816 F.

2d 1477
59 A.F.T.R.2d 87-1029, 87-1 USTC P 9300

UNITED STATES of America and Richard Kawabata,

Revenue
Agent, Internal Revenue Service, Petitioners-Appellees,
v.
Ralph W. SCHMIDT and Reeda Schmidt, RespondentsAppellants.
No. 85-2337.

United States Court of Appeals,

Tenth Circuit.
April 27, 1987.
1

Francis M. Wikstrom (W. Mark Gavre, with him on the briefs) of Parsons,
Behle & Latimer, Salt Lake City, Utah, for respondents-appellants.

Robert S. Parish, Jr., Broomfield, Colo. (Roger M. Olsen, Acting Asst. Atty.
Gen., Michael L. Paup, Charles E. Brookhart, Attys., Tax Div., Dept. of
Justice, Washington, D.C., Brent D. Ward, U.S. Atty., Salt Lake City, Utah,
with him on the brief), for petitioners-appellees.

Before BARRETT and TACHA, Circuit Judges, and BROWN, Senior District
Judge* .

WESLEY E. BROWN, Senior District Judge.

Appellants Ralph W. and Reeda Schmidt appeal from a District Court order
enforcing summonses issued by the Internal Revenue Service. 26 U.S.C. Secs.
7402(b) and 7604(a). We affirm the enforcement order of the District Court.

The facts are not in dispute. On July 3, 1984, the IRS issued administrative
summonses to appellants, pursuant to 26 U.S.C. Sec. 7602 (1982). The
summonses directed appellants to appear before Revenue Agent Richard
Kawabata to testify and to produce for examination certain documents
described in the summonses relating to their federal income tax liability for the

tax years 1981 through 1983. Ralph Schmidt was the sole proprietor of a
contractor business. In response to the summonses, appellants appeared with
their counsel at the IRS office in Salt Lake City, Utah. Counsel stated to
Kawabata that appellants did not bring and would not produce the requested
documents.1 Kawabata terminated the interview without exchanging
discussions with appellants.
7

On October 3, 1984, Kawabata served upon appellants two summonses,

directing them to appear before him on October 22, 1984 with the documents
described in the July 3, 1984 summonses. Appellants appeared with their
counsel on October 30, 1984. Counsel reasserted the appellants' refusal to
produce the documents requested by the summonses. Kawabata again
terminated the proceeding without propounding any questions to appellants.

The IRS filed a petition on December 26, 1984, seeking judicial enforcement of
the summonses pursuant to 26 U.S.C. Secs. 7402(b) and 7604(a). The petition
was accompanied by a supporting declaration of Revenue Agent Richard
Kawabata. He stated that he was a revenue agent who was conducting an
investigation into the tax liability of the appellants for the tax years 1981
through 1983; that appropriate summonses were issued to and served upon the
appellants which directed them to appear and to produce for examination
certain documents; that appellants appeared but refused to comply with the
request for production; that the documents summoned were not in the
possession of the IRS; that the documents were necessary to determine the
correctness of the appellants' tax liability; that all administrative steps required
for issuance of the summons had been taken; and that the IRS at this time made
no recommendation for criminal prosecution of appellants by the Department of
Justice.

On January 3, 1985, the District Court ordered appellants to appear before a

United States Magistrate to show cause why the summonses should not be
enforced. At the enforcement hearing before Magistrate Calvin Gould, the
Government called Kawabata whose testimony on direct and cross
examinations was consistent with his Declaration filed December 26, 1984.
Appellants did not present any evidence or testimony. Counsel for appellants,
however, moved for a dismissal of the petition for summons enforcement by
asserting that the scope of the request for the summoned materials was too
broad, that compelled compliance with the summonses issued to them would
violate their Fifth Amendment protection against self-incrimination; and that
the IRS violated its own rule because it failed to tender fees and mileage
allowances to appellants for each of the summoned appearances.

10

The Magistrate issued a Report and Recommendation on April 29, 1985. The
Report contained findings that the Government had made a prima facie case
showing for the enforcement of the summonses and that appellants failed to
establish a legally sufficient defense showing the impropriety of enforcement.
While the Report discussed that the Fifth Amendment privilege against selfincrimination may apply to act of producing documents by compulsory process,
it concluded that appellants "cannot assert a general claim of privilege, but are
required to show that specific questions or production of specific documents
presents a 'real danger' that they would be incriminated." The Report
recommended that the summonses be enforced

11 the extent they require the respondents (-appellants) to appear and answer specific
to
questions. If the answers to specific questions are privileged, the respondents (appellants) might assert that privilege, but they are not entitled to a general claim of
privilege.
12

