William Shannahan v. Internal Revenue Service

Filing

FILED OPINION (STEPHEN R. REINHARDT, WILLIAM A. FLETCHER and JOHNNIE B. RAWLINSON) AFFIRMED, Judge: WAF Authoring, FILED AND ENTERED JUDGMENT. [8100890] [10-35204, 10-35244]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
WILLIAM P. SHANNAHAN,
Plaintiff-Appellant,
v.
INTERNAL REVENUE SERVICE, a
federal agency,
Defendant-Appellee.

WILLIAM P. SHANNAHAN,
Plaintiff-Appellant,
v.
INTERNAL REVENUE SERVICE, a
federal agency,
Defendant-Appellee.

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

No. 10-35204
D.C. No.
2:08-cv-00560-JLR

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No. 10-35244
D.C. No.
2:08-cv-00452-JLR
OPINION

Appeal from the United States District Court
for the Western District of Washington
James L. Robart, District Judge, Presiding
Argued and Submitted
June 9, 2011—Seattle, Washington
Filed March 13, 2012
Before: Stephen Reinhardt, William A. Fletcher, and
Johnnie B. Rawlinson, Circuit Judges.
Opinion by Judge William A. Fletcher

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COUNSEL
Samuel Ryan Castic, David John Lenci, Michael K. Ryan,
K&L GATES LLP, Seattle, Washington, for the appellant.
Randolph Lyons Hutter, Carmen M. Banerjee, Jonathan S.
Cohen, Nicole Maria Elliott, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., Robert P. Brouil-

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lard, OFFICE OF THE UNITED STATES ATTORNEY,
Seattle, Washington, for the appellee.

OPINION
W. FLETCHER, Circuit Judge:
We are asked to decide whether appellants are entitled
under the Freedom of Information Act (“FOIA”) to disclosure
of tax-related documents held by the Internal Revenue Service
(“IRS”). The government resisted the disclosure of the documents on two grounds. First, it contended that disclosure of
the documents would “seriously impair Federal tax administration” within the meaning of 26 U.S.C. § 6103(e)(7) and
Exemption 3 of FOIA, 5 U.S.C. § 552(b)(3), and “could reasonably be expected to interfere with enforcement proceedings” within the meaning of Exception 7(A) of FOIA. Id.
§ 552(b)(7)(A). Second, it contended under the fugitive disentitlement doctrine that the Cheungs have no right to disclosure
under FOIA, whether or not the documents qualify under an
exemption.
The district court held that the documents are protected
from disclosure under Exemptions 3 and 7(A). It did not reach
the fugitive disentitlement question. We affirm, based on
Exemptions 3 and 7(A). Like the district court, we do not
reach the fugitive disentitlement question.
I.

Background

On January 28, 2003, Steven Cheung and Linda Su
Cheung, husband and wife, were indicted on one count of
conspiracy to defraud the United States. The Cheungs are
United States citizens. The indictment charged that the
Cheungs concealed their ownership of, and millions of dollars
of income derived from, businesses owning commercial park-

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ing lots in Hong Kong. Steven Cheung was charged in the
same indictment with six counts of filing false or fraudulent
income tax returns, five counts of filing false foreign bank
account reports, and one count of failing to file a foreign bank
account report. The indictment alleges that the Cheungs
engaged in financial transactions in the United States, Hong
Kong, the Marshall Islands, and the British Virgin Islands and
“utilized a web of corporations and other entities” in those
countries. When they lived in the United States, their principal residence was in Seattle, Washington.
Summonses were issued to the Cheungs in Seattle and
Hong Kong and to their defense attorneys in Seattle. The
Cheungs did not appear at their February 20, 2003, arraignment in district court. The court then issued warrants for their
arrest. According to newspaper reports, Steven Cheung held
a press conference in Hong Kong in which he “denounced”
the indictment and the investigation. The United States Attorney’s office in Seattle has reason to believe that the Cheungs
are in Shanghai, China, and that they plan to stay in China
indefinitely. China has no extradition treaty with the United
States.
When the criminal proceeding stalled because of the
Cheungs’ fugitive status, the IRS initiated a civil examination
of the Cheungs’ income tax liability. The IRS does not ordinarily perform a civil examination while criminal proceedings
are pending, but the IRS deviated from its standard practice
because the Cheungs are fugitives. IRS Revenue Agent Ev
Stone sent Form 4549-A Income Tax Discrepancy Adjustments to the Cheungs, assessing Steven Cheung about $9.5
million and Linda Cheung almost $8 million in back taxes,
including penalties and interest. Form 4549-A is commonly
referred to as a “Revenue Agent Report,” or an “RAR.”
Plaintiff William Shannahan is an attorney who represents
the Cheungs, as well as two companies allegedly owned by
the Cheungs, West Coast International Limited and West

