United States of America v. Ali
Filing
24
MEMORANDUM OPINION. Signed by Judge Paul W. Grimm on 11/5/2014. (ca2s, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
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UNITED STATES OF AMERICA,
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Petitioner,
v.
MELINA ALI,
Case No.: PWG-13-3398
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Respondent.
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MEMORANDUM OPINION
The United States brought this civil action to enforce an IRS Summons and Respondent
moved to quash it on statutory and Fifth Amendment grounds.
Following an initial hearing at
which I ruled that the Summons itself was valid and certain materials sought were not protected
by the Fifth Amendment, I ordered the parties to provide additional ~riefing on the remaining
issues. The Government argues that Respondent is not protected by the Fifth Amendment, that
the existence of the documents it seeks is a foregone conclusion, and that she has not shown why
her testimony would be incriminating.
would be incriminating,
Respondent contends that the mere act of production
as would be readily apparent from the context of the requests
themselves, and the documents produced in response thereto.
Because I find that the mere
production of most of the documents sought by the Summons would not require Respondent to
incriminate herself, I order her to comply with the Summons, except for specified documents
with respect to which I find her assertion of privilege to be warranted.
I.
1
BACKGROUND
The facts of this case are discussed in detail in my earlier Memorandum Opinion and
Order issued April 24, 2014.
Md. Apr. 24, 2014).
"Summons")
United States v. Ali, No. PWG-13-3398, 2014 WL 1660280 (D.
In a nutshell, Respondent Melina Ali was served with a summons (the
by the Internal Revenue Service on April 26, 2013, directing her to provide
testimony and to produce various categories of documents for the period December 31, 2004
through December 31, 2011. Id. at * 1. Ali appeared in response to the Summons but refused to
answer any questions or to produce any documents, asserting the Fifth Amendment privilege
against self-incrimination.
Enforce Summons ("Gov't's
Id.
On November 14, 2013, the Government filed a Petition to
Pet."), ECF NO.1, in this Court, seeking to compel Ali to testify
and to produce certain categories of documents sought in the Summons.
Specifically, the
Government seeks to compel the production of:
•
Summons Item I.A, seeking records required to be maintained pursuant to 31
C.F.R.
•
S
1010.420 relating to certain foreign financial accounts;
Summons Item I.B, seeking a list of foreign bank accounts that Ali provided to
her attorney and/or tax preparer;
This Memorandum Opinion and Order addresses the United States' Petition to Enforce
Summons ("Gov't's Pet."), ECF NO.1; the Petition to Quash Summons and/or Deny
Enforcement of the IRS Summons Served on Respondent Melina Ali ("Resp't's Mot. to
Quash"), ECF NO.7, and the Government's Supplemental Brief in Support of Its Petition to
Enforce Summons (Privilege) ("Gov't's Supp. Br."), ECF No. 19, the Supplemental Response
Brief of Respondent Melina Ali, ("Ali's Supp. Resp."), ECF No. 20, and the Government's
Reply to Respondent's Supplemental Response Brief ("Gov't Supp. Reply"), ECF No. 23.
2
•
Summons Items I.C-H, seeking a broad range of documents relating to Ali's
foreign and domestic bank accounts during the relevant period;2
•
Summons Item 2.A, seeking records required to be maintained pursuant to 31
C.F .R.
•
S
1010.420 relating to certain foreign financial accounts;
Summons Item 2.B, seeking additional information with respect to Ali's domestic
and foreign brokerage accounts, mutual funds, and security accounts;
•
Summons Items 3.A-I, seeking information relating to various business entities;
•
Summons Items 6.A-B, seeking Ali's passports and driver's licenses;3 and
•
Summons Item 9.A, seeking Ali's income tax returns, with schedules and
attachments, for the tax years 2004-2011.
I issued an Order to requiring Ali to show cause why she should not be requ,ired to
comply with the Summons, and Ali responded with a Petition to Quash Summons and/or Deny
Enforcement
of the IRS Summons Served on Respondent
Melina Ali ("Resp't's
Mot. to
Quash"), ECF NO.7.
I held a hearing on April 21, 2014 to address the enforceability of the Summons generally
and Ali's Fifth Amendment arguments.
At that hearing, I ruled that the Summons was proper
and that Ali had not met her "heavy burden" to obtain an evidentiary hearing on whether the
2
Although Summons Items I.C-H seek a variety of different types of documents,
including those prepared by banks, by Ali, or by others, the parties have grouped them into a
single legal discussion in their briefs. This appears to evidence an agreement by the parties that,
whatever differences there may be among the types of documents sought in those Summons
Items, they are without legal significance, and I will follow the categorization used by the parties
here.
3
Although the Government's Supplemental Memornadum addressed Summons Items
6.A-C, its Petition sought production of documents only in response to Items 6.A-B, and not
6.C. Accordingly, the Government has not sought production of documents in response to Item
6.C and I will not consider it here.