On May 8, 1985, appellants filed their objections to the Magistrate's Report and
Recommendation. Appellants made no challenges to the propriety of the factual
findings set out in the Report. Appellants, however, reasserted the contentions
for dismissal of the IRS's petition in a hearing held before the District Court on
August 5, 1985. Appellants contended that they had already complied with the
summonses by appearing before Kawabata twice and answering--through their
counsel--the question propounded to them each time by Kawabata. They also
argued that they did not produce any of the summoned documents because the
IRS had not shown that these documents were in existence and in their
possession and control. Even if they had possession of the summonded
documents, appellants further asserted that where the act of producing the
documents would involve testimonial self-incrimination, it was privileged
under the Fifth Amendment and therefore could not be compelled by a judicial
process without a statutory grant of use immunity. Finally, they renewed their
claim for reimbursement of fees and mileage for appearing pursuant to the
summonses. After considering appellants' objections and contentions, the
District Court sustained the findings set out in the Magistrate's Report and
adopted the Report and Recommendation in its entirety. The District Court
ordered that the summonses be enforced. This appeal followed.2

13

On appeal, appellants have repeated the contentions which they raised at each
of the enforcement hearings before the Magistrate and the District Court. They
assert that the enforcement order should be reversed because (1) they have
complied with the summonses by appearing twice as required, (2) the Fifth
Amendment protects them from producing any of the summoned documents
where the act of production would result in testimonial self-incrimination, and

(3) the IRS violated its own rule by refusing to pay them the necessary witness
fees and mileage allowances.
14

We will consider the appellants' claim that the Fifth Amendment provides a
blanket insulation from compulsory production of the documents requested by
the summonses first. Appellants argue that under the principle established in
United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552 (1984), the
act of producing the documents at issue is privileged.

15

In Doe, supra, a federal grand jury was investigating corruption in the awarding
of county and municipal contracts. It served several subpoenas on the owner of
several sole proprietorships demanding production of certain specific business
records. The owner responded by filing motions to quash the subpoenas. The
Supreme Court determined that since the preparation of the business records
was done voluntarily by the owner in the normal course of business, the
contents of the business records may not be privileged. Doe, supra, at 611-12,
104 S.Ct. at 1241-42. The Court, however, held that the act of producing the
subpoenaed business records may be privileged if it involves a risk of
"substantial and real" testimonial self-incrimination. Id., at 613 and 615 n. 13,
104 S.Ct. at 1242 and 1243 n. 13. In explicating the testimonial aspects of the
performance of the act and its incriminating effect, the Court reviewed its
decision in Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39
(1976):

16
Compliance
with the subpoena tacitly concedes the existence of the papers
demanded and their possession or control by taxpayer. It also would indicate the
taxpayer's belief that the papers are those described in the subpoena. Curcio v.
United States, 354 U.S. 118, 125 [77 S.Ct. 1145, 1150, 1 L.Ed.2d 1225 (1957). The
elements of compulsion are clearly present, but the more difficult issues are whether
the tacit averments of the taxpayer are both 'testimonial' and 'incriminating' for
purposes of applying the Fifth Amendment. These questions perhaps do not lend
themselves to categorical answers; their resolution may instead depend on the facts
and circumstances of particular cases or classes thereof.
17

Doe, supra, at 613, 104 S.Ct. at 1242. The district court in Doe found that the
act of producing the subpoenaed documents would involve testimonial selfincrimination. The Supreme Court specifically sustained this factual finding,
noting its approval of the district court's statements that

18
enforcement
of the subpoenas would compel (respondent) to admit that the records
exist, that they are in his possession, and they are authentic. These communications,
if made under compulsion of a court decree, would violate (respondent's) Fifth

Amendment rights.
19

Id., at 613 n. 11, 104 S.Ct. at 1242 n. 11.

20

Thus, in order to invoke the constitutional protection under the Fifth

Amendment that bars compelled self-incrimination, appellants must
demonstrate that they have a "reasonable cause to apprehend danger" upon
giving a responsive answer that "would support a conviction," or "would
furnish a link in the chain of evidence needed to prosecute" them for a violation
of the criminal statutes. Hoffman v. United States, 341 U.S. 479, 486, 71 S.Ct.
814, 818, 95 L.Ed. 1118, 1124 (1951). To satisfy this requirement, appellants
must factually establish that the risks of incrimination resulting from their
compelled testimonial communications to be "substantial and 'real,' not merely
trifling or imaginary, hazards of incrimination." Marchetti v. United States, 390
U.S. 39, 53, 88 S.Ct. 697, 705, 19 L.Ed.2d 889, 901 (1968). Appellants are "not
exonerated from answering merely because (they) declare( ) that in so doing
(they) would incriminate (themselves)--(their) say-so does not of itself establish
the hazard of incrimination." Hoffman, supra, at 486, 71 S.Ct. at 818.
Appellants have offered no evidence or sworn statements to justify their claim
that "injurious disclosure could result" from a responsive production of the
summoned documents. Id., at 487, 71 S.Ct. at 818. They sought the protection
of the Fifth Amendment under the "act of production" doctrine in Doe, supra,
by asserting, through their counsel,3 speculative and generalized allegations of
self-incrimination that would establish a link in the chain of evidence for tax
related criminal prosecution.4

