Two More Banks Obtain NPAs under DOJ Swiss Bank Program (12/31/15)

On December 31, 2015, DOJ announced that 2 more banks have entered NPAs under the DOJ program for Swiss banks, here.  The penalties, aggregating $107,261  million are:

Bank Lombard Odier & Co Ltd	$99.809 million
DZ Privatbank (Schweiz) AG	$7.452 million

Interesting excerpts (emphasis supplied by JAT):

A Zurich-based law firm (the Zurich firm) and a Zurich-based lawyer (the Zurich lawyer) referred U.S.-related accounts to Lombard Odier with aggregate assets under management of over $63 million.  The Zurich lawyer was the accountholder and had signature authority and/or power of attorney over all of the U.S.-related accounts that he referred, and was also a director of the Panama corporation that was the accountholder of one of those accounts.  In some instances, the Zurich firm and Zurich lawyer operated in cooperation with a U.S. lawyer in New York, New York.  The Zurich firm and Zurich lawyer referred 13 accounts to Lombard Odier that the U.S. lawyer – or that person’s friends or family members – beneficially owned.

* * * *

Credit Suisse personnel also provided advice to DZ Privatbank personnel related to clients’ potential participation in the IRS’s offshore voluntary disclosure programs (OVDP) to DZ Privatbank personnel.  For example, in or about April 2011, a DZ Privatbank relationship manager who had learned that some legal advisors were recommending a “quiet OVDP” filing sought the views of a Credit Suisse relationship manager on that topic and was informed it was “really dangerous,” tantamount to “giv[ing] [the customer] the rope (to hang themselves),” and should never be recommended.

The banks will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  As indicated in the last quoted paragraph, accountholders in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

Here are the updated statistics for the Swiss Bank Program:

US DOJ Swiss Bank Program	Number	Number Resolved	Total Costs
U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *	16	4	$3,470,550,000
U.S. / Swiss Bank Initiative Category 2 **	96	78	$1,125,659,990
U.S. / Swiss Bank Initiative Category 3	14		$0
U.S. / Swiss Bank Initiative Category 4	8		$0
Swiss Bank Program Results	134		$4,596,209,990
* Includes subsidiary or related entities counted as separate entities, so the numbers may exceed the numbers the IRS and DOJ posted numbers which combine some of the entities.
** DOJ says original total was 106 but that it expects about 80 to complete the process.

Julius Baer Group Ltd. Expects to Pay $547 Million to US to Conclude Criminal Investigation (12/31/15)

Julius Baer Group Ltd. ("Julius Baer) expects to pay $547 million to conclude the criminal investigation pursuant to an agreement in principle with the U.S. prosecutors.  See Juilius Baer's news release here; and Giles Broom & David Voraceos, Julius Baer to Pay $547 Million to Resolve U.S. Tax Probe (BloombergBusiness 12/30/15), here, and Mark Scott, Julius Baer Reaches Preliminary Tax Deal With U.S. Authorities (NYT  DealBook), here

Key points from these sources:

1.  Julius Baer was one of the category 1 banks under criminal investigation excepted from the opportunity to join the U.S. DOJ Swiss Bank Program, here, as a category 2 bank to achieve a nonprosecution agreement.

2. The resolution is a “comprehensive resolution regarding its legacy U.S. cross-border business.” It is not clear what this means.  I would expect that Julius Baer will have to plead guilty to some criminal charge, perhaps conspiracy.  However, the NYT Dealbook reported that

While analysts said the potential settlement might end the issue for Julius Baer, it remained unclear whether the bank would be forced to plead guilty to criminal charges related to suspected conspiring to aid tax evasion.

UBS was required to enter a deferred prosecution agreement; Credit Suisse was required to plead guilty to a conspiracy crime.  See Credit Suisse Pleads to One Count of Conspiracy to Aiding and Assisting (Federal Tax Crimes Blog 5/19/14; 5/20/14), here.

Since a corporate or other juridical entity can't go to jail, its criminal punishment consists of monetary exactions (such as fines, penalties and restitution) and whatever collateral effects a guilty plea may have.  See generally Judge Jed Rakoff Reviews Brandon Garrett's Book on Too Big to Jail: How Prosecutors Compromise with Corporations (Federal Tax Crimes Blog 2/10/15), here.  For financial institutions, the collateral effects can be significant if they preclude the financial institution from certain lines of business or otherwise limits or affects their business models.  Credit Suisse threaded the needle on that.  But I still can't imagine that the U.S. will not require a guilty plea to some crime, just as it did for Credit Suisse.

3.  Two Julius Baer employees, Daniela Casadei and Fabio Frazzetto, were indicted in 2011, but have not yet come to the U.S., so the case has not proceeded beyond the indictment stage.  See BloombergBusiness article.  And, they are reported to still be with Julius Baer.  I would not expect that their criminal indictments will be resolved by the resolution with Julius Baer and would expect that their relationship with Julius Baer will be terminated.  (I am surprised that Julius Baer had not already terminate them in an attempt to curry favor with DOJ.)

Court Orders Compliance with Formal Document Request Upon Taxpayer Motion to Quash (12/30/15; 12/31/15)

Section 982, here, authorizes the IRS to issue a formal document request ("FDR") for foreign documentation.  The consequence of a failure to comply with the FDR is generally that, in a court proceeding, the court must prohibit the taxpayer from introducing the documents within the scope of the FDR.  The taxpayer may, however, bring a court proceeding to quash the FDR.  The taxpayer may bring a proceeding to quash the formal document request; if the taxpayer brings such a proceeding, the IRS “may seek to compel compliance with such request.”  § 982(c)(2)(A).  Thus, the taxpayer by moving to quash the FDR can turn the process from merely an evidence preclusion into a compulsory process.

In LaRue v. United States, 2015 U.S. Dist. LEXIS ______ (D. Or. 2015), here, the taxpayer brought a proceeding to quash.  The background stated by the court is interesting, important and short.  Here it is:

On August 27, 2013; May 8, 2014; and September 11, 2014; IRS Revenue Agent Ivan Bahamonde issued Information Document Requests (IDRs) in connection with the examination of Petitioners' tax returns. Declaration of Agent Bahamonde (Bahamonde Decl.) ¶¶ 7, 12, 16; ECF 10-1. Petitioners declined his requests for an interview and production of documents. Id. at ¶ 11, 15, 16. On May 8, 2014, and October 30, 2014, Agent Bahamonde issued summonses to Petitioners and requested the same information contained in the IDRs. Id. at ¶¶ 13, 18. In response to the October 30, 2014 summonses, Petitioners appeared before IRS Revenue Agent Susan Murrell and asserted their Fifth Amendment privilege under the act of production doctrine. Id. at ¶ 20. The IRS did not enforce the summonses and, instead, issued the present FDR on January 26, 2015. Id. at ¶ 21. 

