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Service of a summons issued under $ 7602 of the Internal Revenue Code of 1954 (26 U.S.C. & 7602), ordering his accountant to produce certain allegedly privileged records. The Court, per Mr. Justice Clark, refused to grant the specific equitable relief requested, holding that the taxpayer had standing to raise his objections by intervening at any administrative or judicial stage of the summons enforcement proceedings and thus had an adequate remedy at law.

"The Government concedes that a witness or any interested party may attack the summons before the hearing officer. There are cases among the circuits which hold that both the parties summoned and those affected by a disclosure may appear or intervene before the District Court and challenge the summons by asserting their constitutional or other claims. In re Albert Lindley Lee Memorial Hospital, 209 F. 2d 122 (2d Cir. 1953); Falsone v. United States, 205 F. 2d 734 (5th Cir. 1953); and Corbin Deposit Bank v. United States, 244 F. 2d 177 (6th Cir. 1957). We agree with that view and see no reason why the same rule would not apply before the hearing officer.” 375 U.S. at 445.

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"Furthermore, we hold that in any of these (summons enforcement) procedures, the witness may challenge the summons on any appropriate ground. This would include as the circuits have held, the defenses that the material is sought for the improper purpose of obtaining evidence for use in a criminal prosecution .. as well as that it is protected by the attorneyclient privilege. . . . In addition, third parties might intervene to protect their interest, or in the event that the taxpayer is not a party to the summons, he, too may intervene. See In re Albert Lindley Lee Memorial H08pital, supra, and Corbin Deposit Bank v. United States, supra." 375 U.S. at

449. The Court's language seems unequivocally to support the standing of a bank customer to raise objects to a summons requiring his bank to divulge records concerning his transactions. This conclusion is reinforced by an examination of the lower decisions approved in the Reisinan opinion. In re Albert Lindley Lee Memorial Hospital and Corbin Deposit Bank v. United States were both cases in which a party other than the one to whom the summons was addressed was allowed, without discussion, to intervene in I.R.S. summons enforcement proceedings. Reisman thus appeared to parallel a contemporaneously developing line of authority which has largely freed Fourth Amendment standing requirements generally from distinctions based on common law property concepts. See, e.g., Jones v. United States, 362 U.S. 257 (1960); Katz v. United States, 389 U.S. 347 (1967); Bumpers v. North Carolina, 391 U.S. 543 (1968); Spinelli v. United States, 393 U.S. 410 (1969).

Subsequent federal court decisions were sharply divided as to whether the Reisman decision was to be broadly applied according to its language or confined narrowly by its facts. The circuits seemed about evenly split between those which read Reisman as abolishing the need for any proprietary interest in the records as a prerequisite to standing to intervene, e.g. Justice v. United States, 365 F. 2d 312, 314 (6th Cir. 1966); Harris v. United States, 413 F. 2d 314 (9th Cir. 1969); United States v. Bank of Commerce, 405 F. 2d 931 (3rd Cir. 1969) ; United States v. Benford, 406 F. 2d 1192, 1194 (7th Cir. 1969), and those which insisted that some minimal protectible legal interest, usually at least a claim of privelege, be present before a taxpayer would be allowed to challenge a summons not formally directed to them. E.G., In re Cole, 342 F. 2d 5, 7–8 (2d Cir. 1965); cert. den. 381 U.S. 950 (1965) ; O'Donnell v. Sullivan, 364 F. 2d 43, 44 (1st Cir. 1965); cert. den. 385 U.S. 969 (1966); Galbraith v. United States, 387 F. 2d 617 (10th Cir. 1967).

Donaldson v. United States, 400 U.S. 517 (1971), cited by the Justice Department in its letter commenting on the testimony of Ms. Eastman and other witnesses, settled the issue with regard to tax records. Donaldson involved nonprivileged records in the hands of plaintiffs' former employer, and there is language in the opinion which apparently distinguishes such facts from situations involving “anyone with whom the taxpayer has a confidential relationship of any kind.” 400 U.S. at 523. Furthermore, as pointed out by Justice Duoglas, concurring (400 U.S. at 536), a taxpayer would clearly have standing to raise a claim of violation of his constitutional rights if a third party were ordered to produce records belonging to the taxpayer, citing United States v. Kordell, 397 U.S. 1, 7; and Reisman v. Caplin, supra.

