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UNITED STATES v. SCHENECTADY SAV. BANK

October 28, 1981

UNITED STATES of America and Richard R. Welcome, Special Agent of the Internal Revenue Service, Petitioners,
v.
SCHENECTADY SAVINGS BANK and Jill Natole, Administrative Assistant, Respondents, Folger P. Gifford, Intervenor; UNITED STATES of America and Richard R. Welcome, Special Agent of the Internal Revenue Service, Petitioners, v. FIRST NATIONAL BANK OF SCOTIA and Calvin Welch, Cashier, Respondents, Folger P. Gifford, Intervenor; UNITED STATES of America and Richard R. Welcome, Special Agent of the Internal Revenue Service, Petitioners, v. AINSWORTH, SULLIVAN, TRACY AND KNAUF, and Jeremiah F. Manning, Partner, Respondents, Folger P. Gifford, Intervenor



The opinion of the court was delivered by: FOLEY

MEMORANDUM-DECISION and ORDER

The United States of America and Richard R. Welcome, Special Agent of the Internal Revenue Service (IRS) filed petitions in the above proceedings on June 1, 1981, for an order directing the respondents to show cause why they should not be compelled to obey IRS summonses served upon them. These proceedings were brought pursuant to Title 26 U.S.C. §§ 7402(b) and 7604(a), to enforce judicially the IRS summonses.

 Petitioners are investigating the accuracy of the federal estate tax return of Katherine P. Gifford, who died on April 1, 1978. In accordance with 26 U.S.C. § 7609(a)(1)(B), Folger P. Gifford, co-executor of the decedent's estate, was given notice of the summonses served upon the above respondents. And pursuant to his legal right under 26 U.S.C. § 7609(b)(2), Folger Gifford administratively stayed compliance. He was then granted leave to intervene in the proceedings pursuant to 26 U.S.C. § 7609(b)(1) without opposition from the petitioners.

 The petitions to enforce the IRS summonses against the above named respondent-banks were granted by my memorandum-decision and order dated June 2, 1981. Intervenor Gifford and Respondent Manning filed papers in opposition to the enforcement of the summons directed at Attorney Jeremiah F. Manning and the law firm of Ainsworth, Sullivan, Tracy & Knauf. Attorney Manning and this law firm of which he is a partner assisted in the preparation of the decedent's federal estate tax return. The IRS summons directed Manning to give testimony regarding the tax liability or the collection of the tax liability of Katherine Gifford's estate. Additionally the summons sought production of the following:

 
1. All documents and records in your possession or control that were utilized in the preparation of the United States Estate Tax Return (Form 706) filed by the estate of KATHERINE P. GIFFORD, including, but not limited to:
 
a. Schedules, summaries, listings, analyses and workpapers.
 
b. Correspondence, notes and memoranda.
 
c. Any and all other records, not herein specifically described, which were utilized in the preparation of the cited estate tax return.
 
2. Retained copy of United States Estate Tax Return Form 706, filed by the Estate of KATHERINE P. GIFFORD.

 Intervenor Gifford and Respondent Manning claim that full compliance with this summons would violate the attorney-client privilege and Gifford's Fifth Amendment rights, and would make available to the IRS the work product of Attorney Manning. However, during oral argument in chambers on petitioners' motion to enforce this summons, an agreement was reached by the attorneys for the parties for at least partial enforcement of and compliance with the summons. It was agreed that thereafter Attorney Manning would appear and testify before an officer of the IRS. During the testimony, he would assert the attorney-client and the Fifth Amendment privileges when appropriate in his judgment. Any documents that were sought by the summons would be produced unless Manning asserted either of these privileges or the work product doctrine to protect them. It was further agreed that after the above proceeding took place, this Court would then determine whether Attorney Manning properly invoked these legal protections for his testimony and documents sought by the IRS.

 On June 17, 1981, Attorney Manning appeared and testified before Special Agent Anthony A. Cesare. He refused to answer approximately seventy-one questions posed to him in regard to the estate of Katherine P. Gifford. See Exhibit 1: Transcript of Investigation, held June 17, 1981. He also refused to produce many of the documents in his possession obtained in regard to the estate. These documents were delivered to the Court on July 21, 1981, by Attorney Manning for in camera inspection to determine whether they were protected from production pursuant to the summons in any way.

 On September 11, 1981, a hearing was held by the Court to determine whether Attorney Manning properly asserted the attorney-client privilege, Fifth Amendment right against self-incrimination or the work product rule to support his refusal to answer certain of the questions or produce certain of the documents described in summons. Only Attorney Manning testified at this hearing. He tendered questions to himself and was questioned by United States Attorney Lowe for the petitioners, and Richard D'Alessandro, attorney for Intervenor Gifford. Part of the testimony of Attorney Manning in open court was heard without the presence of the government attorney and IRS Agent. At the hearing, I directed Attorney Manning to answer some of the questions posed to him which he had claimed were protected. Three documents were produced by the respondent at this hearing for which Intervenor Gifford no longer claimed a privilege. A fourth document was also turned over at the hearing because it developed that a copy of it was already given to the IRS by Intervenor Gifford. Decision was reserved as to some areas of questions and as to the remaining documents. It is the purpose of this memorandum-decision to set forth the reasons why, in my judgment, there should be further enforcement of the summons involved. However, I do find that some documents and some questions are in fact privileged in some manner and to some extent and will not have to be produced or answered pursuant to the summons. For the reasons stated hereinafter, the summons against Attorney Manning will be enforced accordingly.

 DISCUSSION

 WORK PRODUCT ...


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