According to Agent Bahamonde, the IRS has obtained information showing that Petitioners used Portcullis Trustnet Group to set up offshore trusts in order to avoid paying U.S. income tax. Id. at ¶ 4. The FDR seeks documents within the following categories of accounts over which Petitioners had signature or other authority or exercised control: foreign bank accounts; foreign credit, ATM, or charge accounts; foreign brokerage or securities accounts, in any name; foreign entities or structures; and foreign trusts. Id. at ¶ 24. The IRS is investigating: (1) the nature of the funds deposited into the offshore accounts; (2) whether income generated by the accounts was properly reported by Petitioners; (3) what happened to the funds when the offshore accounts were terminated; and (4) whether Petitioners filed the appropriate information returns related to interests in foreign bank accounts and entities during the tax periods at issue. Id. at ¶ 6.

The Court determined the standard to apply to the Government's request to compel as follows:

The standards for enforcement of a FDR are the same as applied to administrative summons under United States v. Powell, 379 U.S. 48 (1964). In order to enforce a FDR, and defeat a petition to quash, the IRS must show that: 1) the investigation is conducted for a legitimate purpose; 2) the inquiry may be relevant to that purpose; 3) the information requested is not already in the possession of the IRS; and 4) the administrative steps required by the Internal Revenue Code have been followed. Powell, 379 U.S. at 57-58. The IRS is required to establish a prima facie case that the Powell requirements have been met. United States v. Samuels, Kramer and Co., 712 F.2d 1342, 1345 (9th Cir. 1983). Declarations or affidavits by directors or agents generally satisfy the requirements set forth in Powell. See Lidas Inc. v. United States, 238 F.3d 1076, 1082 (9th Cir. 2001). 

In addition to meeting the Powell standard, the IRS must show that the FDR satisfies the procedural requirements of 26 U.S.C. § 982 (c)(1). Chris Marine USA, Inc. v. United States, 892 F. Supp. 1437, 1443 (M.D. Fla. 1995); Yujuico, 818 F. Supp. at 287. Section 982 requires that a FDR be mailed by registered or certified mail to the taxpayer at its last known address and set forth (1) the time and place for the production of the documentation; (2) a statement for the reason the documentation previously produced, if any, is not sufficient; (3) a description of the documentation being sought; and (4) the consequences to the taxpayer for failing to produce the documentation described in the FDR. 26 U.S.C. § 982(c).

The taxpayers' defenses to the request to compel were standard ones:  (i) we don't possess the documents and (ii) if we did, we have a Fifth Amendment privilege via the act of production.

The Court first refused the taxpayers' request to permit them an opportunity to appear before the IRS and assert these defenses.  The Court essentially reasoned that § 982 does not require that extra step.

The Court then turned to the taxpayer's claim of lack of possession or control.  The Court found the IRS submissions from the agent to have established a prima facie case of possession or control and that the taxpayers offered no rebuttal "evidence, let alone "credible evidence."  The Court said:

Petitioners do not deny that they owned or controlled these trusts, entities, or accounts; instead, they deny that they have had any interest in them in at least five years. Jack LaRue Decl. ¶ 4. Petitioners also fail to assert that they have made any efforts to retrieve the summoned documents from any party. Petitioners' general declaration that they do not have custody or control of the requested documents falls far short of establishing a defense. Accordingly, the Court concludes that Petitioners have failed to meet their burden to counter the IRS's evidence that Petitioners possess or have custody of the documents and records the IRS seeks.

The Court then rejected the Act of Production doctrine on the basis that the Government had established possession or control was a foregone conclusion and the taxpayers' did not rebut that showing.  The Court said:

Here, the IRS contends that the foregone conclusion exception applies to documents related to the Islands International Trust, Pacific International Trust, Pacific Islands International Trust, and Seabridge LLC. Petitioners concede that "the existence of Islands International Trust is a foregone conclusion" and that they are required to produce documents related to that trust. Pet'rs' Answer fn. 2, p. 5, ECF 14. However, Petitioners argue that they may invoke their Fifth Amendment privilege as to the remaining documents. 

In support of their invocation of the Fifth Amendment privilege, Petitioners asserted in their opening brief that "it does not appear that the IRS knows if the Petitioners ever had a foreign bank account, brokerage or security account or foreign trust." Pet'rs' Am. Br. 5, ECF 13. In response, the IRS submitted the Bahamonde Declaration, which identified in Paragraph 5 the existence of three specific trusts and one LLC. Plaintiff provides no counter-argument as to why Agent Bahamonde's declaration does not establish the IRS's knowledge of the existence of documents connected to these trusts and LLC. Nor do Petitioners offer any argument regarding the documents' authenticity. Finally, as discussed above, the Court finds no reason not to infer that the documents are within Petitioners' custody or control. 

In summary, Petitioners cannot lawfully refuse to produce the records identified in Agent Bahamonde's declaration which are requested in the FDR because the existence of the records relating to those entities is a foregone conclusion. Thus, the production of the documents is not testimonial in nature for purposes of the Fifth Amendment. See Fisher, 425 U.S. at 411.

Based on the foregoing, the Court denied the taxpayers' petition to quash and ordered compliance with the FDR.

JAT Comment:

1.  This is the first instance I recall seeing the IRS use the FDR rather than the summons for offshore bank and entity documents.  Note that the IRS did issue a summons and, presumably, could have enforced the summons.  It is not entirely clear to me why the IRS did not enforce the summons from the get go because the FDR would have offered no compulsion if the taxpayers had not sought to enforce the summons.

2.  That seques into the second point.  The IRS cannot enforce the FDR unless the taxpayer brings a proceeding to quash the FDR.  The only benefit of the FDR within the control of the IRS is that the taxpayer cannot then introduce the documents in a court proceeding.  It is not clear from the relatively short opinion why the LaRues chose to try to quash the FDR.  Perhaps they were concerned that the IRS might set up a draconian assessment that they might be able to rebut if they were not foreclosed from introducing the documents in a court proceeding.  However, the evidence preclusion in a court proceeding would not prevent the taxpayers from ultimately using the documents to persuade the IRS administratively to either not assert too large tax or penalties or to abate same through the normal administrative proceedings.  And, if the taxpayer were to give the documents to the IRS and the IRS were then trying to get a court to bless some action that documents in its possession rebutted, wouldn't the IRS have to introduce the documents because, surely, it will not ask a court to bless a position it knows to be unjust?  Section 982 might be read to permit that, but I don't think that, so articulated, the IRS would do it or a court would look kindly on it.  So, it is a mystery to  me why the taxpayers brought the motion to quash.