21

Appellants' generalized fear of criminal prosecution for a violation of the tax

laws5 is an insufficient basis for asserting a blanket claim of the Fifth
Amendment privilege in refusing to produce any of the documents requested by
the summonses. See Borgeson v. United States, 757 F.2d 1071, 1073 (10th
Cir.1985) (per curiam). In order to validly raise the Fifth Amendment privilege,
appellants must comply with the instructions of the summonses.6 At the
appropriate time, appellants may interpose their claim of Fifth Amendment
privilege pertaining to specific documents and in response to individual
questions upon their reasonable belief that a compulsory response by them to
these testimonial matters will pose a substantial and real hazard of subjecting
them to criminal liability. Hoffman, supra, 341 U.S. at 486, 71 S.Ct. at 818. At
that time, the appropriate parties could then seek judicial determination on each
claim of privilege with respect to the specific documents summoned and
questions asked by the IRS. United States v. Hodgson, 492 F.2d 1175, 1177
(10th Cir.1974); United States v. G & G Advertising Company, 762 F.2d 632,
635 (8th Cir.1985).

22

23

Appellants do not dispute, and the record fully supports the District Court's
findings that the Government has properly established its burden to obtain
judicial enforcement of the summonses. The Government has shown that the
summonses were issued in good faith, and that the information sought was not
in the possession of the IRS and was relevant and material to a proper
determination of the appellants' legal tax liability for the tax years 1981
through 1983. The mere fact that the investigation by a revenue agent on the
correctness of appellants' tax liability during these years may uncover evidence
that might be used against them in a later criminal prosecution will not support
a blanket assertion of the Fifth Amendment privilege against self-incrimination.
Cf. Clark v. C.I.R., 744 F.2d 1447 (10th Cir.1984) (per curiam) (We found that
the taxpayer's claim of privilege against self-incrimination without supporting
facts showing that a "real and substantial danger of incrimination" existed was
"legally frivolous,"). The Fifth Amendment privilege was not intended by the
framers of the Constitution and "may not be itself used as a method of evading
payment of lawful taxes." Edwards v. C.I.R., 680 F.2d 1268, 1270 (9th
Cir.1982). Appellants failed to factually establish that a risk of substantial and
real testimonial self-incrimination would occur as a result of the enforcement of
the summonses properly issued by the IRS. Therefore, we hold that their claim
of the Fifth Amendment privilege against self-incrimination was improper and
will not bar the production of the summoned documents.
We need not delve into a lengthy discussion on each of the remaining issues on
appeal. Appellants cannot complain that they were subject to duplicitous
investigations when the necessary re-examination of their legal tax liability was
brought upon them by their own recalcitrance and intransigence. The IRS has
not completed its audit or investigation to determine the correctness of
appellants' tax liability for the tax years 1981 through 1983 because appellants
refused to comply with the instructions of the summonses. See 26 U.S.C. Sec.
7605(b), see also United States v. Silvestain, 668 F.2d 1161, 1163-64 (10th
Cir.1982). We also reject the appellants' contention that the summonses should
not be enforced because the IRS failed to tender witness fees and mileage costs
to them for their two previous appearances before Revenue Agent Kawabata.
Circuit courts have uniformly held that payment of witness fees and mileage
costs, as authorized by 26 U.S.C. Sec. 7610(a), is not a condition precedent to
the proper enforcement of an IRS summons. United States v. Money, 744 F.2d
779, 780 (11th Cir.1984); United States v. Miller, 609 F.2d 336, 338 (8th
Cir.1979); see also United States v. Coson, 515 F.2d 906, 907 (9th Cir.1975),
cert. denied, 423 U.S. 927, 96 S.Ct. 272, 46 L.Ed.2d 253 (1975); United States
v. Awerkamp, 497 F.2d 832, 836 (7th Cir.1974). The IRS is not denying that
appellants are not entitled to proper reimbursement under 26 U.S.C. Sec.
7610(a). Indeed, the District Court ordered at the close of the enforcement

hearing on August 5, 1985 that appellants' claim of entitlement to receive

appropriate witness fees and expenses "be preserved." ROA Vol. II at 19.
24

AFFIRMED.

