On August 27th the Seventh Circuit decided In Re: Special February 2011-1 Grand Jury Subpoena Dated September 12, 2011. The Court held that the required records doctrine requires a taxpayer asserting a Fifth Amendment privilege to produce the documents required to be maintained under the FBAR statute. Specifically, the Court held that the taxpayer had to comply with a subpoena and produce foreign bank account records that were required to be maintained under the Bank Secrecy Act. The Seventh Circuit’s holding fits squarely with the Ninth Circuit’s holding in M.H. v. United States (In re Grand Jury Investigation M.H.), 648 F.3d 1067 (9th Cir. 2011), here. In M.H. the Ninth Circuit held that, “Because the records sought through the subpoena fall under the Required Records Doctrine, the Fifth Amendment privilege against self-incrimination is inapplicable…”
The Required Records Doctrine’s origin can be traced to the Supreme Court’s decision in Shapiro v. United States, 335 U.S. 1 (1948). The three requirements pronounced in the Shapiro, and later articulated in Grosso v. United States are as follows:
(1) [T]he purposes of the government inquiry must be essentially regulatory; (2) information is to be obtained by requiring the preservation of records of a kind which the regulated party has customarily kept; and (3) the records themselves must have assumed public aspects which render them at least analogous to a public document. When the requirements of the Required Records Doctrine are met, a witness cannot resist a subpoena by invoking the Fifth Amendment privilege against compelled, testimonial self-incrimination.
In balancing the Required Record’s Doctrine against the Fifth Amendment’s privilege against the production, the Court wrote:
[That] it makes little difference, practically speaking, whether the Require Records Doctrine is an outright exception to the Fifth Amendment privilege-and by exception we mean that it overrides or supersedes the privilege-or whether it is a threshold inquiry to determine whether the privilege attaches in the first place; under the former, the privilege exists but is superseded and, under the latter, the privilege cannot attach because one or more of its requirements (usually the testimonial aspect) are missing by virtue of the records satisfying the three requirements laid out in Grosso; either way, the outcome is the same: the witness is denied the use of the privilege and must produce the potentially incriminating documents. Still, we think the Required Records Doctrine is better regarded as an exception rather than a threshold test to determine whether there is a privilege.
The Court rejected the taxpayer’s argument that the Required Records Doctrine applied only where the Fifth Amendment privilege did not apply, holding instead that the Required Records Doctrine is an exception to the privilege.
To read the Seventh Circuit’s decision click here.