Addendum 12/31/15  1:15pm:

The agent's declaration in support of the Government's request to enforce the FDR is here.  The declaration mentions Portcullis Trustnet, an offshore service provider which figured prominently in a database of “leaked” information, released in June 2013 by the International Consortium of Investigative Journalists (“ICIJ”), here, which has done significant investigative work regarding offshore havens that facilitate tax evasion.  As described at an ABA Tax Section Meeting:

The database contains ownership information about companies created in 10 offshore jurisdictions including the British Virgin Islands, the Cook Islands and Singapore. It covers nearly 30 years until 2010. The information was on a computer hard drive received in the mail by an Australian journalist, Gerard Ryle, who is now the Director at ICIJ.  

The mention in the declaration of Portcullis Trustnet suggests a possible origin of the LaRue audit in the ICIJ leak, or possibly an earlier IRS project focusing on clients of the Portcullis Trustnet.

If the ICIJ material is the source of the IRS's inquiry, the IRS seems to have moved quickly in the LaRue case, since the first IDR was issued on August 27, 2013, only a couple of months after the data was made public.  The further inference is that the IRS may be moving against other taxpayers identified in the database.  For example, the agent's declaration mentions Howard Thrall, Mr. LaRue’s business partner, who apparently acted with Mr. LaRue in establishing similar trusts for himself and his family.  (See declaration, paragraph 5.)  One would expect that Mr. Thrall is being investigated as well unless he did a timely voluntary disclosure or has resolved his investigation (rather than delayed the investigation as did the LaRues).

The ICIJ maintains a searchable database on its website, here, where information from that database can be searched.

A colleague, John Colvin, here, searched the ICIJ database, where he found both Ms. LaRue and Mr. Thrall’s name, associated with some of the trusts mentioned in the RA Declaration.

NYT Article on CI Investigator Scoring in Drug Investigation (12/25/15)

Very interesting article about an IRS CI Agent who identified an online drug czar through unconventional methods.  Highly recommended.  Nathaniel Popper, The Tax Sleuth Who Took Down a Drug Lord (NYT DealBook 12/25/15), here.

Court Rules on Pretrial Motions for Venue, Evidence and Other Matters (12/25/15)

In United States v. Barrett, 2015 U.S. Dist. LEXIS 171727 (ED NY 2015), here, the defendant was charged with submitting false claims to the U.S., money laundering, tax perjury at the individual and corporate levels, and aiding and assisting at the corporate level.  The principal locus of the non-tax offenses was the Eastern District of New York (EDNY).  The defendant resided and filed his tax returns from the Southern District of New York (SDNY) and his tax return preparer did his work from SDNY.  The tax omissions related to the income allegedly at the center of the nontax crimes.  Asserting improper venue in EDNY, the defendant initially moved to transfer the tax counts to SDNY, and then moved to dismiss the tax counts.  In this opinion, the Court rejects the venue assertions as, on the facts, premature at this stage and deals with some other issues related to the evidence and bill of particulars.  I will address certain points here.

Prior to moving to the issues, there is an interesting cryptic statement of the nature of the allegations based on an undercover operation with respect to certain drug stores defendant directly or indirectly owned.  The indictment charge the defendant ""submitted and caused the submission of claims for reimbursement to Medicare and Medicaid for drugs purportedly dispensed from [the drug stores] which were in fact never dispensed to Medicare or Medicaid beneficiaries."  A key part of the evidence:

Three undercover patients entered Economy Drug with prescriptions that [4]  also allowed for refills. (Id.; see also Gov't Resp. at 2.) After defendant properly filled and billed the initial subscriptions, the undercover agents did not request or receive refills of their prescriptions. (Indictment P 25.) The government contends that defendant nevertheless billed Medicaid for the additional refills. (Id.)

1.  Venue.

Venue for tax crimes is generally where the defendant resides, signs the return or files the return.  However, 18 USC § 3237(b), here, provides that, where venue

is based solely on a mailing to the Internal Revenue Service, and prosecution is begun in a judicial district other than the judicial district in which the defendant resides, he may upon motion filed in the district in which the prosecution is begun, elect to be tried in the district in which he was residing at the time the alleged offense was committed.

But, the provision further provides that the motion must be filed within 20 days after arraignment.  That was the first problem with the motion.  It was filed five months after arraignment on the initial indictment.

The second problem was that venue was not based solely on mailing to the IRS as expressly required for the provision to apply.

The third problem was the false returns at the heart of the tax counts were related to the nontax counts having their principal locus in EDNY precluded the court from determining at this stage that venue could not be in EDNY.  If venue is contested, the Government has to prove proper venue at trial, so here the court denied the motion without prejudice to the issue being raised at the end of the government's case-in-chief pursuant to FRCrP 29(a).  For those not generally familiar with venue concepts in a criminal trial, I cut and paste some of the court's discussion:

In a federal criminal case, venue "is controlled by a complex interplay of constitutional provisions, statutes, and rules." 2 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 301 (4th ed. 2015) [hereinafter Wright & Miller]. Because appropriate venue in criminal proceedings was of serious concern to the Nation's founders, the Constitution "twice safeguards the defendant's venue right." United States v. Cabrales, 524 U.S. 1, 6 (1998); see U.S. Const. art. III, § 2, cl. 3 ("Trial of all Crimes . . . shall be held in the State where the said Crimes shall have been committed."); U.S. Const. amend. VI ("In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed."). 

Those venue rights are also reflected in the Federal Rules of Criminal Procedure. See Fed. R. Crim. P. 18 ("[T]he government must prosecute an offense in a district where the offense was committed."). Further highlighting the significance of venue is the requirement that venue be proper with respect to each count when a defendant is charged with multiple offenses. See United States v. Beech—Nut Nutrition Corp., 871 F.2d 1181, 1188 (2d Cir. 1989). The purpose of these legal protections is to insulate criminal defendants from the "bias and inconvenience that may attend trial in a forum other than one in which the crime was committed." United States v. Rowe, 414 F.3d 271, 277 (2d Cir. 2005). 

Many crimes are committed only in a single district. In that scenario, venue is not generally in dispute. See United States v. Ramirez, 420 F.3d 134, 139 (2d Cir. 2005) ("When a crime consists of a single, non-continuing [11]  act, the proper venue is clear: The crime is 'committed' in the district where the act is performed." (internal quotation marks and citation omitted)). Other offenses, however, occur in multiple districts. n3 In those circumstances, 18 U.S.C. § 3237(a), the venue statute discussed above, often referred to as the "continuing offense" statute, provides guidance:
   n3 The court recognizes that the indictment charges that the defendant committed the acts underlying the Tax Counts within the Southern District. Yet, as established in the government's submission, the charged conduct also occurred in and is interconnected with conduct in the Eastern District. 

