part25-5
- 25.1.5.1
Overview - 25.1.5.2
Grand Jury Suspense - 25.1.5.3
Unique Features - 25.1.5.4
Civil Settlement
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This section discusses grand jury investigations.
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By Federal Rules of Criminal Procedure 6(e), information
obtained during a grand jury investigation is secret and cannot be disclosed
or used in any civil proceeding. -
CI may request a grand jury investigation by referring
the matter to the Department of Justice Tax Division or the U.S. Attorney
may request the assistance of the IRS.
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When a grand jury investigation has been approved,
examiners must suspend all civil actions, terminate the examination and forward
the file to grand jury suspense. Technical Support will update the case to
AIMS Status Code 36, Grand Jury Suspense. -
An unagreed Revenue Agent Report (RAR) should
be prepared identifying all known adjustments and applicable penalties. The
workpapers should reflect the results of the examination as far as it has
progressed and support all adjustments and penalties proposed. All documentation
in the case file should reflect the date of receipt or preparation. -
Form 4665, Report Transmittal, should be prepared
as explained in IRM 25.1.4.3.9, except the transmittal should not be labeled
“Pre-Prosecution Report.” -
The examiner should prepare a dated status memorandum
establishing a demarcation between facts that existed prior to the grand jury
investigation and facts developed as a result of the grand jury investigation.
Otherwise, the examiner risks such information being tainted and not admissible
for subsequent civil purposes. -
After notification of the grand jury investigation,
the examiner should not establish AIMS controls for prior or subsequent periods. -
Prior to forwarding the case to grand jury suspense, the examiner should
ensure all open statutes of limitation are protected and a minimum of 1 year
remains on the statute of limitations for each open return. -
If the target of grand jury investigation is not currently under examination,
AIMS controls should not be established and statute protection is not the
responsibility of the cooperating grand jury agent.
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The grand jury revenue agent is prohibited from
gathering information useful only to a civil proceeding. The agent must, however,
remain cognizant of the civil ramifications of information received or developed
during the grand jury investigation. Such information can be used in a civil
case provided the information has been made a matter of public record or was
obtained prior to the convening of the grand jury or independent of the grand
jury. One of the agents most important responsibilities is to assist in ensuring
this information is made available for the successful civil settlement of
the case. -
There are generally four critical stages of the
agents involvement with the grand jury investigation and subsequent criminal
proceedings during which pertinent civil assessment information (specific
taxable income information including the sources of income for each year included
in the investigation) may be developed and preserved. During these four stages,
the potential exists for securing pre-grand jury information and including
grand jury information in the public record. The agent must take action to
preserve all usable information for the subsequent civil closure of the case.-
Pre-Investigation Stage — Immediately after assignment as the grand
jury agent, the revenue agent should identify the records, evidence and other
documents secured to-date. Information secured prior to the grand jury should
be identified. This information will be free of secrecy restrictions imposed
by Rule 6(e) and may be used for civil purposes. Examples of information excluded
from the secrecy restrictions include:
• Interviews conducted and
documents obtained by CI prior to referral to the grand jury.
• Information
obtained by search warrants issued and executed prior to the grand jury.
•
Affidavits sworn by the special agent pursuant to securing a search warrant
issued by the court. These affidavits reflect alleged offenses. -
Indictment Stage — An indictment is the formal
written document which identifies the grand jurys charges against the defendant.
The indictment is made a matter of public record. The agent in cooperation
with the Assistant US Attorney (AUSA) should attempt to have complete civil
assessment information included in the indictment. However, depending on the
charges alleged in the indictment, the AUSA may or may not be able to include
this information in the indictment. If the case does not go to trial, the
next opportunity for the agent to ensure civil assessment information is preserved
is the plea agreement. -
Plea Agreement Stage — Even though the revenue
agent usually does not participate in this stage, it is important the agent
convey to the AUSA the importance of including specific civil assessment information
in the plea agreement. Plea negotiations generally result in agreements with
the defendant pleading guilty to lesser charges. This sometimes leads to a
problem if there was limited disclosure of specific information in the indictment.
The absence of specific civil assessment information in the plea agreement
may very well result in the defendant being incarcerated and not paying any
tax or penalties due to lack of information in the public record. Discussion
of this possible outcome with the AUSA demonstrates the importance of including
specific civil assessment information in the plea agreement. If specific civil
assessment information has not been made a matter of public record through
the indictment or plea agreement, the last opportunity to achieve this objective
is during formal sentencing proceedings. -
Formal Sentencing Proceedings Stage — There
are many statements and documents entered into the public record during this
stage. One of the most important documents entered in the public record is
the Governments Version of the Facts. This document is often read into the
record by the prosecuting attorney. This document usually summarizes what
the government would have proven if the case had gone to trial and will also
cover years and/or charges to which the defendant did not plead. Since the
Sentencing Guidelines require for tax charges that the entire loss to the
government be disclosed including years not included in the plea agreement
or indictment, the revenue agent should request the AUSA to read this information
into the record. This is necessary due to the fact this information is often
sealed as part of the probationary report.Note:
Information entered into the record during sentencing proceedings must be
relevant to the question of guilt or assist the court in sentencing the defendant.
In United States v. Alexander, 860 F. 2nd. 508 (2d. Cir. 1988) copious amounts
of grand jury material were introduced by the prosecutor during the sentencing
phase of a prosecution. The court ruled sealing of the record was needed after
the hearing since the prosecutor had abused his discretion by using the hearing
as a pretext for disclosing grand jury materials to other government attorneys
as prohibited by Baggot and Sells.
