Appeal from an order of the District Court for the Southern District of New York, which enforced an Internal Revenue Service summons calling for the testimony of a corporate agent regarding the whereabouts of certain corporate records, on the ground that the agent had waived his privilege against self-incrimination. The Court of Appeals held that the agent's statement that he did not possess the records at issue was compelled by his duty as a corporate agent, and therefore unprivileged, and that no waiver occurred.
Before Feinberg and Meskill, Circuit Judges, and Edelstein, District Judge.*fn*
This is an appeal by O'Henry's Film Works, Inc., and Henry Pergament, as president of O'Henry's Film Works, Inc., from an order of the United States District Court for the Southern District of New York, directing that Pergament comply with a portion of an Internal Revenue Service summons, issued pursuant to 26 U.S.C. § 7602, by answering questions concerning the whereabouts of certain corporate records of O'Henry's Film Works, Inc. The basis for the order was an earlier finding by the district court that certain statements in an affidavit by Pergament constituted a waiver of his Fifth Amendment privilege against self-incrimination. For reasons set forth below, we hold that no waiver occurred and accordingly reverse.
In March 1976, an Internal Revenue Service (IRS) summons was served on Pergament as president of O'Henry's Film Works, Inc. (O'Henry's), which called upon him to produce certain corporate documents of O'Henry's and to give testimony in connection with an IRS investigation of the corporation's tax liability for fiscal years 1973, 1974, and 1975. On the return date of the summons, the corporation made available some of the documents demanded, but did not produce cash register tapes and cash register reconciliation statements called for by the summons. When Pergament appeared in response to the summons, he declined to answer any substantive questions asked by an IRS Special Agent, and claimed his Fifth Amendment privilege against self-incrimination.
A second IRS summons was served on Pergament as president of O'Henry's, in July 1976. It called for his testimony and for production of the cash register tapes and reconciliation statements that had not been produced in response to the previous summons. No such records were produced. When Pergament appeared in response to the summons on August 2, 1976, he again refused to answer any substantive questions on the ground that his answers might tend to incriminate him. Pergament's attorney stated that "(w)e have produced everything we can in response to this summons, and that is nothing," and made similar statements to the same effect.*fn1
Nine months after Pergament's second appearance before IRS agents, in May 1977, Petitioners by order to show cause instituted a summary proceeding pursuant to 26 U.S.C. §§ 7402, 7604 to compel compliance with the second summons. An IRS Special Agent submitted an affidavit in support of the application stating his factual basis for believing the tapes still existed. Pergament submitted an affidavit in opposition to the application which, in relevant part, adopted his attorney's statements made on August 2, 1976, and stated further:
I am not now, nor was I at the time I was served with the summons in question, in possession or in control of the documents called for in the summons. The same is and was true of O'Henry's Film Works, Inc. Moreover, I reaffirm that I respectfully decline on the advice of counsel to answer any further questions concerning these documents on the ground that the answers to such questions may tend to incriminate me.
By memorandum and order filed October 18, 1977, the district court found that Pergament had waived his Fifth Amendment privilege by filing the affidavit described above. However, on the issue of enforcement of the summons to produce records, the district court found that the IRS had not adequately established the existence of the records sought and therefore denied Petitioners' application without prejudice. The court stated that if the IRS could establish, through testimony of Pergament or other evidence, the existence of the records and Pergament's possession of them, the court would enforce the summons. Respondents' motion to reargue the question of waiver was denied by memorandum endorsement filed November 10, 1977.
Pergament then was requested to appear to testify regarding the whereabouts of the cash register records by an Assistant United States Attorney. Pergament's attorney declined to produce Pergament unless a new IRS summons were issued. On April 27, 1978, Petitioners moved for an order directing Pergament to appear and answer questions about the tapes. The district court granted the motion by memorandum endorsement filed June 9, 1978, stating that its earlier memorandum and order of October 18, 1977, had denied enforcement only of the portion of the summons that called for production of documents, and that the portion of the summons that called for Pergament's testimony remained enforceable. Therefore, by order of July 5, 1978, the district court ordered Pergament to "respond to appropriate questions including ones concerning the whereabouts of the documents described in the summons," but stayed enforcement of the order pending this appeal.
The district court's order enforcing the IRS summons is appealable as a final order. Reisman v. Caplin, 375 U.S. 440, 449, 84 S. Ct. 508, 11 L. Ed. 2d 459 (1964); 9 Moore's Federal Practice P 110.13(2)(2) (2d ed. 1975). Therefore, this court has jurisdiction.
O'Henry's and Pergament raise three issues on appeal: first, that Pergament did not waive his Fifth Amendment privilege against self-incrimination; second, that the district court lacked jurisdiction to enter its order of July 5, 1978 because of its earlier denial of enforcement of the same summons; and third, that the district court erred in not making a finding on the issue of the institutional good faith of the IRS's actions, and that further discovery is necessary on that issue, under United States v. LaSalle National Bank, 437 U.S. 298, 98 S. Ct. 2357, 57 L. Ed. 2d 221 (1978). We agree no waiver occurred, but reject the other grounds of appeal.
It is well settled that the Fifth Amendment privilege against self-incrimination does not extend to corporations and similar organizations. An agent of such an organization has a duty to produce the organization's records, even where the records might incriminate the corporation or the agent, if a valid summons or subpoena has issued for those records. Wilson v. United States, 221 U.S. 361, 31 S. Ct. 538, 55 L. Ed. 771 (1911) (corporations); United States v. White, 322 U.S. 694, 701, 64 S. Ct. 1248, 1252, 88 L. Ed. 1542 (1944) (any organization, such as a labor union, that "has a character so impersonal . . . that it cannot be said to embody or represent the purely private or personal interests of its constituents, but rather to embody their common or group interests only"); Bellis v. United States, 417 U.S. 85, 94 S. Ct. 2179, 40 L. Ed. 2d 678 (1974) (small law partnership); United States v. ...