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Coast International (Parking) Limited (“the Entities”). Shannahan filed timely protest letters with the IRS on behalf of the
Cheungs and the Entities. Shannahan asked for the documents
on which the assessments were based “[i]n order to allow the
Taxpayer[s] the opportunity to refute the adjustments in the
RAR and to provide the Taxpayer[s] with fundamental due
process.” IRS Supervisory Agent Blake Becker responded in
a letter in which he declined to provide the documents.
Becker requested in his letter that the Cheungs “appear personally” and “testify under oath” in an interview at the IRS
office in Seattle. The Cheungs did not appear for the interview.
Shannahan sent FOIA requests to the IRS on behalf of the
Cheungs and the Entities. As to the request on behalf of the
Cheungs, the IRS informed Shannahan that it had located
2,932 pages of responsive documents but denied his request
based on FOIA Exemptions 3, 5, 7(A), 7(D), and 7(E). As to
the request on behalf of the Entities, the IRS informed Shannahan that it located 40 boxes of responsive documents but
denied his request based on FOIA Exemptions 3, 5, 7(A), and
7(D). Shannahan appealed the denial to the IRS appeals division. The IRS denied the appeal on the ground that the
Cheungs were “fugitives from justice.” Shannahan then filed
four separate complaints in his own name in district court,
two on behalf of the Cheungs and two on behalf of the Entities, seeking disclosure under FOIA. (The Defendants have
not made an objection that the Entities are not taxpayers under
26 U.S.C. § 6103(c).) The district court consolidated the complaints into two cases, one for the FOIA claims brought on
behalf of the Cheungs and one for the claims filed on behalf
of the Entities. After receipt of the complaints, the IRS identified 5,735 pages of documents and a 35.7 MB electronic database responsive to the complaints. On October 28, 2008, the
IRS sent Shannahan ten documents comprising 318 pages. It
withheld the remaining 5,417 pages and the electronic database.

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The IRS moved for summary judgment in both cases. It
argued that the withheld documents were exempt from disclosure under, inter alia, Exemptions 3 and 7(A) of FOIA. 5
U.S.C. §§ 552(b)(3), 552(b)(7)(A). Exemption 3 exempts
from disclosure documents that are “specifically exempted . . .
by statute.” The relevant statute in this case is § 6103(a) of the
Internal Revenue Code, which characterizes “returns and
return information” as “confidential,” subject to certain
exceptions. 26 U.S.C. § 6103(a). One of the exceptions to
confidentiality is disclosure to the taxpayer, but only “if the
Secretary determines that such disclosure would not seriously
impair Federal tax administration.” Id. at § 6103(e)(7). See
also Kamman v. IRS, 56 F.3d 46, 48 (9th Cir. 1995). Exemption 7(A) exempts from FOIA disclosure records or information compiled for “law enforcement purposes, but only to the
extent that the production . . . could reasonably be expected
to interfere with enforcement proceedings.” The IRS also
argued that the suits should be dismissed under the fugitive
disentitlement doctrine. See, e.g., Degen v. United States, 517
U.S. 820 (1996); Sun v. Mukasey, 555 F.3d 802 (9th Cir.
2009).
The IRS supported its motion with four declarations. The
first was by Janet Freeman, an Assistant U.S. Attorney who
had been assigned to the criminal investigation and prosecution of the Cheungs. Freeman described a number of documents responsive to Shannahan’s FOIA request that were in
the possession of the U.S. Attorney’s office. Among them
were 29 boxes of documents provided by Hong Kong to the
United States pursuant to a mutual legal assistance agreement
(“MLAA”). There is no standing tax treaty providing for
information exchanges between the United States and Hong
Kong. Instead, the United States must enter into a new agreement, specific to each criminal tax investigation, for any
exchange of information. In addition, she reported finding 42
boxes of files related to the grand jury investigation and 16
boxes of “work product connected to the criminal investigation.”