[A]ny offense against the United States begun in one district and completed in another, or committed in more than one district, may be inquired of and prosecuted in any district in which such offense was begun, continued, or completed. 

18 U.S.C. § 3237(a). Circuit courts, including the Second Circuit, have held that both 26 U.S.C. § 7206(1) and § 7206(2) are "continuing offenses" within the meaning of 18 U.S.C. § 3237(a). See United States v. Rooney, 866 F.2d 28, 31 (2d Cir. 1989) ("We have held that the continuing offense statute applies to section 7206(1) prosecutions . . . ."); see also United States v. Shyres, 898 F.2d 647, 657 (8th Cir. 1990) ("[B]ecause the continuing offense statute . . . applies to section 7206(1), venue also lies 'in any district in which such offense was begun, continued, or completed.'"); United States v. Slutsky, 487 F.2d 832, 839 (2d Cir. 1973) (same); United States v. Hirschfeld, 964 F.2d 318, 321 (4th Cir. 1992) (same with respect to § 7206(2)). 

The Second Circuit, having recognized that "there is no single defined policy or mechanical test to determine constitutional venue," United States v. Reed, 773 F.2d 477, 481 (2d Cir. 1985), applies a "substantial contacts" test to evaluate the propriety of venue in any particular district. The substantial contacts test looks to "the site of the defendant's acts, the elements and nature of the crime, the locus of the effect of the criminal conduct, and the suitability of each district for accurate factfinding . . . ." Rowe, 414 F.3d at 278 (internal quotation marks and citation omitted). n4
   n4 Contrary to defendant's suggestion otherwise (Def. Reply at 2), multiple courts have applied the "substantial contacts" test in evaluating the propriety of venue for tax prosecutions. See United States v. Martino, No. 00—CR-389, 2000 WL 1843233, at *2-3 (S.D.N.Y. Dec. 14, 2000); United States v. Strawberry, 892 F. Supp. 519, 521 (S.D.N.Y. 1995). Defendant is correct, however, that the Second Circuit has "alternately applied and ignored the substantial contacts test." United States v. Coplan, 703 F.3d 46, 80 (2d Cir. 2012) (collecting cases) 

In a tax prosecution under § 7206(1) or § 7206(2), venue "may lie not only where the return was made and subscribed, but also where filed, or where the preparer received information from the defendant even though the defendant signed and filed the returns elsewhere." Rooney, 866 F.2d at 31 (internal quotation marks and citation omitted); United States v. Marrinson, 832 F.2d 1465, 1474-75 (7th Cir. 1987); see also United States v. Pace, 314 F.3d 344, 352 (9th Cir. 2002) ("The act of making a tax return commences when one prepares and furnishes information material to the return and continues until that information is received by the IRS. For such continuing offenses, venue is proper in any district in which the continuing conduct has occurred."). With respect to a § 7206(2) offense, venue is appropriate in any district in which any of the aiding or assisting took place. See Hirschfeld, 964 F.2d at 321. 

Finally, the government bears the burden of proving the propriety of venue, see United States v. Tzolov, 642 F.3d 314, 318 (2d Cir. 2011), but need only do so by a preponderance of the evidence. See United States v. Rommy, 506 F.3d 108, 118-19 (2d Cir. 2007). Circumstantial evidence can be sufficient. United States v. Conteh, 2 F. App'x 202, 203-04 (2d Cir. 2001) (unpublished) ("Venue may be proven by circumstantial evidence." (citing United States v. Gargiso, 456 F.2d 584, 588 n.5 (2d Cir. 1972))); Shyres, 898 F.2d at 657-58; 20A Fed. Proc., L. Ed. § 48:1592 ("[T]he absence of direct proof of venue will not defeat a conviction where an inference of venue may be drawn from circumstantial evidence."). n5
   n5 Defendant's original motion to transfer venue pursuant to Fed. R. Crim. P. 21 placed the burden on him to establish grounds to do so. See United States v. Stein, 429 F. Supp. 2d 633, 645 (S.D.N.Y. 2006). However, without explanation, defendant's reply requests that his initial motion to transfer the Tax Counts to the Southern District be converted into a motion to dismiss them for improper venue under Fed. R. Crim. P. 12(b)(3)(A)(i). "Where venue is challenged on a pre-trial motion to dismiss, the Government's burden is limited to showing that the indictment alleges facts sufficient to support venue." United States v. Peterson, 357 F. Supp. 2d 748, 751 (S.D.N.Y. 2005).

The Court then focused on the context of the particular issue here.  There was some issue over the scope of language in an earlier case, United States v. Rooney, 866 F.2d 28, 31 (2d Cir. 1989), but the Court found that the governing cases "indicate that the range of actions establishing venue and criminal tax liability is broad" and that the it was probable that the Government could prove venue by the required preponderance of the evidence.  The Court noted in this regard that, given the underlying facts, trying the case in EDNY was equally convenient as in SDNY, just next door so to speak.

2.  The Back Door Motion in Limine

Guarding against the possibility of losing the venue issue, the Government made a protective motion that it be allowed to present evidence of the tax crimes even if the tax counts cannot be tried in the EDNY case.  The Court decided to rule on the motion, reasoning:

Should defendant successfully renew his motion at a later time to dismiss the Tax Counts for lack of venue, however — thereby raising the specter of the tax-related evidence affecting other issues in the trial — the court will rule now on the government's pending motion in limine to introduce evidence regarding the Tax Counts.

For purposes of ruling on the motion, the Court assumed "assume[d] that the Tax Counts are not properly venued in the Eastern District."

The Government claimed and the Court agreed that the tax crimes arose out of the "same transaction or series of transactions" as the money laundering from health care fraud and was inextricably intertwined with the evidence of that nontax conduct.  The Court did carve out the possibility that, if the tax counts were dismissed, it would instruct the jury to disregard the tax year 2010 counts that temporally preceded the charged nontax conduct.

The Court found that the evidence, so admissible, was not prejudicial or confusing so as to be not admitted pursuant to FRE 403, here.

Finally, the Court held that evidence of the tax crimes was admissible under FRE 404(b), here, "would tend to show that defendant sought unlawfully to conceal or disguise fraudulently obtained income from taxation, from which a jury could find that defendant knew the proceeds at issue in the health care fraud, false claims, and money laundering counts derived from illegal activity."

