United States Court of Appeals,
Eleventh Circuit.
No. 94-4214.
James P. RYAN, Plaintiff-Appellant,
v.
UNITED STATES of America, Defendant-Appellee.
Feb. 14, 1996.
Appeal from the United States District Court for the Southern
District of Florida. (No. 90-6083-CIV-NCR), Norman C. Roettger,
Jr., Chief Judge.
Before COX, Circuit Judge, DYER, Senior Circuit Judge, and
GOETTEL*, Senior District Judge.
GOETTEL, Senior District Judge:
This appeal from a civil action grows out of a criminal
prosecution. Plaintiff, James P. Ryan, was a prominent criminal
defense lawyer in Florida. He was indicted for, inter alia, a
conspiracy to import and distribute marijuana and conspiracy to
defraud the Internal Revenue Service ("IRS") in the ascertainment
of taxes of other persons. He was convicted on two of the three
counts pending against him and sentenced to a period of
imprisonment which he served. (A first trial ended in an early
mistrial).
One of the conviction counts (the third) charged that in
connection with a large scale marijuana distribution ring involving
co-conspirators Dennis McGuire, Bying Goode and Patrick Bilton, he
conspired with them to launder their marijuana proceeds and to
conceal it from the Internal Revenue Service and other
*
Honorable Gerard L. Goettel, Senior U.S. District Judge for
the Southern District of New York, sitting by designation.
investigative agencies by filing fabricated law suits to account
for the proceeds. In addition he was charged with providing "legal
insurance" where, for the sum of $10,000 per participant, paid in
advance, he would represent them if criminal proceedings were
instituted against them.
Ryan's civil claims concern the purported illegal release of
information on two occasions which he claims is "return
information" within the definition of 26 U.S.C. § 6103(b) of the
Internal Revenue Code. He attributes this to the prosecutor in his
criminal case.
The first purported improper release of information concerned
a bar room conversation between the prosecutor and a female friend
of Ryan's, in which the prosecutor purportedly made reference to
Ryan's high living standard as being contrary to the limited income
revealed on his tax returns. The prosecutor's recollection of the
discussion was entirely different from Ryan's friend's
recollection, and the prosecutor could not recall having discussed
Ryan's taxes. Ryan's friend did not testify at trial but her
deposition was read. The trial judge, finding distinct credibility
issues, did not resolve this factual dispute, but held there had
been no improper release of return information.
The more significant claim concerned memoranda summarizing
witness statements made to the prosecution both in interviews and
before the grand jury. Virtually all of this information had been
made public at Ryan's criminal trial. (However, the statements of
one confidential informant, who did not testify at trial,
concerning Ryan investing in a marijuana load, were included). The
prosecution memoranda was in the possession of a reporter who gave
it to his editor, a friend of Ryan's, who then turned it over to
Ryan. After Ryan's conviction, a motion was made for a new trial
citing the prosecution memoranda and claiming prosecutorial
misconduct. This argument was rejected both in the district court
and on appeal. On the day following the denial of a new trial,
this civil action was filed against the United States, claiming the
unauthorized disclosure of tax information. While Ryan
acknowledged that he had no compensatory damages, he sought
statutory damages of $2,000 and punitive damages of
$100,000—although punitive damages are usually not available in a
suit against the government, the statute prohibiting release of
return information is an exception. 26 U.S.C. § 7431. Ryan
offered to drop this suit if the prosecution would ask the Parole
Board to reduce his sentence.
During the bench trial of this case, the reporter and editor
claimed newsgatherer's privilege and declined to reveal the source
of the memoranda. The prosecutor testified that he had no specific
recollection of giving the memoranda to the reporter. While the
trial court noted, therefore, that there was no evidence that the
prosecutor had released the memoranda, it found the prosecutor's
loss of memory disturbing. Consequently, the court did not rest
its decision for the government on the lack of proof of disclosure
but found, rather, that the contents of the memoranda were the
prosecution's work product distilled from statements of trial
witnesses and, consequently, were not "return information" acquired
from the IRS. This is a factual finding which cannot be reversed
since it was not clearly erroneous. Childrey v. Bennett, 997 F.2d
830, 833 (11th Cir.1993).
The district court relied on Stokwitz v. United States, 831
F.2d 893 (9th Cir.1987), cert. denied, 485 U.S. 1033, 108 S.Ct.
