Opinion
Civ. No. 99-1589 (RHK/RLE).
May 31, 2000.
MEMORANDUM ORDER
I. Introduction
This matter came before the undersigned United States Magistrate Judge pursuant to a general assignment, made in accordance with the provisions of Title 28 U.S.C. § 636(b)(1)(A), upon the Motion of the Petitioner Norma June Cordt ("Cordt") for an Order preventing the United States Postal Service ("Postal Service") from obtaining access to her financial records, and upon the Postal Service's Motion for an Order dismissing Cordt's challenge, and directing compliance with its administrative Subpoena. Deeming oral argument to be unnecessary, we have considered the Motions upon the parties' written submissions. For reasons which follow, Cordt's Motion is denied, and the Postal Service's Motion is granted.
II. Factual and Procedural Background
Cordt is a United States Postal employee, who is under investigation by the Postal Service for the suspected embezzling of postal funds during the period from approximately June of 1997, through July of 1999. Cordt began her employment with the Postal Service as a window clerk at the Post Office, in St. Cloud, Minnesota, in July of 1992. As a window clerk, Cordt's responsibilities included cash handling and daily cash drawer accounting. As detailed by the Postal Service, window clerks are assigned a predetermined amount of stamp stock, based upon the sales in their Post Office. See, Declaration of James H. McCollow, at 1. This stamp accountability is audited every four months. Following the audits, if a discrepancy of one hundred dollars or more is found, then the results are reported to the Postal Inspection Service. Large discrepancies are considered by the Postal Service to be indicators of embezzlement.
In 1997, Postal Inspectors began to investigate Cordt, because of an accountability shortage of $3,204. Id. In 1998, and early 1999, additional accountability shortages of $2,177, and $3,250 were uncovered. Id. Subsequent to the discovery of the 1999 shortage, a confidential tip was received by the Postal Service, which advised that Cordt had sustained substantial gambling losses. Id. Consequently, her postal financial records, that is, her PS 1412 Forms, were obtained from the St. Cloud Post Office, and examined, in order to determine whether any additional shortages had been incurred from the date of the early 1999 count. As related by the Postal Inspector:
PS FORM 1412 is a daily summary of all financial transactions made by a window clerk. See, Declaration of James H. McCollow, at 2.
A review of [Cordt's] PS FORM 1412s showed that * * * Cordt made numerous "error corrects" every day. An error correct is basically an adjustment to the window clerk's stamp accountability.
* * *
An error correct can also be used to embezzle postage sales. The window clerk creates a fictitious error, does an error correct which reduces the stamp accountability, then takes that amount of cash out of the drawer.Id., at 2. As a result of the investigation into Cordt's suspected embezzlement, on September 24, 1999, the Postal Service issued Subpoena No. 0889, under the provisions of the Right of Financial Privacy Act, Title 12 U.S.C. § 3401-3422 ("RFPA"), to the St. Cloud Federal Employee's Credit Union. The Subpoena seeks financial records involving the financial accounts maintained by Cordt at the institution. The Postal Service believes that these bank records will demonstrate a possible motive for embezzlement by showing the cash flow, and the availability of funds, during the period in which the embezzlement is purported to have taken place.
Apparently as a result of the provisions of RFPA, copies of the Subpoena, and instructions for filing any objections to it, were served upon Cordt in September of 1999. See, Government's Memorandum of Points and Authorities, Ex. A. In response, Cordt filed a timely objection to the Subpoena on October 15, 1999. According to Cordt, the Postal Service is not authorized to issue a Subpoena for financial records unless there is a civil purpose for doing so, and no formal recommendation has been made to the Justice Department to pursue criminal prosecution. See,Petitioner's Memorandum in Support of Motion. However, the Postal Service contends that Cordt's argument should be rejected, because it is based upon a unique, and inapplicable, provision of the Internal Revenue Code, and upon a flawed understanding of the RFPA.