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The second declaration was by Deborah Neyhart, a Special
Agent for Criminal Investigations in the Seattle office of the
IRS. Neyhart described a 2,722-page Special Agent Report
(“SAR”) prepared by now-retired Special Agent Molly
Mahoney in connection with the criminal investigation of the
Cheungs. The SAR contained a description of the criminal
offenses recommended for prosecution, along with a description of the supporting evidence, a witness list, and a summary
of anticipated testimony.
The third declaration was by Caesar White, the Supervisory
Special Agent for Criminal Investigations in the Seattle office
of the IRS. White described five categories of documents
responsive to Shannahan’s FOIA request: “examination workpapers,” “agent’s working papers,” “interview notes, third
party contacts and contact sheets,” “internal correspondence,”
and the “electronic database.” White stated that disclosure of
any documents in these categories would “seriously impair
federal tax administration” because it (1) “would allow the
Cheungs to determine the nature, direction, scope, and limits
of the criminal proceedings, and the strategies and theories
being utilized by the government”; (2) “would allow the
Cheungs earlier and greater access to information about the
proceedings than they would otherwise be entitled to receive”;
(3) “could enable the Cheungs to craft explanations or
defenses based upon the government’s analysis;” and (4)
“could enable the Cheungs to conceal or disguise income, or
take other steps to avoid having income attributed to them.”
The fourth declaration was by Meghan Mahaney, an attorney in the IRS’s Office of Chief Counsel, Procedure and
Administration. Mahaney described the search that had been
performed to locate documents responsive to Shannahan’s
request. She stated that 5,735 pages of responsive documents
had been found. These documents were described, as discussed above, by the other declarants. She stated that of the
5,735 pages, the IRS had released 318 pages to Shannahan.
The IRS had withheld the remaining 5,417 pages of docu-

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ments pursuant to, inter alia, Exemptions 3 and 7(A).
Mahaney divided these documents into the five categories
described in the White declaration. She stated that the IRS
was withholding 42 pages of examination workpapers; 5,280
pages of agents’ working papers; 88 pages of interview notes,
third party contacts, and contact sheets; seven pages of internal correspondence; and the entire electronic database.
The court denied the motion for summary judgment in both
cases. Shannahan v. IRS, 637 F. Supp. 2d 902, 908 (W.D.
Wash. 2009). It found that the IRS had failed to show that the
withheld documents qualified as “return information” within
the meaning of § 6103 and Exemption 3, id. at 916, and had
failed to show a sufficient connection between the withheld
documents and the claimed interference with enforcement
proceedings within the meaning of Exemption 7(A). Id. at
920. The court ordered the IRS to provide a Vaughn index of
a representative sampling of documents for each of the five
categories, including at least 500 pages of documents, that
would “(1) [ ] identify each document withheld; (2) state the
statutory exemption claimed; and (3) explain how disclosure
would damage the interests protected by the claimed exemption.” Id. at 923. See also Citizens Comm’n on Human Rights
v. FDA, 45 F.3d 1325, 1326 n.1 (9th Cir. 1995); Vaughn v.
Rosen, 484 F.2d 820 (D.C. Cir. 1973). The court declined to
reach the question of fugitive disentitlement. Shannahan, 637
F. Supp. 2d at 923.
In response to the court’s order, the IRS filed a second declaration by Mahaney, 38 pages of which were a Vaughn
index. Mahaney stated that during her further review she had
discovered 24 additional pages of documents that would be
disclosed, in redacted form, to Shannahan. She then described
withheld documents falling into the five categories. She specifically described three examples of examination workpapers; 18 examples of agents’ working papers; one example
of notes of an interview with a third party; and one example
of IRS internal correspondence. She also described the elec-

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tronic database. As to each specifically described document
and the database, Mahaney explained the basis for her conclusion that they were exempt from disclosure under FOIA.
The district court then granted partial summary judgment in
both cases. With respect to documents not specifically
described by Mahaney in her Vaughn index, the court denied
summary judgment. The court held that Mahaney had not sufficiently explained how she had selected the documents she
described and had not sufficiently shown that they were representative of the rest of the documents. The court also denied
summary judgment as to the electronic database because it did
not have “adequate information upon which to identify potentially exempt files.”
With respect to documents specifically described in the
Vaughn index, the court granted summary judgment under
Exemptions 3 and 7(A) as to all the documents that had been
prepared by the IRS or other governmental agencies. The
court held that Mahaney had shown that these documents contained “return information” within the meaning of § 1603(a)
and Exemption 3. It also held that White had provided a sufficient basis to conclude that disclosure of these documents
would cause harm within the meaning of Exemptions 3 and
7(A). Finally, it held that Mahaney had provided sufficient
information to justify the IRS’s conclusion that these documents could not reasonably be segregated from non-exempt
information. However, the court denied summary judgment as
to specifically described documents that had been prepared by
third parties, holding that there had not been a sufficient
showing that disclosure of these documents would cause
harm.
In response, the IRS filed a third declaration from Mahaney
and a declaration from IRS Special Agent Steven Bellis.
Mahaney described the method by which she had chosen what
she deemed to be representative documents and explained
why disclosure of documents and information from third par-

