United States Court of Appeals, Tenth Circuit
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75-2 USTC P 9701
UNITED STATES of America and John E. Hunt, Special Agent
of
the Internal Revenue Service, Petitioners-Appellees,
v.
HANSEN NIEDERHAUSER CO., INC., and George
Niederhauser, as
President of Hansen Niederhauser Co., Inc.,
Respondents-Appellants.
No. 74-1693.
United States Court of Appeals,
Tenth Circuit.
Argued May 22, 1975.
Decided Sept. 8, 1975.
Carleton D. Powell, Atty., Tax Div., Dept. of Justice (Scott P. Crampton,
Asst. Atty. Gen., Gilbert E. Andrews and Robert E. Lindsay, Attys., Tax
Div., Dept. of Justice, and William J. Lockhart, U. S. Atty., of counsel, on
the brief), for petitioners-appellees.
Jefferson E. LeCates, Salt Lake City, Utah, for respondents-appellants.
Before MURRAH, BARRETT and DOYLE, Circuit Judges.
WILLIAM E. DOYLE, Circuit Judge.
We here consider the validity of an Internal Revenue summons issued to the
Hansen Niederhauser Company, a corporation, and to George Niederhauser as
president of said company. The purpose of the summons was to obtain
corporate records so as to determine the tax liability of the company.
Niederhauser, the president, had consistently refused to produce the records,
claiming that to do so would violate his privilege against self-incrimination
under the Fifth Amendment. His further claim was that he was denied due
process in connection with the court's adjudication that he was in contempt.
His basic position is that he is unable to produce the records. Why we do not
know, although the Internal Revenue Service may have information as to this.
We say this because the Internal Revenue Service offered to make a showing in
connection with the contempt hearing, but the trial court proceeded without a
hearing, so the principal issues presented are, first, whether Mr. Niederhauser is
in a position to assert Fifth Amendment rights and, secondly, whether his
procedural due process rights were violated.
The suit was commenced on June 13, 1973, at which time a petition was filed
seeking enforcement of the summonses issued by Special Agent Hunt to the
Hansen Niederhauser Company. This issuance was on December 5, 1972. The
records were sought in the interest of obtaining information as to the tax
liability of the corporation. A show cause order was issued by the court on
September 6, 1973. At the initial hearing on September 14, 1973, the
government made clear that it was corporate records which were sought. The
government conceded that Niederhauser could assert his Fifth Amendment
privilege if he were called upon to testify concerning the corporate records. The
court concluded that the corporation had to produce the books and records on
October 15, 1973. In his answer filed on that date, Niederhauser asserted that
the records had disappeared and that he did not know where they were, but that
even if he could have produced them he would not do so.
The next development was a hearing on September 6, 1974, followed by an
order issued on September 10, 1974. This directed Niederhauser to produce the
records on September 26, 1974. The order prohibited him from destroying or
concealing the records. The court also ordered that Niederhauser would be held
in contempt if he failed to comply. It was further ordered that the records be
turned over to the Internal Revenue Service and that Niederhauser appear
before the special agent to identify and authenticate the records and give
testimony as to the tax liability of the company.
I.
5
The law is clear that a corporation cannot assert a privilege against selfincrimination. Hale v. Henkel, 201 U.S. 43, 26 S.Ct. 370, 50 L.Ed. 652 (1906).
Nor can a corporate officer refuse to produce corporate records on the ground
of self-incrimination. Wilson v. United States, 221 U.S. 361, 31 S.Ct. 538, 55
L.Ed. 771 (1911). The fact that the corporation may have ceased to do business
does not matter. Grant v. United States, 227 U.S. 74, 33 S.Ct. 190, 57 L.Ed. 423
(1913); Wheeler v. United States, 226 U.S. 478, 33 S.Ct. 158, 57 L.Ed. 309
(1913). The fact that the corporation is of the Subchapter S kind for tax
purposes is no moment. See United States v. Richardson, 469 F.2d 349 (10th
Cir. 1972). This factor does not alter the proposition that a corporate officer
cannot forestall production of corporate records. Similar to this case is Bellis v.