Honorable Wesley E. Brown, United States Senior District Judge for the
District of Kansas, sitting by designation

The summonses required appellant to produce the following documents. ROA

Vol. I at 1, Exh. B and D
All books, papers, records and other data in your possession or control
reflecting the receipt of taxable income by you for the years 1981 through
1983; including but not limited to: employee earning statements for the years
1981 through 1983; records of deposits to bank accounts, cancelled checks,
check registers and bank statements for the years 1981 through 1983; savings
account passbooks including money market transactions for the years 1981
through 1983; and any and all books, records, documents regarding wages,
salaries, tips, fees, commissions and any other compensation for services
(including the receipt of property other than money), gains from dealings in
property; interest, rental, royalty, dividend income; alimony, annuities, income
from life insurance policies and endowment contracts, pensions, income from
the discharge of indebtness (sic), distributive shares of partnerships gross
income, and income from an estate of trust.
All books and records, invoices, statements and other documents pertaining to
operation of Ralph W. Schmidt Contractor Business for the period beginning
January 1, 1981, and ending December 31, 1983, including but not limited to all
journals including general journal, cash receipts, and cash disbursements
journals; general ledger and all subsidiary ledgers; savings account passbooks
including money market transactions; bank statements, including cancelled
checks and deposit slips; loans and notes ledgers and files; payroll records;
depreciation records and investment credit worksheets.
Workpapers prepared in connection with the preparation of the financial
statements and tax returns for the years 1981 through 1983 in your possession,
custody or control.

Parties entered into a stipulation on September 16, 1985 to stay the

enforcement order pending this appeal

We note that the record discloses that both appellants offered no sworn

statements or testimony in asserting their Fifth Amendment privilege against

self-incrimination in the enforcement proceedings before the Magistrate and the
District Court. Indeed, their claim of Fifth Amendment privilege was invoked
by appellants' counsel on their behalf. Because we conclude that the District
Court properly ordered that the summonses be enforced, we reiterate the basic
legal precept that the "Fifth Amendment is a personal privilege." Couch v.
United States, 409 U.S. 322, 328, 93 S.Ct. 611, 616, 34 L.Ed.2d 548, 554
(1973) (emphasis in original). While "it can be asserted in any proceeding, civil
or criminal, administrative or judicial, investigatory or adjudicatory," Kastigar
v. United States, 406 U.S. 441, 444, 92 S.Ct. 1653, 1656, 32 L.Ed.2d 212, 217
(1972), this privilege against self-incrimination is limited to and can be invoked
by "a person who shall be compelled in any criminal case to be a witness
against himself." Fisher v. United States, 425 U.S. 391, 398, 96 S.Ct. 1569,
1574, 48 L.Ed.2d 39, 48 (1976) (quoting Hale v. Henkel, 201 U.S. 43, 69-70,
26 S.Ct. 370, 376-77, 50 L.Ed. 652, 663 (1906)). Only the appellants, not their
counsel, are the proper parties to interpose a claim of privilege personal to
themselves to prevent compelled disclosures that appellants "reasonably
believe( ) could be used (against them) in a criminal prosecution or could lead
to other evidence that might be so used." Kastigar, supra, at 445, 92 S.Ct. at
1656
4

The summonses in this case were issued pursuant to 26 U.S.C. Sec. 7602
(1982). Section 7602 was amended in 1982 by Sections 333(b) and (c) of the
Tax Equity and Fiscal Responsibility Act of 1982, Pub.L. 97-248, 96 Stat. 324
(1982). By enacting Section 333(b) and (c), Congress intended to provide the
IRS the authority to issue a summons, so long as the tax matter has not been
referred to the Justice Department for criminal prosecution, "for the purpose of
inquiring into any offense connected with the administration or enforcement of
the Internal Revenue laws, even when the criminal investigation is the sole
investigation." See Joint Committee on Taxation, Annual Expansion of the
Revenue Provisions of the Tax Equity and Fiscal Responsibility Act, 97th
Cong.2d Sess. at 234-236 (1982), reprinted in Internal Revenue Act, 1982, Text
and Legislative History, at 1182-85 (West 1983)

Appellants' counsel pointed out that appellants could potentially be prosecuted

under 26 U.S.C. Sec. 7201 (tax evasion) and Sec. 7206 (fraud or false
statements in filing a tax return) if they produced the summoned documents.
ROA III at 23-24

Appellants contend that they could waive their Fifth Amendment privilege
against self incrimination if they complied with the District Court's order
enforcing the summonses. They cited United States v. Trails End Motel, Inc.,
657 F.2d 1169 (10th Cir.1981) (per curiam), for this proposition. Our decision

in Trails End Motel did not involve a determination of an issue on waiver of

appellants' Fifth Amendment privilege. We dismissed the appeal in Trails End
Motel because we found there was no case and controversy existed on appeal
when the appellants complied with the district court's order by supplying the
IRS the information it sought in the summonses. Id., at 1170. We further stated
that the appellants in that case "may adequately protect their asserted interest by
challenging the IRS procedure if and when the government attempts to make
further use of the information obtained by the summonses." Id