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ties would be harmful. She further explained why the nonexempt material could not reasonably be segregated from
exempt documents.
Bellis described three categories of documents and information obtained from third parties. First, some documents
were provided, on a confidential basis, pursuant to the MLAA
with Hong Kong. Bellis declared that disclosure of these documents would violate the terms of the MLAA and “would
place at risk the government’s future ability to obtain information from the Hong Kong government in criminal investigations.” Second, one or more confidential informants
provided documents and information to the IRS. Bellis stated
that disclosure of information provided by confidential informants would help the Cheungs discover their identity. Disclosure would thus discourage any informants from cooperating
further and would expose them to a risk of harm. Third, some
third-party documents were provided to the IRS by nonconfidential informants pursuant to subpoenas. Bellis stated
that disclosing those documents would reveal to the Cheungs
the “scope of the government’s investigation” and might
allow the Cheungs to infer the identity of any confidential
informants. Bellis also explained the nature of the electronic
database and described the harm its disclosure would cause.
The district court then granted summary judgment in both
cases. It held that the entirety of the responsive documents, as
well as the electronic database, were properly withheld under
FOIA Exemptions 3 and 7(A). Shannahan v. IRS, 680 F.
Supp. 2d 1270, 1272 (W.D. Wash. 2010). Shannahan timely
appealed in both cases.
II.

Standard of Review

We review summary judgment in a FOIA case in a twostep process. First, we decide de novo if the district court’s
ruling was supported by an adequate factual basis. Pac. Fisheries, Inc. v. United States, 539 F.3d 1143, 1149 (9th Cir.

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2008). If so, we review “the district court’s conclusions of
fact . . . for clear error, while legal rulings, including its decision that a particular exemption applies, are reviewed de
novo.” Lane v. Dep’t of Interior, 523 F.3d 1128, 1135 (9th
Cir. 2008). We review de novo the adequacy of a Vaughn
index. Wiener v. FBI, 943 F.2d 972, 978 (9th Cir. 1991). We
review a denial of discovery for abuse of discretion. Lane,
523 F.3d at 1134.
III.

Discussion

“‘[D]isclosure, not secrecy, is the dominant objective’ ” of
FOIA. Dep’t of Interior v. Klamath Water Users Protective
Ass’n, 532 U.S. 1, 7-8 (2001) (quoting Dep’t of Air Force v.
Rose, 425 U.S. 352, 361 (1976)). We construe narrowly
FOIA’s nine exemptions. Id at 8. The purpose of FOIA is to
“ensure an informed citizenry, vital to the functioning of a
democratic society, needed to check against corruption and to
hold the governors accountable to the governed.” John Doe
Agency v. John Doe Corp., 493 U.S. 146, 152 (1989) (quoting
NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 242
(1978)). The government bears the burden of demonstrating
that an exemption applies. Lahr v. Nat’l Transp. Safety Bd.,
569 F.3d 964, 973 (9th Cir. 2009). To justify withholding, the
government must provide tailored reasons in response to a
FOIA request. It may not respond with boilerplate or conclusory statements. Wiener, 943 F.2d at 978-79. We accord substantial weight to an agency’s declarations regarding the
application of a FOIA exemption. Hunt v. CIA, 981 F.2d
1116, 1119-20 (9th Cir. 1992).
[1] The question under Exemption 3 is whether the Secretary properly determined that disclosure of documents to
Shannahan, acting on behalf of the Cheungs, would “seriously
impair Federal tax administration.” 26 U.S.C. § 6103(a),
(e)(7); 5 U.S.C. § 552(b)(3). “Tax administration” is defined
broadly in the statute. It “means . . . the administration, management, conduct, direction, and supervision of the execution