III. Discussion
A. Standard of Review. The RFPA protects the secrecy of customers' financial records in banks, by limiting both the ability of Federal law enforcement to obtain access to the information, as well as the bank's freedom to distribute such information. See, Puerta v. United States, 121 F.3d 1338, 1340 (9th Cir 1997) "Under the RFPA, the government may have access to, or obtain copies of, information contained in a customer's financial records from a financial institution only if the customer authorizes the disclosure, the government obtains an administrative or judicial subpoena or summons, or the records are sought pursuant to a search warrant or formal written request." Anderson v. La Junta State Bank, 155 F.3d 756, 757 (10th Cir. 1997), citing Title 12 U.S.C. § 3402 see also, Puerta v. United States, supra at 1340 (noting that the RFPA prohibits Government access to information contained in customers' financial records, unless one of the statutory exceptions, such as customer authorization or a Subpoena applies); Neece v. IRS, 96 F.3d 460, 462 (10th Cir. 1996); United States v. U.S. Bancorp, 12 F. Supp.2d 982, 984 (D. Minn. 1998) (noting that the RFPA prohibits financial institutions from providing the Government with information concerning their customers' financial records, unless the customer authorizes the disclosure of such information or the Government obtains a valid Subpoena or Search Warrant); Adams v. Board of Governors of Federal Reserve Bd., 659 F. Supp. 948, 954-55 (D. Minn. 1987). "If the government gains access to financial records through a warrant, subpoena, court order, or written request, it must give the financial institution's `customer' simultaneous notice of the access." United States v. Daccarett, 6 F.3d 37, 50 (2nd Cir. 1993), citing Title 12 U.S.C. § 3405(2) (administrative Subpoena and Summons); Title 12 U.S.C. § 3406(b) (Search Warrant); Title 12 U.S.C. § 3407(2) (judicial Subpoena); Title 12 U.S.C. § 3408(4)(A) (formal written request). "However, the `most salient feature of the Act is the narrow scope of the entitlements it creates', because congress wanted to `minimize the risk that customers' objections to subpoenae will delay or frustrate agency investigations.'" United States v. Daccarett, 6 F.3d 37, 50 (2nd Cir. 1993), quoting S.E.C. v. Jerry T. O'Brien. Inc., 467 U.S. 735, 745-746 (1984).
Together, Sections 3405 and 3410 of the RFPA set forth the statutory requirements for issuing an administrative Subpoena under the Act, as well as the procedural requirements for challenging that Subpoena. As provided in Section 3405:
A Government authority may obtain financial records under section 3402(2) of this title pursuant to an administrative subpoena or summons otherwise authorized by law only if —
(1) there is reason to believe that the records sought are relevant to a legitimate law enforcement inquiry;
(2) a copy of the subpoena or summons has been served upon the customer or mailed to his last known address on or before the date on which the subpoena or summons was served on the financial institution together with * * * [a] notice which shall state with reasonable specificity the nature of the law enforcement inquiry * * *.Title 12 U.S.C. § 3405 . Under the RFPA, the issues presented by a challenge to a Subpoena often focus on whether there is a legitimate law enforcement inquiry, whether the requested records are relevant to that inquiry, and whether the Government has complied with the Act's procedural requirements. See, Title 12 U.S.C. § 3410(c) ; Breakey v. Inspector General of the United States Department of Agriculture, 836 F. Supp. 422 (E.D. Mich. 1993).
B. Legal Analysis. Here, Cordt does not challenge the Subpoena, that was issued by the Postal Service, on the basis of any purported procedural deficiency, or because it was not issued in furtherance of a legitimate law enforcement inquiry. Rather, Cordt contends that, if there is a likelihood of criminal proceedings, an agency seeking an individual's records pursuant to the Subpoena power, which has been granted under the Inspector General Act, must have a civil purpose, and the Agency must not have made a formal recommendation to the Justice Department to prosecute.