1592, 99 L.Ed.2d 907 (1988). In that case Navy employees had
searched the plaintiff's office and seized his copies of his own
federal tax returns, the originals of which had been filed with the
IRS. These documents were then disclosed to various Navy
employees. The plaintiff, a civilian attorney employed by the
Navy, sought damages for wrongful disclosure of his tax returns.
The district court and the Ninth Circuit held that the statutory
protection is directed at government employees (such as those of
the IRS) who obtain tax returns and return information as a result
of these materials being filed by or on behalf of the taxpayer with
the IRS, since the purpose of the statute was to control loose
disclosure practices by the IRS. Id. at 894.1
The statute, 26 U.S.C. § 6103(b)(2)(A), is quite broad but it
is restricted to data:
... received by, recorded by, prepared by, furnished to, or
collected by the Secretary with respect to a return or with
respect to the determination of the existence, or possible
existence, of liability (or the amount thereof) of any person
under this title for any tax, penalty, interest, fine,
forfeiture, or other imposition, or offense ...
Consequently the statutory definition of "return information"
confines it to information that has passed through the IRS.2
1
See S.Rep. No. 938, 94th Cong.2d Sess. 316-318.
2
Plaintiff argues that we should also look at the next
paragraph of the section, 6103(b)(3), but that section merely
incorporates (b)(2) for the definition of "taxpayer return
information."
Attorney's memoranda, which are work product distilled from
statements of trial witnesses, are not such materials.3 Moreover,
the information disseminated in the prosecution memoranda did not
concern, or derive from, Ryan's tax returns but concerned, inter
alia, the tax status of other persons.4
The government frames the question presented as whether
financial information obtained by a federal prosecutor
independently of the IRS constitutes "return information." Ryan
argues that, if the IRS is involved in a prosecution (and it was
here along with the Drug Enforcement Agency), and his tax returns
were made available to the United States Attorney's Office (as they
were), this makes the prosecution memorandum data received and
collected "by the Secretary" with respect to the tax liability of
"any person"—i.e. the other persons whose tax returns were involved
in the conspiracy to defraud the IRS.
Initially we note that "return information" requires a nexus
between the data or information obtained and the furtherance of
3
As a simple example, tax returns may include the names of
companies in which the taxpayer has ownership interests. If a
prosecutor learns of a business relationship from witnesses, the
fact that this information also appears in a tax return does not
make the prosecutor's knowledge "return information."
4
There were three memoranda. The first, dated May 20, 1988,
recommended prosecuting Ryan (for the violations that were
subsequently alleged in the indictment) and detailed at length
the activities of the co-conspirators in concealing and
laundering their marijuana importing profits as well as the
arrangement for "legal insurance". It also described some of the
marijuana smuggling operations including Ryan's personal
investments of $15,000 in one venture. A second memorandum,
dated June 28, 1988, added testimony of two additional witnesses.
The final memorandum, dated July 29, 1988, reviews the evidence
available for a conviction without the testimony of Dennis
McGuire who Ryan's defense counsel had claimed had contrived his
version of the events to get revenge against Ryan.
obligations controlled by the tax laws ( i.e. Title 26). In Re
Grand Jury Investigation, 688 F.2d 1068, 1070 (6th Cir.), reh'g
denied, 696 F.2d 449 (6th Cir.1982). While there were tax aspects
to the investigation of Ryan, the conspiracies of which he was
convicted (importing marijuana and defrauding the IRS), violate
Titles 18 and 21 of the United States Code. Section 6103 of Title
26 protects only information filed with and disclosed by the IRS,
not all information relating to any tax matter. Stokwitz, supra,
831 F.2d at 897.
More to the point, information collected by the United States
Attorney's Office, even with the assistance of an IRS Special
Agent, is not information belonging to the Secretary of the
Treasury—it is within the custody of the Attorney General or the
Department of Justice. Finally, even if the information were
considered to belong to the Treasury, and to concern the tax
liability of persons, those were persons other than Ryan (i.e. the
three aforementioned co-conspirators) and he lacks standing to
object to its dissemination. In re Grand Jury Investigation,
supra, 688 F.2d at 1070-71; see also Mid-South Music Corp. v.
United States, 818 F.2d 536, 539 (6th Cir.1987).
The decision of the district court is in all respects
AFFIRMED.