3. Bill of Particulars.

The defendant asked for a bill  of particulars identifying unindicted co-conspirators and certain facts related to the duration and scope of the alleged conspiracy.  This is a standard request.  A threshold issue was that conspiracy was not charged, so none of the nonparty actors were described in the charging document as unindicted co-conspirators.  The Court nevertheless treated the allegations regarding the nonparty actors as being equivalent to co-conspirators (n1):

n1 Although the indictment does not charge a conspiracy, it repeatedly alleges that defendant operated "together with others." (See Indictment PP 25, 30, 32, 34, 36.) Accordingly, the court will occasionally refer to these other individuals as "unindicted co-conspirators."

The Court granted the motion.

4.  Case-in-Chief Documents.

I just cut and paste the Court's discussion:

Defendant next requests identification of documents the government plans to use at trial. Defendant relies on United States v. Turkish, 458 F. Supp. 874, 882 (S.D.N.Y 1978), for the proposition that where the government provides thousands of documents to a defendant in advance of trial and where the trial will likely involve substantial reliance on documents, the government has an obligation to identify the documents on which it will rely in its case-in-chief. 

The reasoning of Turkish, however, has been called into serious question by subsequent cases, and has never been adopted by the Second Circuit. See Nachamie, 91 F. Supp. 2d at 569 ("The Turkish court cited no authority for its conclusion that the Government had an obligation to identify the documents it intended to use in its case-in-chief, and it mistakenly relied on another district court case . . . which merely held that the Government had a duty to produce such documents."); see also United States v. Ferguson, 478 F. Supp. 2d 220, 243-44 (D. Conn. 2007); United States v. Kaplan, No. 02-CR-883, 2003 WL 22880914, at *20-21 (S.D.N.Y. Dec. 5, 2003) (denying motion for identification of government's case in chief documents as not required under current version of Rule 16); Reddy, 190 F. Supp. 2d at 571 ("It is clear that [Fed. R. Crim. P. 16(a)(1)(E)] does not require the government to identify specifically which documents it intends to use as evidence. It merely requires that the government produce documents falling into the three enumerated categories." (citation omitted)). n20
   n20 The court recognizes the problems associated with "document dumps" in white collar criminal cases. Commentators have recognized the dangers created where the government produces a large body of discovery material. See Robert G. Morvillo et al., Motion Denied: Systematic Impediments to White Collar Criminal Defendants' Trial Preparation, 42 Am. Crim. L. Rev. 157, 160 (2005); see generally Sara Kropf et al., The "Chief" Problem with Reciprocal Discovery Under Rule 16, Champion, September/October 2010. Some of these commentators have also recognized the inconsistencies in the case law. See Sheila Sawyer, Is 'It's in There Somewhere' Enough? Defining the Scope of the Government's Brady Obligations in 'High-Volume Discovery' Prosecutions, 24 White-Collar Crime Rep. 1, 4 (2009) ("Some older district court decisions have . . . required the government to separate its discovery production into the categories identified in Rule 16. More recent decisions, however, have rejected the holdings of those cases as inconsistent with the plain language of Rule 16." (footnotes omitted)). Ultimately, the court "has no license to rewrite the Federal Rules of Criminal Procedure. While it might be wise for the Advisory Committee on Criminal Rules to consider an amendment that would require a party to identify those documents it intends to use in its case-in-chief, no such requirement now exists in the plain language of the Rule." Nachamie, 91 F. Supp. 2d at 570. 

Even assuming the court has the authority to require the government to identify the documents it plans to use in its case-in-chief, the court would not use its discretion to order the government to identify these documents at this time. The indictment itself contains information about the specific prescriptions alleged to have been improperly filled, and the government has represented that it provided defendant additional information in later productions. From that information, defendant should be able to identify the most relevant documents. In addition, although the government has stated that it will identify the documents it intends to introduce two weeks before trial (Gov't Resp. at 11), the court's pretrial order directs the parties to exchange a list of exhibits 45 days before trial. The request for identification of the government's case-in-chief documents 60 days in advance of trial is denied.

Focus on the document dump issue in footnote 20.  This is a real problem in terms of the defendant's counsel being able to discover exculpatory evidence in large document cases.  Note that the requirements of Brady are more extensive than the requirements of Rule 16, so sensitive to this issue.

Five More Banks Obtain NPAs under DOJ Swiss Bank Program (12/23/15)

On December 23, 2015, DOJ announced here and here that 5 more banks have entered NPAs under the DOJ program for Swiss banks, here.  The penalties, aggregating $215.735 million are:

Bank J. Safra Sarasin AG	$85.809 million
Banque Cantonal du Valais	$2.311 million
Banque Cantonale Vaudoise	$41.677 million
Coutts & Co Ltd	$78.484 million
Gonet & Cie	$11.454 million

The banks will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  As indicated in the last quoted paragraph, accountholders in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

Here are the updated statistics for the Swiss Bank Program:

US DOJ Swiss Bank Program	Number	Number Resolved	Total Costs
U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *	16	4	$3,470,550,000
U.S. / Swiss Bank Initiative Category 2 **	95	76	$1,018,398,990
U.S. / Swiss Bank Initiative Category 3	14		$0
U.S. / Swiss Bank Initiative Category 4	8		$0
Swiss Bank Program Results	133		$4,488,948,990
* Includes subsidiary or related entities counted as separate entities, so the numbers may exceed the numbers the IRS and DOJ posted numbers which combine some of the entities.
** DOJ says original total was 106 but that it expects about 80 to complete the process.

Interesting Report on U.S. Taxpayer Suit Against Swiss Authorities for UBS Information Turnover (12/23/15; 12/26/15)

Swissinfo reports on a case from the The European Court of Human Rights denying a U.S. person relief for the turnover of information from UBS to the U.S.  Swiss ‘justified’ in giving UBS bank data to US (Swissinfo.ch 12/22/15), here.   The case itself, apparently available only in French, is here. The result is not surprising.  The reasoning narrated in the article is surprising -- not that everyone did not already know it, but that the court would articulate the reasoning.  The reasoning, as reported, is (bold-face supplied by JAT):

The Swiss bank client brought his case to Strasbourg after his file was handed to the US in 2012. He claimed that his right to family privacy had been broken, contravening article eight of the human rights convention. 

But judges threw the case out on Tuesday on the grounds that Switzerland was justified in protecting its economic interests. The US was threatening criminal action against UBS unless the data was transmitted, which could have jeopardized the future of Switzerland’s largest bank.

I think most observers knew that Swiss banks and Switzerland justify anything based on their economic interests.  For a long time, their economic interests were served by assisting U.S. tax evasion (as well as other country tax evasion and even more dastardly conduct).  Now that is changing, so Switzerland must protect its economic interests by changing.  And, Switzerland and its banks owe no recompense to those who were affected by the change dictated by their economic interests.

Addendum:  The foregoing is as corrected pursuant to a comment by SwissTechie.  I have clarified that it was not a Swiss court who made the holding.  Rather it was the European Court of Human Rights.