3
Summons had been issued in bad faith. Ali, 2014 WL 1660280, at *4. However, I noted that
Item 9.A, seeking Ali's previously filed tax returns, appeared to seek information that was within
the possession of the IRS and therefore was not appropriate unless and until the Government
made a diligent search for those tax returns and determined that they could not be located. ld.
I also ruled that Summons Item 1.A, insofar as it sought only records required to be
maintained pursuant to 31 C.F.R.
S
1010.420, was covered by the required records doctrine and
documents responsive to that category must be produced. ld. at *7. I asked for clarification as to
whether Summons Item 2.A, which also seeks documents required to be maintained pursuant to
31 C.F.R.
S
1010.420 (and therefore also within the required records doctrine), sought a different
class of documents or merely duplicated Item 1.A. ld. With respect to the remaining documents,
I found that the parties had not provided sufficient information to determine whether production
of those documents was privileged under the Fifth Amendment,
and ordered the parties to
provide additional briefing on the matter. ld. at *7-8.
The Government also sought to compel Ali to respond to questions after she had refused
to do so at an interview in June 2013. I found that she had not made a sufficient record at that
interview properly to invoke her Fifth Amendment rights. Id. at *5. Accordingly, I ordered the
parties to work together to develop a more complete record to present the issue in a manner that
would facilitate meaningful review, id. at *5-6, and to address it in their supplemental briefs as
well, id. at *8.
On May 27, 2014, Ali appeared for a second interview (the "2014 Interview") at which
time she "answered
many questions, but continued to decline to answer more than 200
questions" relating to specific topics. Gov't's Supp. Br. in Supp. of Its Pet. to Enforce Summons
(Privilege) ("Gov't's
Supp. Br.") 3, ECF No. 19.
4
Subsequently, the Government filed its
Supplemental
Brief, seeking to require her to answer those 238 questions and to produce
documents in response to the Summons Items listed above, with the exception of Items 9.A-C.
ld. at 6, 14. Ali responded by filing her Supplemental Response ("Ali's Supp. Resp."), ECF No.
20, arguing not only that she should not be compelled to answer any additional questions or
produce any additional documents, but also seeking reconsideration of my earlier ruling that the
Summons is enforceable and Items l.A and 2.A are not covered by the Fifth Amendment.
Ali's
Supp. Resp. The Government has replied, Gov't's Reply to Resp't's Supp. Resp. Brief ("Gov't's
Supp. Reply"), ECF No. 23, and the matter is fully briefed (although in contesting every issue
regardless of whether the argument had merit, the parties have, in many instances, succeeded
more in obfuscating the issues than in clarifying them). Having reviewed the filings, I find that a
hearing is not necessary. Loc. R. 105.6.
II.
ALI'S REQUESTS TO RECONSIDER
A substantial
portion of Ali's
Supplemental
Response is spent reargumg that the
Summons is unenforceable because it was issued in bad faith and that, in any event, the Fifth
Amendment shields Ali from producing documents in response to Summons Items 1.A and 2.A.
Because I already have ruled on these issues in my earlier Memorandum Opinion and Order, Ali,
2014 WL 1660280, at *4, *7, this properly is viewed as a motion to reconsider my earlier ruling.
At the outset, this Court's local rules require a motion to reconsider to be filed not more
than fourteen days after entry of the order sought to be reconsidered.
request to reconsider-which
Loc. R. 105.10. Ali's
was not filed as a free-standing motion in any event-was
filed on
July 8, 2014, and therefore is untimely as relates to my ruling on April 24, 2014. But even if the
fact that I reserved final ruling on the Government's Petition and Ali's Motion to Quash makes it
5
unclear whether a motion to reconsider is timely, Ali has not shown any grounds why such a
motion should be granted.
In the widely cited case of Above the Belt, Inc. v. Bohannan
Roofing,
Inc., 99 F.R.D. 99
(E.D. Va. 1983), the court noted there are "circumstances when a motion to reconsider may
perform a vaiuable function," but that it is improper to use such a motion to "ask the Court to
rethink what the Court had already thought through-rightly
or wrongly." Id. at 101. The court
concluded:
The motion to reconsider would be appropriate where, for example, the Court has
patently misunderstood a party, or has made a decision outside the adversarial
issues presented to the Court by the parties, or has made an error not of reasoning
but of apprehension. A further basis for a motion to reconsider would be a
controlling or significant change in the law or facts since the submission of the
issue to the Court. Such problems rarely arise and the motion to reconsider should
be equally rare.
Id.
With respect to the enforceability of the Summons generally, Ali argues that .there has
been an intervening change in the law following the Supreme Court's June 19, 2014 ruling in
United States
v. Clarke,
134 S. Ct. 2361 (2014).
In that case, Justice Kagan, writing for a
unanimous Court, held that "a bare allegation of improper purpose does not entitle a taxpayer to
examine IRS officials.
Rather, the taxpayer has a right to conduct that examination when he
points to specific facts or circumstances plausibly raising an inference of bad faith." Id. at 2365.