United States, 417 U.S. 85, 94 S.Ct. 2179, 40 L.Ed.2d 678 (1974) dealing with
partnership records. Nor does the fact that Niederhauser may himself be the
object of an investigation serve to alter the condition. See Bellis v. United
States, supra.
6
We see no basis for any claim of privilege under the Fifth Amendment to the
Constitution of the United States in this situation involving as it does corporate
records.
II.
7
We see no merit to the second contention of Niederhauser that the summonses
were not issued by a judicial officer. Congress has authorized this procedure
and, as we view it, the authorization was valid and not in violation of separation
of powers. The administrative agency could not carry out its investigatory
functions without this authority. See United States v. Morton Salt Co., 338 U.S.
632, 70 S.Ct. 357, 94 L.Ed. 401 (1950); Oklahoma Press Pub. Co. v. Walling,
327 U.S. 186, 66 S.Ct. 494, 90 L.Ed. 614 (1946). In Donaldson v. United
States, 400 U.S. 517, 91 S.Ct. 534, 27 L.Ed.2d 580 (1971), the Supreme Court
noted that such an administrative summons must be enforced through the
courts.
The fact that a criminal prosecution may be possible does not undermine the
effectiveness of the summons. See Donaldson v. United States, supra. The
exception noted in Donaldson is that if a criminal prosecution is pending or the
investigation is solely for criminal purposes, the situation might be different.
Here, however, the proceedings are apparently in good faith. See, United States
v. Billingsley, 469 F.2d 1208 (10th Cir. 1972).
III.
9
We have examined Curcio v. United States, 354 U.S. 118, 77 S.Ct. 1145, 1
L.Ed.2d 1225 (1957), and we are of the opinion that under the Curcio doctrine
Niederhauser can be held in contempt for refusal to produce the corporate
records. The fact that they are not under his sole control does not prevent him
from having to suffer the consequences for not producing them if he does not
take appropriate action to produce them. See, Wilson v. United States, 221 U.S.
361, 31 S.Ct. 538, 55 L.Ed. 771 (1911). See, also, United States v. Fleischman,
339 U.S. 349, 70 S.Ct. 739, 94 L.Ed. 906 (1950).
10
We see no error in the manner of the court's enforcement of the summonses in
relationship to the Fifth Amendment privilege.
IV.
11
Finally, we consider whether the alternative order directed to Niederhauser to
either produce the records or be held in contempt was valid.
12
Noteworthy is the fact that the government did not introduce evidence that the
records existed or that Niederhauser was able to produce the records, nor did
the court hear any evidence on his behalf. The government was prepared at the
September 6, 1974 hearing to produce witnesses and documents as to the
existence and control of the records, and the court refused to hear it. We are
aware, of course, that the appellant has not been adjudged in contempt because
the order was stayed pending appeal, but he is subject to contempt if he fails to
produce the records. The question is whether an evidentiary hearing is
necessary. We feel that it was and is.
13
In view of the government's concession that proof of inability to comply with
the order is a defense under the doctrine of United States v. Bryan, 339 U.S.
323, 70 S.Ct. 724, 94 L.Ed. 884 (1950), it follows that a hearing as to
accessibility of the records is necessary. We recognize that this case has been
long and drawn out and that Niederhauser has manipulated the courts to serve
his own purposes, but we feel that the government must make some showing
regarding the existence of the records, and once it does then Niederhauser will
not be able to rest on his contention that he simply does not know where they
are and cannot produce them. He must have some positive justification under
McPhaul v. United States, 364 U.S. 372, 81 S.Ct. 138, 5 L.Ed.2d 136 (1960)
and under United States v. Fleischman, supra.
14
It is not our desire that the proceedings be further delayed, and we make clear
that we are simply modifying the adjudication so as to allow the government to
proceed with its evidence. This will satisfy the procedural due process
contention.
15
The cause is remanded for further proceedings consistent with the views
expressed herein.