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and application of the internal revenue laws or related statutes
. . . and tax conventions to which the United States is a party,
and . . . the development and formulation of Federal tax policy . . . .” 26 U.S.C. § 6103(b)(4)(A). It “includes assessment,
collection, enforcement, [and] litigation . . . under such laws,
statutes, or conventions.” § 1603(b)(4)(B).
[2] “Seriously impair” is not defined in the statute, but it
has been construed broadly. In Lewis v. IRS, 823 F.2d 375,
377 (9th Cir. 1987), the taxpayer sought documents relevant
to a criminal tax investigation. The IRS refused to disclose the
documents, relying on Exemptions 3 and 7(A). Id. at 377 &
n.2. According to an affidavit filed by an IRS official,
[d]isclosure of the documents . . . would interfere
with the current Service investigation of the plaintiff
by prematurely revealing the evidence developed
against the plaintiff; the reliance placed by the government on that evidence; the names of witnesses
and potential witnesses; the scope and limits of the
investigation; the identities of third parties contacted;
the specific transactions being investigated; [and] the
strengths and weaknesses of the government’s case
. . . . In addition, disclosure could aid plaintiff in
tampering with potential evidence and witnesses, or
otherwise frustrat[e] the government’s ability to
present its best case in court.
Id. at 378 n.5. Addressing but not specifically citing Exemption 3, we wrote that the affidavit sufficiently showed “why
disclosure would impair the IRS’s investigation of Lewis for
criminal tax violations.” Id. at 378.
In Chamberlain v. Kurtz, 589 F.2d 827, 841 (5th Cir.
1979), the Fifth Circuit held, similarly:
[T]he IRS has sustained its burden by demonstrating
that the release of the documents would result in

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serious impairment of the effort to collect back taxes
and penalties from Chamberlain. Virtually all of the
documents sought discuss either the facts or law
relating to the fraud claim against Chamberlain or
the computation of tax deficiencies for the years
1962 to 1968. Release of this information would
doubtless be of benefit to him in the preparation of
his defense to the various claims against him. Subsections 6103(c) and (e)(6)1 were designed precisely
to avoid the damage to tax collection that would
result from the untimely disclosure of the IRS’
files[.]
Finally, in Linsteadt v. IRS, 729 F.2d 998, 1003 (5th Cir.
1984), the IRS withheld portions of a memorandum of an IRS
interview with taxpayers who were the subjects of criminal
and civil tax investigations. The withheld portions “contained
only a factual summary of the Linsteadts’ statements, and did
not include any conclusions or opinions of the Special Agent
who took the statements.” Id. at 1004. IRS officials provided
affidavits describing the effect disclosure would have:
Any such disclosure would impair the Service’s ability to present its best case in court should [taxpayers]
ultimately be indicted or in any future criminal or
civil litigation involving plaintiffs . . . by prematurely revealing evidence; the reliance placed by the
government on that evidence; the nature and direction of the government’s case; and the scope and
limits of the investigation. In addition, disclosure
would aid plaintiffs in tampering with potential evidence or otherwise frustrate the continuing investigative process.
1

Subsections 6103(c) and (e)(6) then contained the language that is now
contained in § 6103(e)(7)—“if the Secretary determines that such disclosure would seriously impair Federal tax administration.” See Chamberlain, 589 F.2d at 836 n.26 (emphasis added).

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Id. at 1004 n.10 (affidavit of Deputy Director of IRS for the
Dallas District); see also id. (affidavit of Special Agent
assigned to taxpayers’ case, stating essentially the same
thing). The court in Linsteadt affirmed the district court’s
holding that the portions had been properly withheld under
§ 6103 and Exemption 3. Id. at 1005.
[3] The question under Exemption 7(A) is whether disclosure of the documents “could reasonably be expected to interfere with enforcement proceedings.” 5 U.S.C. § 552
(b)(7)(A). In NLRB v. Robbins Tire & Rubber Company, 437
U.S. 214 (1978), the Supreme Court explained the purpose of
Exemption 7(A):
In originally enacting Exemption 7, Congress recognized that law enforcement agencies had legitimate
needs to keep certain records confidential, lest the
agencies be hindered in their investigation or placed
at a disadvantage when it came time to present their
case. Foremost among the purposes of this Exemption was to prevent harm to the Government’s case
in court.
Id. at 224 (emphasis added; citation and internal quotations
omitted). Robbins Tires invoked FOIA to obtain witness
statements the NLRB had collected prior to a hearing on an
unfair labor practice complaint. Id. at 216. The Court held that
the statements were properly withheld because disclosing the
statements would have given Robbins Tires advance access to
the government’s case. Id. at 236-37, 240. This access would
have allowed Robbins Tires to “coerce or intimidate employees who have given statements, in an effort to make them
change their testimony or not testify at all.” Id. at 239. It
would also have allowed a “suspected violator” to “construct
defenses which would permit violations to go unremedied.”
Id. at 241 (citation and internal quotations omitted).