According to Ali, the Supreme Court relaxed the standard for a party opposing an IRS
Summons to obtain an evidentiary hearing to challenge the good faith basis for the summons in
the following dicta in Clarke:
circumstantial evidence can suffice to meet that burden; after all, direct evidence
of another person's bad faith, at this threshold stage, will rarely if ever be
available. And although bare assertion or conjecture is not enough, neither is a
fleshed out case demanded: The taxpayer need only make a showing of facts that
give rise to a plausible inference of improper motive.
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Jd. at 2367; see also Ali's Supp. Resp. 7.
But Ali simply is incorrect that Clarke worked a change in the law. In fact, the Court
granted certiorari in that case for the purpose of correcting the Eleventh Circuit, which had split
from every other circuit to hold that "a bare allegation of improper motive entitles a person
objecting to an IRS summons to examine the responsible officials."
Clarke, 134 S. Ct. at 2367.
Nothing in Clarke is the least bit inconsistent with the standard applied by the Fourth Circuit in
Conner v. United States, 434 F.3d 676 (4th Cir. 2006), and accordingly, the request that I
reconsider my earlier ruling that the Summons is enforceable on the basis of Clarke borders on
the frivolous.4
With respect to Ali's request that I reconsider whether Items 1.A and 2.A fall within the
required records doctrine, Ali does not even allege a change in law or the existence of new facts,
but simply argues. that producing such material may incriminate her-particularly
because the
production of documents that she was required to and did not report is, itself, evidence of a
violation of 31 U.S.C.
S
5322, which imposes criminal penalties for willful nonreporting.
Ali's
Supp. Resp. 15.
Not only is this an insufficient basis to reconsider my earlier decision, it simply
misapprehends the scope and effect of the required records doctrine.
As the Sixth 'Circuit has
explained, "[t]he fatal flaw in [this] reasoning is that it overlooks the fundamental fact that the
required records doctrine is an exception to the Fifth Amendment.
4
As such, the doctrine
Ali also argues that a March 2014 summons served upon Ali's banks is significant
because the IRS no longer can claim that it does not already have the information the Summons
seeks. See Ali's Supp. Resp. 20 (citing Conner, 434 F.3d at 680. However, "[t]he validity of the
summons 'became fixed when the summons was served,''' and later events cannot retroactively
render it invalid. United States v. Rosinsky, 547 F.2d 249, 254 (4th Cir. 1977) (quoting Couch v.
United States, 409 U.S. 322, 329 n.9 (1973)).
7
presupposes that compliance with the government's inquiry may be incriminating."
In re Grand
Jury Subpoena, 781 F.2d 64, 70 (6th Cir. 1986).
Further, as the Seventh Circuit has explained:
One of the rationales, if not the main rationale, behind the Required Records
Doctrine is that the government or a regulatory agency should have the means,
over an assertion of the Fifth Amendment Privilege, to inspect the records it
requires an individual to keep as a condition of voluntarily participating in that
regulated activity. That goal would be easily frustrated if the Required Records
Doctrine were inapplicable whenever the act of production privilege was invoked.
The voluntary choice to engage in an activity that imposes record-keeping
requirements under a valid civil regulatory scheme carries consequences, perhaps
the most significant of which, is the possibility that those records might have to be
turned over upon demand, notwithstanding any Fifth Amendment privilege. That
is true whether the privilege arises by virtue of the contents of the documents or
by the act of producing them.
In re Special February 2011-1 Grand Jury Subpoena dated September 12,2011,691
F.3d 903,
908-09 (7th Cir. 2012). Accordingly, by choosing to engage in transactions with foreign banks
and entities that are covered by 31 C.F .R.
S
1010.420, Ali consented to present the required
records to the government if requested, and cannot now invoke the Fifth Amendment to avoid so
doing.
In addition, the Government has clarified the different scope of Summons Items 1.A and
2.A. Item 1.A seeks information related to "foreign bank accounts," whereas Item 2.A seeks
information relating a different class of accounts: "foreign brokerage accounts, mutual funds and
security accounts."
Gov't's Supp. 7. I am satisfied that these categories are not duplicative, and
because they are defined by the scope of 31 C.F.R.
required records doctrine.
Government's
S
1010.420, they are entirely within the
Accordingly, with respect to Summons Items 1.A and 2.A, the
Petition will be granted, and Ali's Motion to Quash will be denied; Ali will be
required to produce documents in response to those Summons Items.
8
III.
REMAINING
DOCUMENTS
SOUGHT BY THE SUMMONS
A.
Ali's Personal Bank and Brokerage Records-Summons
Items l.C-H and
2.B.
Summons Items l.C-H
and 2.B seek an extensive list of records relating to Ali's
domestic and foreign bank and brokerage accounts.
Importantly, Ali acknowledges that the
documents themselves likely are not covered by the Fifth Amendment because they existed prior
to the Summons and therefore "the creation of those documents was not 'compelled'
meaning of the privilege" against self-incrimination.
within the
See United States v. Hubbell, 530 U.S. 27,
36 (2000); see also Ali's Supp. Resp. 12. Rather, Ali argues only that "the act of producing such
documents would convey that Ms. Ali received information about such accounts," which would
tend to show that, to the extent she did not report the contents of those accounts, she acted
willfully and may be subject to criminal penalties.