Addendum #2:  Thanks to a reader for forwarding the link to the opinion.  I do not have it in English. I would appreciate receiving a copy in English or a link to a copy in English.

Addendum #3 12/26/15 3:30pm:

Addendum 12/26/15 3:30pm

The English Press Release is here.  Here is a cut and paste of the key parts of the English press release:

Decision of the Court

Article 8

As regards the legal basis for the measure, the Court reiterated that Agreement 09 and Protocol 10 had been negotiated and concluded by the Federal Council, approved by the Federal Parliament and then ratified by the Government in accordance with the procedure for concluding treaties set out in constitutional law. Inasmuch as the applicant submitted that the AFC’s decision of 1 September 2009 lacked any basis in law because Parliament had not yet approved Agreement 09 at the time, the Court agreed with the Government that the AFC had only taken the decision so that it could assess whether the conditions for affording cooperation had been met. At all events, the immediate implementation of Agreement 09 on a provisional basis had been confirmed by the Government at the time of its approval, and that of Protocol 10 had been confirmed by the Federal Parliament on 17 June 2010. 

As regards the foreseeability of the impugned measure, the Court reiterated that the European Convention of Human Rights should be interpreted in line with the general principles of international law. Indeed, under the 1969 Vienna Convention on the Law of Treaties regard should be had to “any relevant rules of international law applicable in the relations between the parties”. In the present case the Court considered relevant the Federal Court’s and the Government’s argument that Article 28 of the Vienna Convention allows the parties to an international treaty to go against the principle of non-retroactivity and provide for the consideration of acts or facts which occurred  before the treaty in question entered into force.  

In the present case the Federal Court had settled case-law to the effect that provisions on administrative and criminal-law cooperation requiring third parties to provide specific information were procedural in nature and consequently applied, in principle, to all present or future proceedings, including those relating to tax periods predating their adoption. The applicant, assisted by a lawyer, could not reasonably have been unaware of that judicial practice. He therefore could not validly submit to the Court that the interference had occurred in a manner which he could not have foreseen. The impugned measure could therefore be regarded as being “prescribed by law”. As regards the legitimacy of the aim pursued by the measure, in the knowledge that the banking sector is an economic branch of great importance to Switzerland, the Court held that the impugned measure formed part of an all-out effort by the Swiss Government to settle the conflict between the bank UBS and the US tax authorities. The measure might validly be considered as conducive to  protecting the country’s economic well-being. The Court accepted the Government’s argument that the US tax authorities’ allegations against Swiss banks were liable to jeopardise the very survival of UBS, a major player in the Swiss economy employing a large number of persons. Therefore, given Switzerland’s interest in finding an effective legal solution in cooperation with the US, it had pursued a legitimate aim within the meaning of Article 8 § 2 of the Convention. 

As regards whether the measure had been “necessary in a democratic society”, the Court noted that the Federal Administrative Court had ruled that the conditions set out in Article 8 for any interference with private or family life had been met in the instant case. The major economic interests at stake for the country and the Swiss interest in being able to honour its international undertakings had taken precedence over the individual interests of the persons concerned by the measure. 

With particular regard to the applicant’s situation, it should be noted that only his bank account details, that is to say purely financial information, had been disclosed. No private details or data closely linked to his identity, which would have deserved enhanced protection, had been transmitted. His bank details had been forwarded to the relevant US authorities so that they could use standard procedures to ascertain whether the applicant had in fact honoured his tax obligations, and if not, to take the requisite legal action.  

Finally, the Court observed that the applicant had benefited from various procedural safeguards. He had been able to lodge an appeal with the Federal Administrative Court against the AFC’s 7 June 2010 decision. The latter court had subsequently set aside the said decision on the grounds of violation of the applicant’s right to a hearing. The AFC had invited the applicant to transmit any comments he might have, of which right the applicant had availed himself. On 4 November 2010 the AFC had given a fresh decision finding that all the conditions had been met for affording administrative cooperation. The applicant had subsequently lodged a second appeal with the Federal Administrative Court, which dismissed it. The applicant had consequently benefited from several effective and genuine procedural guarantees to challenge the disclosure of his bank details and obtain protection against the arbitrary implementation of agreements concluded between Switzerland and the United States. 

It follows that there had been no violation of Article 8 of the Convention. 

Article 14 in conjunction with Article 8 

The Court found, essentially on the same grounds as those mentioned above in support of the absence of violation of Article 8, that the applicant had not suffered  discriminatory treatment for the purposes of Article 14 in conjunction with Article 8. It added that the applicant had provided no evidence to permit an assessment of whether his treatment would have been any different in another Swiss bank. 

Therefore, there had been no violation of Article 14 in conjunction with Article 8 of the Convention.

TNT has this article:  William Hoke,  Human Rights Court Rejects Appeal on UBS Data Transfer to IRS, 2015 TNT 248-2 (12/28/15), no link available.  It adds some background details, but I am not sure that it contributes anything that would be particularly informative to most readers of this blog.

U.S. Taxpayer Seeks Declaratory Judgment that Government Must Prove Willfulness for the FBAR Willful Penalty by Clear and Convincing Evidence (12/22/15)

Former Swiss account holders who joined the OVDP program and, upon opt out, are potentially subject to the willful penalty have filed a complaint, Gubser v. IRS (SD TX No. 15-00298), here, seeking a declaratory judgment as follows (from the complaint prayer for relief, p. 13 of the Complaint):

A judgment under 28 U.S.C. § 2201 declaring that the Defendants must establish willful violations of the FBAR filing requirement of 31 U.S.C. § 5314 by clear and convincing evidence when seeking to impose civil penalties under 31 U.S.C. § 5321(a)(5)(C)-(D).

The gravamen of the legal claim as to the proper evidentiary standard is in the following paragraph:

21. Congress’ use of the term “willful” with respect to the civil FBAR penalty reflects a level of wrongdoing commensurate with civil fraud [which is subject to the clear and convincing standard].

Most of the rest of the complaint seems to go far beyond the requirements of "notice" pleadings required by FRCP Rule 8(a), here, and seems more directed to an audience other than the judge and the opposing party.

Readers will recall that I have visited the issue of the proper burden of proof frequently and believe that the correct standard should be clear and convincing.  I link to some of those blog entries at the end of today's blog.  That is the same issue presented in this declaratory judgement format.  Normally, this issue would be presented after the FBAR is assessed, some of it paid, and suit to recover the payment as illegal.  (Note that this is not a tax refund suit subject to Flora's full payment requirement.)