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[4] In Lewis, we held that the IRS properly relied on
Exemption 7(A) in refusing to disclose documents connected
to its criminal tax investigation:
Under Exemption 7(A) the government is not
required to make a specific factual showing with
respect to each withheld document that disclosure
would actually interfere with a particular enforcement proceeding. The IRS need only make a general
showing that disclosure of its investigatory records
would interfere with its enforcement proceedings.
Congress intended that Exemption 7(A) would allow
the federal courts to determine that, with respect to
particular kinds of enforcement proceedings, disclosure of particular kinds of investigatory records
while a case is pending would generally interfere
with enforcement proceedings.
823 F.2d at 380 (emphasis in original; citation and internal
quotations omitted).
[2] The district court in this case properly relied on both
Exemptions 3 and 7(A) in upholding the IRS’s refusal to disclose the documents and electronic database. The court was
meticulous. It required the preparation of a Vaughn index of
representative documents. Compare Lion Raisins v. U.S.
Dep’t of Agric., 354 F.3d 1072, 1082 (9th Cir. 2004)
(“Ordinarily, the government must submit detailed public affidavits identifying the documents withheld, the FOIA exemptions claimed, and a particularized explanation of why each
document falls within the claimed exemption. This submission is commonly referred to as a ‘Vaughn’ index.” (internal
citations omitted)) with Lewis, 823 F.2d at 380 (“When, as is
the case here, a claimed FOIA exemption is based on a general exclusion, such as Exemption 7(A)’s criminal investigation exclusion, which is dependent on the category of the
requested records rather than the individual subject matters
contained within each document, a Vaughn index is futile.”).

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It subsequently insisted on an explanation of how the documents were selected, in order to ensure that the documents in
the index were truly representative. Finally, it insisted on evidence about, and explanation of, the harm that would be
caused by the release of two kinds of documents—those prepared by the IRS and other government agencies, and those
obtained from third parties. See Chamberlain, 589 F.2d at
840-42. It insisted on an appropriate explanation for why the
exempt documents could not reasonably be segregated from
non-exempt material. See Pac. Fisheries, 539 F.3d at 1148.
[6] FOIA is not designed “as a substitute for civil discovery.” Baldride v. Shapiro, 455 U.S. 345, 360 n.14 (1982). The
fact that the Cheungs wish to use the documents they seek in
their civil tax proceeding does not make Exemptions 3 and
7(A) inapplicable. Indeed, it is precisely because of the uses
to which the Cheungs might put the documents that the
exemptions are applicable. The district court properly denied
Shannahan’s discovery requests for information concerning
the nature and origins of documents he requested. See Lane,
523 F.3d at 1134 (holding that in FOIA cases “discovery is
limited because the underlying case revolves around the propriety of revealing certain documents”).
The Cheungs’ problem is partly of their own making. They
were indicted for tax-related crimes—conspiracy to commit
tax fraud (both Cheungs), filing fraudulent income tax returns
(Steven Cheung), filing false foreign bank account reports
(Steven Cheung), and failing to file a foreign bank account
report (Steven Cheung). Instead of defending against the
criminal charges, the Cheungs fled the United States. It
appears that they are now in China, which has no extradition
treaty with the United States.
If the Cheungs had stayed in the United States and
defended against the charges, the IRS would likely have gone
forward with the criminal case before instituting any civil tax
proceedings, in accordance with its usual procedure. Once the

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SHANNAHAN v. INTERNAL REVENUE SERVICE

Cheungs’ criminal proceedings were complete, the Cheungs
would have had access to some of the documents they now
seek, either because they would have received the documents
during the criminal proceedings or because the harm of disclosing the documents would have been vitiated by the conclusion of those proceedings. But here the criminal
proceedings have not taken place because the Cheungs have
fled, and they must live with the consequences.
Conclusion
[7] For the foregoing reasons, we hold under Exemptions
3 and 7(A) that the district court was correct to uphold the
IRS’s refusal to disclose the tax-related documents sought by
the Cheungs.
AFFIRMED.