Ali's Supp. Resp. 17. But this does not
suffice to meet Ali's burden to show that the act of producing the documents is incriminating in
and of itself. See United States v. Wujkowski, 929 F.2d 981, 984 (4th Cir. 1991) (party asserting
the Fifth Amendment privilege bears the burden to prove the nature of the documents in
question).
As a threshold matter, the Fifth Amendment does not protect against the production of
documents where "their existence, possession, and authentication are a 'foregone conclusion.'"
United States v. Stone, 976 F.2d 909, 911 (4th Cir. 1992). Ali reported the existence of accounts
with Citibank, Citigroup, SunTrust, and National Financial Services in her 2006 Income Tax
Return. 2006 U.S. Individual Income Tax Return (Form 1040) 5, Brimage Decl. Ex. A, ECF No.
19-6. She also testified that she has accounts at Citibank, SunTrust, and Smith Barney, had a
brokerage
account
with
Fidelity
and/or
Franklin
9
Templeton,
and has
annuities
with
TransAmerica, New York Life, and Ohio Mutual.
Interview of Ali, May 27, 2014 (the "2014
Interview") 156:19 - 160:9, Gov't's Supp. Br. Ex. D, ECF No. 19-9. And Ali is required to
report to the IRS her interests in any foreign bank accounts pursuant to 31 C.F.R. ~ 1010.350, so
that the existence of any such accounts is or already should be known by the Government.
The
fact that Ali applied for each of her bank accounts and received monthly statements and other
information from the banks where those accounts are located is sufficiently well-known to be
judicially noticeable. See Kaggen v. I.R.S., 71 F.3d 1018, 1020-22 (2d Cir. 1995); Fed. R. Evid.
201.
The same is true of Ali's brokerage accounts.
documents
Acknowledging
the existence of the
listed in Items 1.C-H and 2.B therefore would add little, if anything, to the
Government's knowledge.
The mere production of the documents also cannot be incriminating because it does not
require Ali to authenticate them (the IRS may have them authenticated by the banks) or to
concede the truth of their contents as against any contrary representations by Ali. Rather, any
discrepancies between the documents and Ali's previously filed tax returns could as easily be the
result of bank errors, transactions of which Ali was not aware, or even identity theft or fraudulent
transactions without her permission as the result of any willful or improper misrepresentation.
5
These possibilities distinguish this case from United States v. Sharp, in which the Fourth Circuit
held that requiring a respondent to testify about his income could provide direct evidence that he
willfully underreported.
920 F.2d 1167, 1171 (4th Cir. 1990. In short, the existence of these
documents is a foregone conclusion based on Ali's on prior disclosures, and the act of further
producing them (without testifying about them) is not incriminating.
5
In fact, Ali testified that she has been a victim of identity theft in the past.
Interview 161 :4-7.
10
2014
And finally, even were the information incriminating on its face, it is apparent that she
has waived the privilege at least with respect to her domestic accounts whether or not she
disclosed every such account at her interview. "It is well established that a witn~ss, in a single
proceeding, may not testify voluntarily about a subject and then invoke the privilege against selfincrimination when questioned about the details." Mitchell v. United States, 526 U.S. 314, 321
(1999) (citing Rogers v. United States, 340 U.S. 367, 373 (1951)).
During her interview, Ali
provided a list of the banks and brokerages where she had accounts and answered numerous
questions about them.
2014 Interview 156:4 - 163: 11. Ali argues that the possibility that
documents would show that she "willfully testified falsely during the interview" "makes her
claim to the [Fifth Amendment] privilege even stronger."
Ali's Supp. Resp. 19. But to the
contrary, it is well-settled "that the Fifth Amendment 'does not endow the person who testifies
with a license to commit perjury.'"
United States v. Apfelbaum, 445 U.S. 115, 127 (1980)
(quoting Glickstein v. United States, 222 U.S. 139, 142 (1911)).
"'[P]roper invocation of the
Fifth Amendment privilege against compulsory self-incrimination
allows a witness to remain
silent, but not to swear falsely .... " Id. at 116; see also Brogan v. United States, 522 U.S. 398,
404-05 (1998) (same).
Ali directly answered questions about the identity of her domestic
accounts and, having declined to remain silent, she now cannot seek to withhold documents on
the grounds that they may show that she perjured herself on that issue. Accordingly, Ali will be
requIred to produce documents respecting her personal accounts in response to Sqmmons Items
1.C-H and 2.B.
B.
List of Bank Accounts Prepared by Ali-Summons
Item l.B
Summons Item 1.B seeks a list provided by Ali to her tax attorneys Sonali Patel and JG
Tax Group listing Ali's foreign bank accounts and which Patel had represented she would
11
provide to the Government but later declined to provide.