We note that the Postal Service has sufficiently demonstrated that any challenges to the procedural or substantive validity of the subpoena would be unwarranted, as it is clear that the financial records sought are reasonably related to a legitimate law enforcement inquiry, and that the procedural requirements of the RFPA have been satisfied. Under the terms of RFPA, a "law enforcement inquiry is defined as "a lawful investigation or official proceeding inquiring into a violation of, or failure to comply with, any criminal or civil statute." Title 12 U.S.C. § 3401(8) . In determining if a stated law enforcement purpose is legitimate, a Court is free to consider the recitations on the face of the Subpoena, as well as supporting Affidavits, or Declarations, that are submitted in support of the Subpoena. See, In re Blunden, 896 F. Supp. 996, 1000 (C.D. Cal. 1995); Donovan v. U.A. Local 38 Plumbers and Pipe Trades Pension Fund, 569 F. Supp. 1488, 1490 (N.D. Cal. 1983). Here, Cordt is under investigation for the theft of postal funds, in violation of Title 18 U.S.C. § 1711. See, Declaration of James H. McCollow, at 1. Further, Cordt's financial records are relevant to this investigation, as they are needed to demonstrate the possible motive for the alleged embezzlement by determining the cash flow, and availability of funds, during the time of purported embezzlement.
Further, under the RFPA, prior to the issuance of the subpoena, the customer whose financial records are sought is required to be provided with notice of the request and the basis for the request. See, Title 12 U.S.C. § 3402(1) . Also, the RFPA requires that a copy of the subpoena be served on the applicable financial institution, as well as on the customer whose records are sought. See, Title 12 U.S.C. § 3405 . In addition, the agency must serve the customer with forms advising them of the right and procedure to challenge the subpoena. Id.
Here, Cordt does not contest the fact that she was provided with a copy of the subpoena, and its accompanying notice, as required by the RFPA. Further, it appears that the additional procedural requirements of the RFPA have been satisfied, as the copy of the subpoena, and the accompanying notice to Cordt, state that the subpoena is being issued in connection with an investigation under the Inspector General Act, regarding accountability for missing postal funds, and also provides a detailed explanation of the procedures used to challenge the subpoena. See, Government's Memorandum of Points and Authorities, Ex. A.
In support this argument, Cordt relies on two cases. The first, United States v. Genser, 602 F.2d 69 (3rd Cir. 1979), involved a challenge to several Summonses that had been issued by the Internal Revenue Service ("IRS"), pursuant to Title 26 U.S.C. § 7602. Ultimately, the Court determined that the challenge was unsuccessful, and stated that "[i]t is not just an institutional commitment to recommend prosecution that renders a summons issued under § 7602 invalid; rather, it is the absence of a civil purpose for that summons that triggers the LaSalle rule." United States v. Genser, supra at 70 (referring to the legal rule enunciated in United States v. LaSalle National Bank, 437 U.S. 298, 311-14 (1978), that the enforcement of an IRS Summons is prohibited once the criminal process has effectively been commenced) [emphasis added]. However, since the Court's analysis in Gesner dealt exclusively with a provision of the Internal Revenue Code, and made no mention of the RFPA, it has no bearing, directly or indirectly, upon this case, or the issues before us.
