controls) and conduct that is otherwise concealed (such as operating an illicit gambling operation). Of course, in the present case, not only is the conduct (maintaining offshore accounts) inherently private, but the government is seeking the records in the context of a pending criminal investigation. Many defense lawyers who practice in this area hope the Supreme Court takes the case and rejects the conclusion reached by the four appellate courts: that the Fifth Amendment does not protect against the compelled production of records under these circumstances.
To read more from Jeremy Temkin please visit www.maglaw.com