The Government argues that the
existence of this document is a foregone conclusion and that the production of the document
would not authenticate
Amendment.
it, and therefore that its production
is not protected by the Fifth
Gov't's Supp. Br. 11-12.
However, with respect to the list sought in Item 1.B, Ali not only asserts the Fifth
Amendment privilege against self-incrimination, but also argues that the list is protected by the
attorney-elient
privilege.
confidential communications
frank communication
The attorney-client
privilege "is the oldest of the privileges for
known to the common law," and serves "to encourage full and
between attorneys and their clients and thereby promote broader public
interests in the observance of law and the administration of justice."
Upjohn Co. v. United
States, 449 U.S. 383, 389 (1981). To assert the privilege, a party must demonstrate:
(1) the asserted holder of the privilege is or sought to become a client; (2) the
person to whom the communication was made (a) is a member of the bar of a
court, or his subordinate and (b) in connection with this communication is acting
as a lawyer; (3) the communication relates to a fact of which the attorney was
informed (a) by his client (b) without the presence of strangers (c) for the purpose
of securing primarily either (i) an opinion on law or (ii) legal services or (iii)
assistance in some legal proceeding, and not (d) for the purpose of committing a
crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the
client.
In re Allen, 106 F.3d 582, 600 (4th Cir. 1997) (quoting United States v. Tedder, 801 F.2d 1437,
1442 (4th Cir. 1986)). Here, it is not disputed that Ali was a client of Patel's, that Patel is an
attorney, or that Ali provided Patel with the list of foreign bank accounts to secure legal advice.
See Ali's Supp. Resp. 23. The Government also has not contended that Patel was attempting to
aid Ali in the commission of a crime or tort.
The list plainly falls within the scope of the
privilege. The Government's only argument is that Ali had not previously asserted the privilege
despite having "multiple opportunities to do so." Gov't's Supp. Reply 17.
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The Government simply is incorrect that Ali has squandered multiple opportunities to
assert the attorney-elient
privilege with respect to her list of foreign bank accounts.
No
documents have been produced by the parties regarding the pending motion and the only
previous briefing provided by Ali was an attack on the Summons in toto, following which I
ordered the parties to provide briefing on the specific Summons Items that the Government is
seeking to enforce. See Mem. Gp. 12-13. To argue the contrary, the Government quotes from a
treatise stating that where a "client fails to timely and properly voice any objection to the
disclosure, [s]he impliedly waives the privilege protection."
Client Privilege in the
us. ~ 9:33.
2 Paul R. Rice et aI., Attorney-
But in its selective citation to this treatise, the Government
conveniently overlooks its further explanation that the need for "the privilege holder timely [toJ
assert [her privilege] generally translates into an objection on the ground of privilege being made
before there is a disclosure of the communication."
Id.
Here, no disclosure has occurred yet,
and Ali has not missed any deadlines or failed to provide a privilege log where required to do so.
Cf, e.g., Horace Mann Ins. Co. v. Nationwide Mut. Ins. Co., 240 F.R.D. 44, 48 (D. Conn. 2007)
(finding privilege waived where party failed to supply a privilege log in a timely fashion).
Accordingly, the list that she provided to her attorney in confidence under circumstances falling
within the aegis of the attorney-client privilege remains protected, and she shall not be required
to disclose it in response to Summons Item 1.B.
C.
Corporate Records-Summons Items l.C-H and 3.A-I
The Summons further seeks several categories of documents related to "domestic and
foreign entities/structures."
First, in addition to seeking personal bank records as already
discussed, Items l.C-H seek records relating to domestic and foreign "business accounts, ...
LLC accounts, [and] other corporate accounts" over which Ali "had signature authority and/or
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other authority and/or over which [she] exercised control" during the relevant period.
Second,
Items 3.A-I seeks a comprehensive list of organizational documents, records, and other files
relating to "domestic and foreign entities/structures ...
in which [Ali] exercised control and/or
held an ownership interest, legal interest, fiduciary interest, and/or beneficial interest" during the
relevant time period.
Ali argues that the production of any of these documents "would be
potentially incriminating" because she would be required to admit that she has a financial interest
in certain entities that she has not reported.
Ali's Supp. Resp. 20.
She also objects to any
production that would require her to "convey her 'belief that the papers are those described in the
[Summons]""
Id. at 21 (quoting United States v. Doe, 465 U.S. 605, 613 (1984)).
However, it is well-settled that "a corporate custodian ...
corporate records on Fifth Amendment grounds."
may not resist a subpoena for
Braswell v. United States, 487 U.S. 99, 109
(1988); see also Wujkowski, 929 F.2d at 983 (same). "Any claim of Fifth Amendment privilege
asserted by the agent would be tantamount to a claim of privilege by the corporation-which
course possesses no such privilege."
"collective entity" rule.
of
Braswell, 487 U.S. at 110. This doctrine is known as the
Id. at 104. Ali attempts to rely upon United States v. Doe, for the
proposition that the production of corporate documents can, under some circumstances,
protected under the Fifth Amendment.