Nor have the federal courts been willing to extend the holding of Donaldson to bank records not sought by investigators pursuant to specific provisions of the Internal Revenue Code. In Stark v. Connally, No. 72 1045 (N.D. Calif. September 11, 1972), a three-judge federal district court held that bank depositors had standing to challenge Treasury Regulations requiring reports of their bank records to be submitted by banks to the Secretary of the Treasury pursuant to the Bank Secrecy Act of 1970. Having found that the depositors had standing to challenge the reporting requirement as a violation of their Fourth Amendment rights, the Court further held on the merits that the requirement was indeed unconstitutional.

There is little basis in federal decisional law, therefore, for the Justice Department's assertion that bank depositors have no cognizable Fourth Amendment interest in the records of their banking transactions. Yours sincerely,

JOHN H. F. SHATTUCK,

Staff Counsel. HARVARD UNIVERSITY,

Cambridge, Mass., September 18, 1972. Hon. WILLIAM PROXMIRE, Committee on Banking, Housing and Urban Affairs, U.S. Senate, Washington, D.C.

DEAR SENATOR PROXMIRE: I now have had an opportunity to read the letter from Mr. Lynch of the Justice Department to Senator Bennett concerning the proposed legislation to amend the Bank Secrecy Act. I will try to keep my reactions to that letter brief because the points he discusses are much the same as those presented to the Subcommittee during the hearings in August.

Mr. Lynch's letter concludes that: “it is thus apparent that the review of bank records by law enforcement offices in the course of criminal investigation, with the consent of the bank, poses no constitutional problems.” The simple fact is that the United States Supreme Court has never so held and the cases cited by Mr. Lynch are both factually and legally distinguishable. Not mentioned by Mr. Lynch are the numerous Supreme Court decisions, such as Griswold v. Connecticut, Katz v. United States, and United States v. United States District Court, which seem to suggest the emergency of a constitutionally based right to citizen privacy viz-a-viz the government. In that vein, as I am sure you are aware, two members of a threejudge panel of the United States District Court for the Northern District of California in Stark v. Connally, concluded that the Bank Secrecy Act "insofar as it authorized the Secretary to require virtually unlimited reporting from banks and their customers of domestic financial transactions as a surveillance device for the alleged purpose of discovering possible, but unspecified, wrongdoing among the citizenry, so far transcends the constitutional limits, as laid down by the United States Supreme Court for this kind of legislation, as to unreasonably invade the right of privacy protected by The Bill of Rights, particularly the Fourth Amendment provision protecting the right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures.''

At the very least, the constitutional propriety of portions of the Bank Secrecy Act and its unfettered delegation of authority to the Treasury Department is unclear and the bills before the Subcommittee should be evaluated in terms of their intrinsic merits.

Mr. Lynch's letter would have the reader believe that the proposed legislation to amend the Bank Secrecy Act goes so far as to create "a confidential relationship not hitherto recognized in law.” That is not the case. The bills before the Subcommittee have as their primary, and quite limited, objective the establishment of some procedural safeguards designed to limit governmental surveillance of bank records to those cases in which there is a showing that the law enforcement agency in question has a bonafide reason for pursuing that inquiry. Nothing in the bills creates a general “confidential relationship" between banker and customer, establishes anything in the nature of a “privilege,” or prevents legitimate investigations by appropriate governmental agencies. Moreover, despite Mr. Lynch's unsupported assertion that the bills would have a “pernicious effect *** on the government's effort to curb organized crime,” there has been absolutely no showing that the infusion of reasonable procedural safeguards into the statute would have that effect. Indeed, as the Court in Stark v. Connally pointed out, the legislative basis for the statute is rather vague and unconvincing and the Secretary of the Treasury's justification for the massive record keeping and reporting

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structure established by the Treasury Department's Regulations consists of a one line dogmatic imperative.

Again I urge the Subcommittee to contrast the uncontrolled investigative power of the Treasury Department under their Regulations, as well as the potential surveillance by other Federal, State and Local agencies pursuant to the Bank Secrecy Act, with the careful limitations on governmental surveillance in the field of wire tapping and eavesdropping in the Crime Control Act and the restraints on tax investigations in the Internal Revenue Act of 1954 (26 U.S.C. 8 7602 et seq.).

In sum, I think Mr. Lynch's letter, quite understandably, is preoccupied with the notion that the law enforcement community should have uncontrolled discretion to use every possible weapon to wage its war against crime. Unfortunately, in a democracy we must place reasonable limitations on the government in order to preserve the reasonable expectancies and rights of the people. Thus, as was stated in Stark v. Connally:

It would seem reasonable therefore, for the drawer of a check to regard himself as the real owner of his checks, subject only to normal banking processing, and to expect that detailed information shown only on the face of his checks will not be automatically broadcast throughout the vast government bureaucracy wihout at least some notice, summons, subpoena or warrant in connection with some legitimate pending inquiry.”