As to the ripeness of the case in terms of the fundamental requirement of case or controversy, the key part of the complaint's introduction is as follows (emphasis supplied by JAT):

4. An actual controversy exists between Gubser and Defendants because: (i) the IRS has notified Gubser of a proposed civil FBAR penalty for a willful violation; (ii) an IRS Appeals Officer has indicated that, were the clear and convincing evidence standard applied, the IRS could not establish a willful violation by Gubser; (iii) the civil FBAR penalty for a non-willful violation is $10,000; and, thus, (iv) this Court’s declaration that the clear and convincing standard applies will prevent government confiscation of one-half of Gubser’s retirement savings, or approximately $1.35 million, as well as the opprobrium and other negative consequences of a finding that Gubser willfully violated U.S. law.

The current posture is that the IRS has made a proposed decision now being reviewed by Appeals, but that is just a proposed decision.  Even if the Appeals Officer has stated an inclination to apply the preponderance of the evidence standard in assessing the hazards of litigation (see par. 36, p. 12), that seems to just be stating at most a preliminary inclination rather than a decision on behalf of the IRS.  Moreover, I am not sure how much independent authority the Appeals Officer exercises for the FBAR willful penalty; when I handled an appeal on a proposed willful penalty, the Appeals Officer clearly signaled that the ultimate authority was not his.  So, I would expect that a significant "defense" to the case will be that the case is not yet ripe.  And, when it does become ripe -- by assessment -- Gubser will have an adequate remedy once the decision is made and an assessment pursuant to the decision is made.

I do not know that I can add anything that I have not said before.  I think the ultimate legal position is the correct one.  And I think the issue is an important one.  That is why proper presentation and ultimate resolution of the issue is so important.  As I have argued before, the two cases to date are of limited authority, if any, so the issue should still reasonably be in play when presented and properly litigated in a proper venue.  I am just not sure that the current action presents a proper venue for litigating the issue.

Here are some but not all of my previous blogs (presented in reverse chronological order):

• ABA Tax Lawyer Publication Comment on FBAR Willful Penalty (Federal Tax Crimes Blog 2/16/15), here.
• More on Recklessness as Cheek Willfulness (Including for FBAR Civil Penalty) or Willful Blindness (Federal Tax Crimes Blog 7/22/14), here.
• Willful Blindness / Conscious Avoidance and Crimes Requiring Intent to Violate a Known Legal Duty (Federal Tax Crimes Blog 7/21/14), here.
• 11th Circuit Holds Clear and Convincing Evidence Required for Section 6701 Penalty; Can Reasoning be Extended to FBAR Willful Penalty? (Federal Tax Crimes Blog 6/14/14), here.
• McBride #2 - Proof of Willfulness (Federal Tax Crimes Blog 11/13/12), here.
• McBride #1 - Court Holds Government Must Prove FBAR Willful Penalty by a Preponderance (Federal Tax Crimes Blog 11/11/12), here.
• Fourth Circuit Reverses Williams on Willfulness (Federal Tax Crimes Blog 7/20/12; revised 7/24/12), here.
• Burden of Proof for Willfulness in FBAR Violations (Federal Tax Crimes Blog 9/6/11), here.

Assertion of the Fifth Amendment by a Taxpayer in a Tax Court Deficiency Redetermination Proceeding (12/21/15)

What does a party in a civil case do when, in discovery or at trial, the party asserts that party's Fifth Amendment privilege?  The purpose of the Fifth Amendment is to limit the ability of the opponent or the court to get to potentially relevant information.  After all, the civil litigation system counts on open discovery to serve the legitimate goal of making sure that all the truth relevant to determining and deciding the truth comes out.  But, the Fifth Amendment privilege serves a valuable purpose also of permitting a person from having to provide incriminating testimony that can be used in a criminal proceeding.  There are a host of issues raised by the circumstances.  If the party asserting the Fifth Amendment privilege in civil litigation is the proponent in the civil litigation (often call a plaintiff or petitioner), can the party continue to press the civil claims when he denies the opposing party the ability to discover or test the truth of the claims?  If so, should there be any consequence to the asserting party when denying the opposing party the benefit of discovery?  If the party asserting the privilege is a defendant and thus not the party instigating the litigation, are there different considerations that should apply?  There are many more questions both when a party asserts the privilege and when a nonparty witness asserts the privilege.

A recent case from the Tenth Circuit dealt with this issue where a party asserted the privilege in a Tax Court deficiency redetermination proceeding.  In Feinberg v. Commissioner, ___ F.3d ___, 2015 U.S. App. LEXIS 22161 (10th Cir. 2015), here, the taxpayers were in the marijuana sales business in Colorado where marijuana distribution is legal in the state but remains illegal under federal law.  See 21 USC § 841, here.  The IRS denied their related business deductions " on the ground that their conduct violates federal criminal drug laws. See 26 U.S.C. § 280E [here]."  In reality, as developed in the case, as a matter of prosecutorial discretion, DOJ does not prosecute persons such as the taxpayers for violating § 841.   As the Tenth Circuit said, this tension results in a phenomenon that "today prosecutors will almost always overlook federal marijuana distribution crimes in Colorado but the tax man never will."

In discovery in the Tax Court proceeding, the taxpayers claimed the Fifth Amendment privilege.  That's when the IRS engaged the issue of whether the taxpayers could properly claim the privilege where the Government would not prosecute the federal crime asserted as the basis for the privilege.  The court summarized as follows:

It's here where the parties' fight took an especially curious turn. The IRS responded to the petitioners' invocation of the Fifth Amendment by filing with the tax court a motion to compel production of the discovery it sought. Why the agency bothered isn't exactly clear. In tax court, after all, it's the petitioners who carry the burden of showing the IRS erred in denying their deductions — and by invoking the privilege and refusing to produce the materials that might support their deductions the petitioners no doubt made their task just that much harder. See Tax Ct. R. 142(a)(1). And harder still because in civil matters an invocation of the Fifth Amendment may sometimes lawfully result in an inference that what you refuse to produce isn't favorable to your cause. See, e.g., Baxter v. Palmigiano, 425 U.S. 308, 318 (1976). 

Still, the IRS chose to pursue a motion to compel. And in support of its motion the agency advanced this line of reasoning. Yes, of course, the IRS said, it thinks THC's deductions are impermissible precisely because they arise from activity proscribed by federal criminal statutes. Yes, the Fifth Amendment normally shields individuals from having to admit to criminal activity. But, the IRS argued, because DOJ's memoranda generally instruct federal prosecutors not to prosecute cases like this one the petitioners should be forced to divulge the requested information anyway. So it is the government simultaneously urged the court to take seriously its claim that the petitioners are violating federal criminal law and to discount the possibility that it would enforce federal criminal law.