Ali's Supp. Resp.21.
be
But Doe considered the privilege
only in the context of a sole proprietorship, in which "the owner ... acts in a personal rather than
a representative capacity," Doe, 465 U.S. at 609, and its reasoning does not apply to corporate
entities generally. Braswell, 487 U.S. at 104.
The Government has asserted, and Ali has not contested, that Ali has served as the
secretary and treasurer of at least two entities: White Pearl Enterprises LLC d/b/a White Pearl
Investment Company ("White Pearl") and Richtree Corporation ("Richtree"), which have issued
14
5,000 and 25,000 shares of common stock, respectively.
entities is a sole proprietorship,
Gov't's Supp. Br. 11. Neither of these
and accordingly, Ali holds the records of White Pearl and
Richtree in a representative, not a personal, capacity. Ali also has not argued that the contents of
White Pearl and Richtree's corporate files are personal, rather than corporate, in nature.
See
Wujkowski, 929 F.2d at 984. And it is not relevant that the Summons, though seeking corporate
records, is addressed to Ali personally.
Dreier v. United States, 221 U.S. 394, 399 (1911) ("By
virtue of the fact that they were the documents of the corporation in his custody, and not his
private papers, he was under an obligation to produce them when called for by proper process.").
Ali argues that she no longer is an officer of Richtree, Ali's Supp. Resp. 22, but this does not
transform corporate documents that she obtained in a representative capacity into personal ones
merely because she retained them after she ceased to serve as custodian, and Ali cites no case
law to the contrary. Although the Government only has knowledge of White Pearl and Richtree,
I also cannot see how the Fifth Amendment would apply to any entity for which Ali is or, during
the relevant time period, was the custodian of records under circumstances equivalent to her
possessing documents of White Pearl and Richtree, even if the Government is not aware of such
entities. Accordingly, Ali must comply with Summons Items l.C-H and 3.A-I with respect to
any and all entities for which she is or has been the custodian of records under the stated
circumstances.
But insofar as the Government seeks the production of "any other business to which [Ali]
owns an interest," Gov't's Supp. Br. 11, its request extends beyond the scope of the collective
entity rule. Although Ali may bear the burden of proof to show that any corporate documents
that she holds indeed are personal in nature, see Wujkowski, 929 F.2d at 984, the mere fact that a
document relates to Ali's holdings in a corporate entity does not alone establish that she
15
possesses it in a representative capacity. And unlike the production of her personal bank records,
the Government has not shown why the production of corporate documents not held by her in a
custodial capacity would not require Ali to admit holdings in certain entities. See Gov't's Supp.
Reply 16-17 (arguing only that the Fifth Amendment does not apply to corporate documents
held in a representative capacity). Asking Ali to produce documents relating to entities in which
she owns an interest would require her to acknowledge her belief that she Qwns an interest in
such entities, which, as in Sharp, could establish that she willfully misrepresented her ownership
interests in the past. See United States v. Sharp, 920 F.2d 1167, 1171 (4th Cir. 1990). On the
record before me, I find that.such a production implicates the Fifth Amendment and therefore
cannot be compelled.
To the extent that the Government's
Petition seeks production
of
documents in response to Summons Items I.C-H and 3.A-I with respect to entities in which Ali
similarly has an ownership interest, but is not holding them in a representative capacity, it will be
denied without prejudice
D.
Ali's Identification-Summons
Items 6.A-B
Summons Items 6.A-B seek Ali's U.S. and foreign passports, whether current or expired.
Having failed to respond to the Government's argument on this point, Ali has conceded it. See
Burns & Russell Co. of Balt. v. Oldcastle, Inc., 166 F. Supp. 2d 432, 440 (D. Md. 2001).
Accordingly, Ali will be required to respond to Summons Items 6.A-B.
IV.
Testimony Sought by the Summons
The Government also seeks to compel Ali to provide testimony In response to the
Summons.
After Ali refused to provide any substantive responses at her initial, June 2013
interview, she was re-interviewed by the Government on May 27, 2014, where she answered
many questions and refused to answer many others on Fifth Amendment grounds. See generally
16
2014 Interview.
The Government has provided a partial transcript of the interview, which
appears to include Ali's significant invocations of privilege but omits a number of pages that,
though presumably unhelpful to the Government, would have been useful to provide context to
the interview as a whole.
In its excerpts, the Government has identified 238 questions that Ali refused to answer on
Fifth Amendment grounds, and has grouped them into categories by subject: "Inheritance, Gifts,
and Non-Taxable
Property";
Sources of Income"; "Property Ownership";
"Businesses";
"Income
During the Tax Years at Issue";
Accounts"; and "Foreign Bank Accounts."
See Gov't's
Respondent Pled the Fifth Amendment ("Gov't's
No. 19-3.
"Loans Made"; "Sources of
"Use of Structured
App'x II: List of Questions Where
App'x II"), Gov't's Supp. Br. App'x 2, ECF
According to the Government, Ali did not validly invoke the Fifth Amendment
because she did not explain why her answers would have been incriminating, Gov't's Supp. Br.
