Tax
Aug. 1, 2002
IRS Seizure of Group's Membership List is Ruled Legal
SAN FRANCISCO - A Los Angeles area tax protest group cannot get its membership lists and other literature returned while it is under criminal investigation, even though the seizure by the Internal Revenue Service has the potential to infringe upon the First Amendment, a divided federal appeals court ruled Tuesday.
"We recognize that First Amendment rights may be chilled when the government seizes information about the members of an organization," wrote Judge Susan Graber for the 9th U.S. Circuit Court of Appeals.
Nonetheless, the court said, permitting constitutional review of the seizure at this early stage "is likely to affect the integrity of the investigation and potential criminal trial."
Instead, the court held that the issue could be raised, but only at the conclusion of the criminal trial, perhaps years later.
The ruling effectively limits the ability of groups to challenge seizure of their membership information on First Amendment grounds during a criminal investigation.
Two leaders of the Institute for Global Prosperity, which allegedly teaches people to avoid taxes by moving money to offshore tax havens, sought an injunction against the IRS after several special agents executed eight search warrants in 2001 around the country. Andersen v. United States, 2002 DJDAR 8546.
With warrants in hand, agents seized membership lists, confidentiality agreements, promotional literature and lists of prospective members, according to the court. The seizures were part of a grand jury investigation of the group which, according to the court, is still ongoing.
The plaintiffs, Daniel Andersen and Lorenzo J. LaMantia, argued the seizure violated their First and Fourth Amendment rights. They asked for return of the material and an injunction that would prevent further seizure of material by the IRS and bar the use of the material.
In dissent, Judge Stephen Reinhardt protested that the majority failed to consider the broader importance of their ruling.
"In my view, the First Amendment right to association is one of those questions of exceptional importance that must be resolved as soon as possible, without waiting for the end of what may be interminable criminal proceedings," Reinhardt wrote.
Reinhardt cited a long history of constitutional decisions holding that the seizure of membership lists has implications for the freedom of association and speech. He pointed to a 1958 case in which the National Association for the Advancement of Colored People successfully fought Alabama's attempts to compel disclosure of members' names in the early years of the civil rights movement, NAACP v. Alabama, 357 U.S. 449 (1958).
He noted that although the 9th Circuit considers criminal proceedings to be in place once a grand jury investigation has begun, four other circuits take a different position. Those circuits require charges to be filed before criminal proceedings are "pending." They include the Cincinnati-based 6th Circuit, Chicago's 7th Circuit, St. Louis 8th Circuit and Denver's 10th Circuit.
Reinhardt's dissent appeared to be written as a broad invitation for the full court to reconsider the case.
The majority held that, although Andersen and LaMantia sought a preliminary injunction against the IRS, it was, in substance, a motion for return of property seized pursuant to search warrants.
Graber relied on two 9th Circuit rulings denying constitutional review of a request for return of seized evidence. In both cases it was the Fourth Amendment's protection against illegal search and seizure rather than free speech and association that was at issue.
"We conclude that no exception to the procedural bar may be made here on the ground that plaintiffs assert First Amendment as well as Fourth Amendment interests," she wrote.
The court said in a footnote that the parties agreed the court should assume that there is a grand jury investigation in progress, without disclosing the existence of the confidential grand jury review.
Graber was joined by visiting Judge Roger Hunt, of the district court in Nevada.
Neither the group's attorney, William A. Cohan, a sole practitioner in San Diego, nor Justice Department attorney Gretchen Wolfinger returned calls for comment.
Pamela Mac Lean
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