When the Court ordered the taxpayers to produce despite their assertion of privilege.  Such a discovery order would not be the type of order that normally could be appealed until the proceedings at the trial level are concluded.  They had not been concluded in this case.  Hence, the taxpayers petitioned the Tenth Circuit for mandamus to order the Tax Court to withdraw its discovery order.  Mandamus is an unusual proceeding mid-stream at the trial level and requires a strong showing of right to relief.  The Court said that showing had not been made because the taxpayers could be given adequate relief in their appeal from the final decision (judgement) in the case.  The Court reasoned (footnotes omitted)

When it comes to establishing a clear and indisputable entitlement to relief, you might wonder if the petitioners are indeed able to bear the burden the law imposes on them. Of course it's true, as the IRS argues, that to invoke the Fifth Amendment you must "face some authentic danger of self-incrimination." United States v. Rivas-Macias, 537 F.3d 1271, 1277 (10th Cir. 2008) (internal quotation marks omitted). And it's true, as the IRS stresses, that two consecutive Deputy Attorneys General have issued memoranda encouraging federal prosecutors to decline prosecutions of state-regulated marijuana dispensaries in most circumstances. But in our constitutional order it's Congress that passes the laws, Congress that saw fit to enact 21 U.S.C. § 841, and Congress that in § 841 made the distribution of marijuana a federal crime. And, frankly, it's not clear whether informal agency memoranda guiding the exercise of prosecutorial discretion by field prosecutors may lawfully go quite so far in displacing Congress's policy directives as these memoranda seek to do. There's always the possibility, too, that the next (or even the current) Deputy Attorney General could displace these memoranda at anytime — by way of illustration look no further than DOJ's (still) evolving views on corporate waivers of the attorney-client privilege expressed in so many memoranda by so many Deputy Attorneys General over so many years.  

In light of questions and possibilities like these, you might be forgiven for wondering whether, memos or no memos, any admission by the petitioners about their involvement in the marijuana trade still involves an "authentic danger of self-incrimination." Maybe especially given the fact that the government's defense in this case is wholly premised on the claim that the petitioners are, in fact, violating federal criminal law. And given the fact that counsel for the government in this appeal candidly acknowledged that neither the existence nor the language of the DOJ memoranda can assure the petitioners that they are now, or will continue to be, safe from prosecution. And given the fact that this court has long explained that, once a witness establishes that "the answers requested would tend to incriminate [him]" under the law of the land, the Fifth Amendment may be properly invoked without regard to anyone's "speculat[ion] [about] whether the witness will in fact be prosecuted." United States v. Jones, 703 F.2d 473, 478 (10th Cir. 1983). 

But even if their Fifth Amendment objection bears merit, the petitioners still face a problem. As we've seen, a writ of mandamus isn't available when an appeal in the normal course would suffice to supply any necessary remedy. And in Mid-America's Process Service v. Ellison, 767 F.2d 684 (10th Cir. 1985), this court expressly held that any error in a district court's order compelling production of civil discovery that the petitioners believed protected by the Fifth Amendment could be satisfactorily redressed in an appeal after final judgment. Id. at 685-86. A holding that would seem to cover the very situation we now face.

The Court then addressed the taxpayers' claim that the appeal after the final order would be inadequate.

Besides, even if Mid-America's Process didn't control this case (it does) the petitioners still offer us no persuasive reason for thinking an appeal after final judgment would fail to remedy any wrong they might suffer. Suppose the petitioners are right and the tax court's order compelling production violates their Fifth Amendment rights. If they defy the tax court's order and that court issues an improper monetary or other sanction, this court would seem well able to undo the sanction after final judgment. By contrast, if the petitioners choose to comply with the discovery order under protest and the materials they produce are unlawfully used against them at trial, this court would still seem to enjoy ample authority to offer a remedy, maybe even in the form of a new trial without resort to the materials in question. 

Of course there are nuances here, but even they seem like they can be fairly addressed later. For example, if the petitioners stand on their privilege we would face the difficulty of separating out a permissible adverse inference (sometimes employable, as we've seen, in civil cases even when the Fifth Amendment is validly invoked) from an impermissible sanction. But no one suggests that task is beyond us after final judgment. Similarly, if the petitioners choose to produce the discovery under compulsion we might have to confront the question whether any error by the tax court in ordering production was harmless and so beyond our power to remedy after final judgment. But that sort of inquiry seems built into the mandamus standard too. See, e.g., Petersen v. Douglas Cty. Bank & Trust Co., 940 F.2d 1389, 1392 (10th Cir. 1991). Neither is it clear that an erroneous order compelling production in this civil case would yield an unremediable negative impact for the petitioners in a later criminal proceeding. For should they elect, under threat of sanction, to comply with the tax court's order — and should it turn out that order was entered in error — the petitioners might later move to suppress any of the evidence they produced on the ground that the production was made involuntarily — a point even the government in this appeal does not dispute. See, e.g., Minnesota v. Murphy, 465 U.S. 420, 425, 434 (1984); Lefkowitz v. Cunningham, 431 U.S. 801, 805 (1977). 

In the end, then, the petitioners fail to offer a convincing reason to think that without an immediate remedy they will face an irreparable injury. Maybe we're missing something. Maybe a future party will show us what it is we're missing. But the petitioners have not done that much here. And that by itself supplies an independent reason, beyond even our controlling precedent, to withhold the extraordinary remedy of mandamus in this case.

JAT Comment:  The key here is that, if the taxpayers in the case were forced to testify over their proper assertion of the Fifth amendment privilege, in any subsequent criminal proceeding, the courts could then provide an adequate remedy, including suppression of the testimony and the fruits of the evidence.  The taxpayers would then have a form of practical immunity from the continuation of the prosecution, because the Government probably could not prove that whatever it had after a suppression of that scope was sufficient for its criminal case.  See Kastigar v. United States, 406 U.S. 441 (1972).

For related blogs, see

• Negative Inference from NonParty Alleged Co-Conspirator's Invocation of Fifth Amendment in a Civil Case (Federal Tax Crimes Blog 4/13/13), here.
• Another Bullshit Shelter Bites the Dust Even with Variations (5/14/14), here.
• Parallel Civil Proceedings and Criminal Proceedings - The Balancing Act (Federal Tax Crimes Blog 10/12/12), here.

A dated but nevertheless seminal work on the general subject is Robert H. Heidt, The Conjurer's Circle--The Fifth Amendment Privilege in Civil Cases (1982), here.  More recent shorter summaries may be found at A. Brian Albritton,  Rights, Presumption of Guilt: Taking the Fifth in Civil Proceedings, 34 Litigation 20 (2007); and Jacob C. Lehman, Asserting the Privilege Against Self-Incrimination in a Civil Case; A Guide for the Pennsylvania Practitioner, 84 PA Bar Assn. Quarterly 70 (2013).