The opinion of the court was delivered by: Nickerson, District Judge:
Plaintiff brought this action under the Internal Revenue
Code, 26 U.S.C. § 7422, seeking the refund of income taxes,
interest and penalties erroneously and illegally assessed. The
court has jurisdiction pursuant to 28 U.S.C. § 1346(a)(1).
Plaintiff now moves for summary judgment.
The parties have stipulated to the facts, as follows.
Plaintiff, Phyllis Altman, is the surviving spouse of Bennett
Altman, who died on December 25, 1981. The Altmans filed joint
tax returns for the years 1976 and 1978.
In 1980, a Special Grand Jury in the Eastern District of New
York investigated whether Bennett Altman and other persons
violated the Internal Revenue Laws. On October 10, 1980,
Bennett Altman pled guilty to one count of a nine count
information. That count charged him with a violation of
26 U.S.C. § 7201 for the tax year 1978. Other counts of the
information charged him and two others, Joseph and Anthony
Cecere, with involvement in a money laundering scheme and with
knowingly and willfully failing to file a return in 1977 and
filing false and fraudulent tax returns in 1976 and 1978.
In September 1981 the United States applied for an order
under Federal Rule of Criminal Procedure 6(e) for release of
"books, records, other documents and testimony obtained during
the Grand Jury's investigation" which the Assistant United
States Attorney described as "vitally necessary to determine,
establish, assess and collect the federal civil tax liabilities
of BENNETT ALTMAN, JOSEPH CECERE and ANTHONY CECERE." Upon this
application, Judge Charles P. Sifton entered an order on
September 25, 1981, under Rule 6(e) authorizing the United
States Attorney to:
make available to agents of the Internal Revenue
Service all books, records, and documents
subpoenaed by or presented to the Grand Jury
pertaining to the above-captioned cause and the
transcripts of testimony presented to the Grand
Jury in that connection for purposes of
determining, establishing, assessing and
collecting the federal civil tax liabilities of
BENNETT ALTMAN, JOSEPH CECERE AND ANTHONY CECERE,
and for use in any judicial proceeding related
On April 9, 1982, the Internal Revenue Service (IRS) issued
a statutory notice of deficiency to Bennett Altman's estate
care of Phyllis Altman, saying that their income tax payments
for 1976 and 1978 were deficient in the amounts of $19,168.00
and $38,177.00 respectively, and assessing penalties of
$9,584.00 and $19,089.00 respectively. The deficiencies were
due to unreported amounts Bennett Altman received through the
money laundering scheme charged against him. The notice also
said that civil fraud penalties should be charged because the
underpayment was due to Bennett Altman's fraudulent conduct. No
part of the underpayment, however, was due to fraud on the part
of Phyllis Altman, and so no fraud penalty was assessed against
The government concedes that the IRS used some of the Grand
Jury material in determining Phyllis Altman's tax deficiency
and in denying her claim for refund as an innocent spouse. The
government also concedes that the Rule 6(e) order would not
satisfy the standards for such orders were it issued today.
Rule 6(e) of the Federal Rules of Criminal Procedure
prohibits disclosure of "matters occurring before the grand
jury" with certain exceptions. Fed.R.Crim.P. 6(e)(2). The
relevant exception in this case permits disclosure "when so
directed by a court preliminarily to or in connection with a
judicial proceeding". Fed.R.Crim.P. 6(e)(3)(C)(i).
On June 30, 1983, the Supreme Court, in United States v.
Sells Engineering, Inc., 463 U.S. 418, 103 S.Ct. 3133, 77
L.Ed.2d 743 (1983), held that the government was required to
make a showing of particularized need to obtain disclosure of
grand jury materials for use in civil suits. In United States
v. Baggot, 463 U.S. 476, 103 S.Ct. 3164, 77 L.Ed.2d 785 (1983),
decided the same day, the Court held that Rule 6(e)(3)(C)(i)
does not permit disclosure to the IRS for use in a civil tax
audit, which is normally neither in connection with nor
preliminary to a judicial proceeding. It is undisputed that the
Assistant United States Attorney's affidavit ...