Suspected Tax Evader Can’t Plead the Fifth

CHICAGO (CN) - A man cannot invoke the Fifth Amendment to ignore a subpoena for foreign bank records that could implicate him in tax evasion, the 7th Circuit ruled.

To conceal the identity of the subject of a grand jury investigation, the 12-page decision refers the subpoenaed individual only as Target Witness, or T.W. It says T.W. learned in 2009 that the Internal Revenue Service had opened a file on him.

A grand jury later subpoenaed T.W. for foreign bank records from 2006 to 2011. Such records are required under the Bank Secrecy Act of 1970.

But T.W. refused to comply, asserting his Fifth Amendment privilege against self-incrimination and.

Finding that production of the requested records would be incriminating, a federal judge quashed the subpoena.

The federal appeals court found Monday, however, that the Required Records Doctrine overrides Fifth Amendment privilege.

Originating from the 1948 U.S. Supreme Court resolution of Shapiro v. United States, this doctrine holds that records required to be kept in accordance with a valid government regulatory scheme could be subpoenaed without regard to Fifth Amendment pleas. Such records had attained "public aspects," and could be considered quasi-public, the court found.

T.W. argued that his case differed from Shapiro because the government wants him to produce records in relation to a grand jury proceeding, rather than for the purposes outlined in the Bank Secrecy Act.

Compliance with the subpoena could well incriminate T.W., the 7th Circuit found.

It "may, for instance, reveal that T.W. has not reported bank accounts that should have been reported or that he has reported inaccurate information," Judge Bauer wrote for a three-member panel. "On the other hand, if T.W. denies having the requested records, he still risks incriminating himself because failure to keep those records is a felony under the [Bank Secrecy] Act."

Ultimately, the court found that T.W. "twists" Shapiro to justify his defense.

"One of the rationales, if not the main rationale, behind the Required Records Doctrine is that the government ... should have the means ... to inspect the records it requires an individual to keep as a condition of voluntarily participating in that regulated activity," Bauer wrote.

"That goal would be easily frustrated if the Required Records Doctrine were inapplicable whenever the act of production privilege was invoked," he added.

"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 the by act of producing them. The district court erred to the extent that it held that the Required Records Doctrine was not applicable because T.W.'s compelled production was incriminating and thus protected under the Fifth Amendment."

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