14, and the incriminating nature of Ali's responses was not readily apparent, id. at 15. The
Government asks me to deny Ali's Motion to Quash or, in the alternative, to hold an in camera
hearing to determine whether Ali's answers to the questions she was asked actually would
incriminate her.
"[N]o ritualistic formula or talismanic phrase is essential in order to invoke the privilege
against self-incrimination.
All that is necessary is an objection stated in language that a
[questioner] may reasonably be expected to understand as an attempt to invoke the privilege."
Emspak v. United States, 349 U.S. 190, 193 (1955). However, "to invoke this privilege the party
claiming it must not only affirmatively assert it, [s]he must do so with sufficient particularity to
allow an informed ruling on the claim." N. River Ins. Co. v. Stefanou, 831 F.2d 484, 487 (4th
Cir. 1987). The "proper invocation of the fifth amendment privilege requires its assertion with
17
respect to specific questions," United States v. Boineau, 856 F.2d 187, 1988 WL 86616, at *1
(4th Cir. Aug. 19, 1988) (unpublished opinion), and generally, "a blanket refusal to respond [is]
not sufficient," N. River Ins. Co., 831 F.2d at 487.
In my earlier opinion, I found that, by refusing to answer every substantive question she
was asked, Ali's invocation of the Fifth Amendment at her earlier interview was tantamount to a
blanket refusal to respond and did not provide an adequate record on which to rule on her
invocation of the Fifth Amendment. Ali, 2014 WL 1660280, at *5. In contrast, the transcript of
Ali's 2014 Interview demonstrates
that her invocations of the Fifth Amendment-though
frequent and covering a large portion of the material on which she was questioned-were
made
in response to specific questions. See generally 2014 Interview. And Ali answered a number of
questions that, though apparently not incriminating, she had refused to answer at her initial
interview.
(Ali's
See, e.g., 2014 Interview 8:19 - 13:8 (previous names that Ali has used), 13:17-18
citizenship),
12:9-16
(Ali's
marital
status).
And crucially,
the Government
has
acknowledged that she invoked her right to silence only with respect to certain subject matter.
See Gov't's App'x II. This is a sufficient record on which to discern the scope of her refusal to
testify and to rule on it.
Moreover, compelling Ali's testimony implicates a different set of concerns than those
raised by the Government's attempt to obtain documents.
Whereas Ali may produce documents
from her banks without adopting their contents without authenticating them, she cannot distance
herself from her own testimony. If her testimony contradicts the statements she made on her tax
returns for the years that the IRS is investigating, it potentially could show that she willfully
misrepresented her income or other information relating to her tax liability, which is an essential
element of the criminal offense of failure to file income tax returns. 26 U.S.C.
18
S
7203; United
States v. Sharp, 920 F.2d 1167, 1171 (4th Cir. 1990). As the Fourth Circuit has recognized in a
similar case, it is "evident from the very questions asked under the circumstances of their asking"
that, even if not directly incriminating, any such testimony could "'furnish a link in the chain of
evidence that could lead to prosecution,'
and that suffices."
Id. (quoting Hoffman v. United
States, 341 U.S. 479,486 (1951).
Indeed, the broad categories outlined by the Government show that Ali's invocations of
the Fifth Amendment
misrepresented
cover
areas that directly
her tax liability.
are relevant
to whether
Ali willfully
In light of Sharp, it borders on disingenuous
for the
Government to contend that questions about Ali's "Income During the Tax Years at Issue" could
not call for an incriminating answer. And in several instances, the Government's description of
the categories misrepresent the very nature of the questions asked. For example, the Government
argues that Ali must answer questions about "Gifts, Inheritances, and Non-Taxable
Items"
because those items would not have led to any tax liability. See Gov't's Supp. Br. 16. But of the
six questions that the Government lists under that heading, three actually ask if Ali inherited any
interest in her father's business-questions
that could lead to evidence that she misrepresented
her holdings or received unreported income from that business. See Gov't's App'x II, Questions
1, 2, 6.
The Government asserts with respect to several categories that there only is the
possibility that those questions "might be incriminating for some taxpayers," Gov't's Supp. Br.
19, and that "there is no evident risk of incrimination from the questions, unless hypothetical,
unique circumstances
are present."
Gov't's
Supp. Reply 20.
But by invoking the Fifth
Amendment Ali has made clear that she believes that they would be incriminating with respect to
her. The context of this case-including
the Government's
information and her persistent resistance-suggest
19
insistence on obtaining Ali's tax
that such circumstances are far more than
hypothetical.
And it readily is apparent how questions about Ali's "Property Ownership,"
"Loans Made," "Sources
of Property,"
"Businesses,"
"Use of Structured
Accounts,"
and
"Foreign Bank Accounts" could lead to evidence that Ali's income and financial situation are
other than she had reported. Sharp does not require more for her to invoke her Fifth Amendment
privilege appropriately.