Note:
The grand jury agent should segregate
all documents in the case file prepared by the revenue agent assigned to the
case prior to identification of the case as a grand jury case (administrative
revenue agent). This information should be forwarded to the field territory
manager designee for inclusion in grand jury suspense. -
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The grand jury revenue agent has the responsibility
of assembling and forwarding documents and evidence necessary for a civil
tax closing of a grand jury investigation. The grand jury agent in preparing
to close the case following completion of the grand jury investigation should
complete the following actions:-
If the investigation is discontinued and/or no
indictment is returned and nongrand jury information was previously forwarded
to the field territory manager designee, the agent will prepare a memorandum
informing the designee that the grand jury aspects of case have been concluded
and the case should be released for civil settlement. -
If the investigation was conducted entirely using
grand jury procedures and as a result there are no pre-grand jury documents,
the agent will prepare a memorandum to the file so stating. -
Segregate and assemble nongrand jury documents that
will be utilized in the civil settlement. -
Immediately following sentencing of the defendant,
a Form 5346, Examination Information Report should be prepared addressing
the civil aspects of the case. Form 5346, should include the following information:
a)
A narrative summarizing the history of the case and the results of the investigation.
b)
An index of documents included in the case file briefly describing the source
of the documents and their content.
c) A copy of the indictment, information
and/or plea agreement.
d) Copies of documents, i.e., jury books, evidence
admitted during trial, trial transcripts, if available.
e) Grand jury agents
workpapers and schedules admitted or referenced and discussed specifically
in open court.
f) Grand jury agents trial notes, if appropriate and
useful to civil settlement.
g) Tax computations.
h) Any other pertinent
and relevant public documents available.
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The completed information item package should be
forwarded through the first-line manager to the territory manager designee
for civil disposition. If appropriate, the package should be associated with
the case in suspense to be released for civil settlement.
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IRS relinquishes control of a grand jury case
to the U.S. Attorney. The examiner assigned to the grand jury investigation
assists the U.S. Attorney with the consideration, resolution and review of
technical issues related to the criminal charges being investigated. -
Evidence obtained during a grand jury investigation
is protected under the secrecy provisions of Rule 6(e) of the Federal Rules
of Criminal Procedure. Therefore, an examiner cannot disclose in a civil case
any information obtained by the grand jury, unless the grand jury information
has been made a matter of public record. -
An examiner assigned to a grand jury investigation
is
“tainted”
for any subsequent civil examination. -
Examiner’s time should be charged to the
applicable activity code:-
Activity Code 815 Grand Jury — Non Narcotics
Related -
Activity Code 816 Grand Jury — Drug Enforcement
Task Force Case -
Activity Code 817 Grand Jury Narcotics Related —
Other
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During a grand jury investigation, examiners should
identify themselves as assistants to the U.S. Attorney and not an IRS employee.
IRS credentials may only be used for identification purposes. -
Grand jury materials should be kept in a separate
work area inaccessible to other IRS personnel not assisting the U.S. Attorney. -
The examiner’s workpapers will be part of
the Cl grand jury files. These files will not be available for the civil examination
without a Rule 6(e) court order. Workpapers, however, admitted or referenced
and specifically discussed in open court are available for civil settlement.
Workpapers referred to are usually the charts used for testimony.
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Upon completion of the grand jury investigation,
cases originating in an examination function will be released from Grand Jury
Suspense and returned for civil settlement. Examiners who had access to grand
jury information are
“tainted”
for civil settlement and
cannot be assigned to the case. Rule 6(e) precludes the use of
”
matters occurring before the grand jury”
in any subsequent civil action.
Per Rule 6(e)(3)(B), Any person to whom matters are disclosed under subparagraph
(A)(ii) of this paragraph shall not utilize that grand jury material for any
purpose other than assisting the attorney for the government in the performance
of such attorneys duty to enforce federal criminal law. -
The examiner may use information in public record,
including the search warrant affidavit, indictment, plea agreement and other
information in the court file. As discussed above, the grand jury revenue
agent will gather this information during the grand jury investigation and
at the conclusion of the grand jury investigation, forward the information
to the territory manager designee. -
Since the taxpayer may not be convicted for all
years in the indictment, information available may not be complete. A Rule
6(e) order may be obtained through the U.S. Attorney’s Office to disclose
grand jury information when the information is needed
“preliminarily
to or in connection with a judicial proceeding.”
There must be a
“particularized need”
in that the information cannot be obtained
from some other source. An IRS civil examination does not meet this requirement.
There must be specific litigation, such as a Tax Court or District Court proceeding. -
The touchstone of Rule 6(e)’s applicability
is whether the disclosed material would
“elucidate the inner
workings of the grand jury.”
The
“inner workings”
test
would preclude disclosure of evidence which tended to reveal the identity
and/or testimony of witnesses, the direction of the investigation and the
deliberation of the grand jurors. -
The examiner should ask Cl if they have possession
of specific documents known to be non-grand jury evidence. A memorandum from
the field territory manager to the SAC should be prepared providing a brief
explanation of the situation and the specific documents requested. -
Grand jury evidence cannot be released even when
the taxpayer volunteers to execute a waiver authorizing disclosure. The taxpayer
could furnish records in their possession even though the grand jury subpoenaed
those very records. -
If a court determines the IRS has improperly used
grand jury material, the court may refuse to admit the evidence, reverse the
burden of proof and/or require the IRS to proceed with evidence not derived
from the grand jury. Further, the court may decide to dismiss the case, without
prejudice, due to government misconduct. If the court determined the IRS intentionally
used grand jury material, attorney and legal fees could be awarded to the
taxpayer.