Next, in support of her contention, that the Postal Service's Subpoena is invalid because of a lack of a civil purpose, Cordt relies upon United States v. Art Metal-U.S.A., Inc., 484 F. Supp. 884 (D.N.J. 1980). In Art Metal, the Court examined the validity of a Subpoena duces tecum that had been issued pursuant to the Inspector General Act, Title 26 U.S.C.A. § 7122(a) , for certain tax and related business records of taxpayers, in connection with an investigation of payoffs and other fraudulent practices arising out of a Government Services Administration Contract. Despite the Defendant company's argument, the Court held that the likelihood of criminal prosecution alone is insufficient to bar enforcement of the Subpoena. United States v. Art Metal-U.S.A., Inc., supra at 886. Specifically, the Court stated:
The Third Circuit has recently placed upon LaSalle, the following gloss. Once the IRS has formally recommended prosecution to the Justice Department, IRS summonses may not be enforced in any case. United States v. Garden State National Bank, 607 F.2d 61, 69-70 (3rd Cir. 1979). However, if there has been merely an institutional (i.e. intra-agency) commitment to refer the matter to Justice, but no formal recommendation, then a summons may be enforced unless the party opposing the enforcement is able to show that there is no civil purpose for the summons. United States v. Genser, 602 F.2d 69, 71 (3rd Cir. 1979)
Applying the Genser construction of LaSalle to administrative summonses or subpoenae outside the IRS context, it is clear that the mere likelihood or even the imminence of criminal proceedings does not bar enforcement of a civil summons or subpoena so long as (1) the agency in question has not itself made a formal recommendation to the Justice Department to prosecute; and (2) the summons or subpoena has a civil purpose.Id. As was the case with Genser, Cordt's reliance on the language of Art Metal is misplaced. In Art Metal, the Court's discussion encompassed Subpoenae, that were issued under the Inspector General Act, and the Court made no reference to the RFPA. Hence, Cordt has failed to present any support for her contention that the Subpoena, which had been issued by the Postal Service in connection with its internal investigation, was invalid because it lacked a civil purpose. Had Congress intended to restrict the issuance of Subpoenae, under the RFPA, as it had restricted Subpoenae in other statutory contexts, Congress was at liberty to do so. We should not read into Congress's enactment of the RFPA restrictions that Congress elected not to incorporate, at least in the absence of a Constitutional deprivation — which is not here presented — or a compelling basis, under the principles of statutory construction, to do so. Cordt offers no such showings.
As Cordt implicitly concedes, the Subpoena was not issued out of mere idle curiosity on the Postal Service's part, as her challenge is not directed at the procedural propriety of the Subpoena, or at the fact that the Subpoena related to an area of both civil and criminal inquiry, which was appropriate to the proper administration of public funds in the operation of the Postal Service. While not expressly required, ample probable cause has been presented for the Postal Service's further investigation of a suspected criminal offense, by Cordt, and the Subpoena requested information that was plainly relevant to that investigation.
In sum, the issue presented here involves a Postal Service Subpoena, that was issued pursuant to the RFPA, and that, if enforced, would require the St. Cloud Federal Employees Credit Union to provide the Postal Service with certain of Cordt's financial records. Although the Postal Service's investigation of Cordt is being conducted pursuant to the Inspector General Act of 1978, that is not the statutory basis upon which the Subpoena was based. Rather, the Subpoena issued under the provisions of the RFPA, as referenced in the Notice that was provided to Cordt. See, Government's Memorandum of Points and Authorities, Ex. A. As such, Cordt's arguments are misguided, and inapplicable to the present circumstances. No authority has been provided, nor have we uncovered any, to support the proposition that a Subpoena, which has been issued by an Inspector General for records under the RFPA, may not be pursued for criminal purposes. Rather, as underscored by the Postal Service, the decisional authorities to date reflect no such restriction in RFPA Subpoenae. See e.g., Chang v. Tennessee Valley Authority, 82 F. Supp.2d 817 (E.D. Tenn. 2000) (enforcing Office of the Inspector General Subpoena, under RFPA, for records requested for potential use in a criminal investigation). Therefore, Cordt's Motion must be denied.
NOW, THEREFORE, It is —
ORDERED:
1. That the Petitioner's Motion for an Order Preventing the United States Government from Obtaining Access to Her Financial Records [Docket No. 1] is DENIED.
2. That the Respondent's Motion for an Order Dismissing the Petitioner's Challenge, and Directing Compliance with Adminisrative Subpoena No. 0889 [Docket No. 7] is GRANTED.