The Government also objects to Ali's invocation of the Fifth Amendment in response to
several specific questions on the grounds that her stated reason for refusing to answer was not a
valid invocation of the Fifth Amendment.
context surrounding Ali's explanations
But once again, the Government has ignored the
and, in so doing, has mischaracterized
them.
For
example, the Government argues that Ali improperly objected to certain questions as assuming
facts not in evidence, which it asserts is not a valid reason to invoke the Fifth Amendment.
Gov't's
Supp. Br. 15 (citing United States v. Ottovich, No. ll-cv-01793-JSW(JCS),
6486919, at *9 (N.D. Cal. Oct. 17,2013)).
See
2013 WL
But in fact, Ali was responding to questions that, for
her to answer, would have required an acknowledgement of facts about which she already had
refused to testify, and thus would have waived her Fifth Amendment privilege on matters with
respect to which she already had invoked it. See id. 199: 1-7 (refusing to answer the question "Is
that money from your foreign account?" after previously refusing to state whether Ali had any
foreign accounts), 217: 14-22 (refusing to provide the cost of a home at the time Ali purchased it
after previously refusing to state whether she had purchased the home).
Similar issues appear
to exist where the Government contends that Ali improperly invoked the Fifth Amendment
"because she did not know the answer to the question."
Gov't's
Supp. Br. 14. In fact, these
actually appear to be instances in which Ali was unclear on the information sought or was
concerned that answering based upon incomplete information could constitute a waiver with
20
respect to incriminating facts of which she was not certain at the time. See id. at 83: 14 -84: 12
(declining to answer where Ali's counsel explained that "I don't know if, sitting here today, that
we would be able to definitively figure out the answer, because he is asking a compensation
question"), 133:4-5 (refusing to state how she purchased a car), 200:14-15
(after refusing to
testify as to whether she received certain income, refusing to testify as to whether her family
members received similar amounts), 227: 18 - 228 :4 (declining to answer whether Ali was visited
by foreign bankers). Ali's caution over unwittingly waiving her Fifth Amendment privilege by
testifying on unclear issues does not appear to me to be a sufficient reason to order her to
respond to questions that, on their face, are at least potentially incriminating.
The Government asks me to hold an in camera hearing to determine "whether unique
circumstances
incrimination."
are present
here
that
would justify
the
Respondent's
alleged
fear
of
It is true that other courts have held in camera hearings when necessary to
develop a record to rule on inadequately asserted Fifth Amendment invocations.
See, e.g.,
United States v. Duncan, 704 F. Supp. 820, 822-23 (N.D. Ill. 1989). But here the record has
been developed satisfactorily, and the Government has been able to identify specific topics on
which Ali has refused to testify, all of which plainly touch on information that is potentially
incriminating.
See Sharp, 920 F.2d at 1171. In light of the record before me, I cannot see how
the in camera review of 238 specific questions and answers would be an appropriate expenditure
of the resources of the Court or the parties-particularly
where the Fifth Amendment invocations
to which the Government
objects most strenuously appear to be at the very periphery of
relevance, see, e.g., Gov't's
Supp. Br. 14-15 (citing Ali's refusal to answer a question about
what income her family members received or whether she was visited by foreign bankers at any
time), and where the documents Ali is being ordered to produce may confirm or refute her claim
21
that testifying would incriminate her in any event-and
may obviate the Government's need for
any further testimony on some topics.
In the event that, after reviewing the documents produced by Ali, the Government comes
to believe that Ali was not entitled to invoke the Fifth Amendment with respect to specific
questions outside the scope of Sharp, I will not foreclose its ability to pursue additional
testimony at that time. However, on the record before me, I find that the. incriminating nature of
the information sought by the government readily is apparent and, therefore, that Ali properly
has invoked the Fifth Amendment with respect to her testimony.
Insofar as the Government
seeks to compel further testimony from Ali, the Government's Petition will be denied without
prejudice.
V.
CONCLUSION
For the aforementioned reasons:
1) The United States' Petition to Enforce Summons, ECF NO.1, will be GRANTED
with respect to Items LA, I.C-H, 2.A-B, 3.A-I, and 6.A-B, and otherwise will be
DENIED without prejudice;
2) Respondent Melina Ali's Petition to Quash Summons and/or Deny Enforcement of
the IRS Summons Served on Respondent Melina Ali, ECF NO.7, will be GRANTED
with respect to Summons Items I.B and 9.A, and otherwise will be DENIED;
3) Respondent
NEED NOT provide additional testimony
in response to the IRS
Summons issued April 26, 2013, subject to the Government's
ability so to move
should further testimony appear necessary after review of documents produced by
Ali; and
22
4) Respondent SHALL PRODUCE documents in response to the Summons that the
accompanying Order will direct her to make within twenty-one (21) days of this
Memorandum Opinion and accompanying Order; the failure to do so may subject Ali
to being held in contempt of court.
A separate order shall issue.
lSI
Paul W. Grimm
United States Dis
Dated: November 5,2014
dsy
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