It is for the government to demonstrate that its laws and regulations are rationally related to the accomplishment of a permissible state policy and to provide safeguards against the misuse of those regulations, regardless whether that misuse be for political or personal objectives. I submit that the bills before the Subcommittee would strike a balance between the citizen and his government that is more in keeping with the philosophical traditions of this nation than the situation that exists under the Bank Secrecy Act and the Treasury Department's Regulations.

If I can be of any further help to you in connection with the proposed legislation, please do not hesitate to call upon me. Sincerely yours,

ARTHUR R. MILLER,

Professor of Law,

[A letter written by Frederick M. Pownall on behalf of the California Bankers Association offering further rebuttal of the Justice Department letter of September 8 may be found at page 268. The letter was written after the decision striking down a part of the Bank Secrecy Act was rendered by the California 3-judge district court (see p. 277).]

Senator BENNETT. For the record, the subcommittee will continue its hearings on Monday.

The witnesses will be Jack Anderson, the columnist; Arthur Miller, Professor of Law, Harvard University; Ray Hopkins, Unitarian Universalist Association; Hope Eastman, American Civil Liberties Union; Rex J. Morthland, American Bankers Association; and Frederick M. Pownall, California Bankers Association.

At this point the committee will stand in recess until Monday morning.

(Whereupon, at 1:15, the hearing was adjourned, to reconvene at 10 à.m., on Monday, August 14, 1972.)

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AMEND THE BANK SECRECY ACT

MONDAY, AUGUST 14, 1972

U.S. SENATE,
COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS,
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS,

Washington, D.C. The subcommittee met at 10 a.m., pursuant to adjournment, in room 5302, New Senate Office Building, Senator William Proxmire, chairman of the subcommittee, presiding.

Present: Senators Sparkman and Proxmire.
Also present: Senator John V. Tunney.
Senator PROXMIRE. The subcommittee will come to order.

Our first witness this morning is the distinguished, very well known syndicated columnist, Jack Anderson.

Is Mr. Anderson present?

STATEMENT OF JACK ANDERSON, COLUMNIST; ACCOMPANIED

BY JOE SPEAR

Senator PROXMIRE. We are happy to have you. You and your predecessor have been great champions of fair and equal treatment for all Americans and you have been willing to criticize even those institutions of our Government that many people have thought are beyond criticism. We need people like you very much. We never needed you more. So, we are glad to have you appear, and go right ahead in your own way. You have a brief statement. You present it any way you wish.

Mr. ANDERSON. I would like to introduce my associate, Joe Spear, who worked with me on this problem and he might be able to answer questions. So, with your permission, I would like him to be with me.

Senator PROXMIRE. Fine.

Mr. ANDERSON. Mr. Chairman, members of the Subcommittee on Financial Institutions, I have been asked to come here today to document the fact that the Federal Bureau of Investigation has virtually unlimited access to private bank account records.

We are all aware that our civil liberties and right of privacy are slowly giving way to an increasingly intrusive Federal Government. But most of us, I think, have labored under the impression that our financial dealings with banks are confidential. Our own finances are our own business, we have assumed, and are immune to the probings of curious Federal investigators. The idea that our banker would willingly divulge our dealings is, to most people, preposterous. Like lawyers and doctors, bankers are people we can trust.

Well, Mr. Chairman, bankers do, in fact, open their books to Federal sleuths. Indeed, representatives of various Federal agencies came before this committee last Friday and openly admitted as much.

William S. Lynch, the Justice Department spokesman, even suggested that the individual citizen has no right to think of his bank account as his exclusive property. Any law Congress might write that would compel a Federal agency to obtain court permission to investigate an account, Lynch suggested, would bog down investigations and impede the apprehension of criminals.

To support his bizarre interpretation of the fourth amendment, which explicitly protects "the right of the people to be secure in their persons, houses, papers, and effects”—Lynch conjured up a hypothetical example in which a kidnaper deposited ransom money in a bank account. The audacious criminal, Lynch suggested, would be stalking the streets while the FBI was forced to ask the courts for permission to get into his bank account.

I, for one, would not like to see any law written which would prevent the FBI, or any other law enforcement agency, from getting the goods on genuine criminals. I might add, however, that I do not feel it is unreasonable to require investigators to obtain judicial authorization before searching confidential bank account records.

But Mr. Lynch's imaginary kidnaping gives only a part of the picture. The FBI is also looking into the bank accounts of private individuals who have been accused of no crimes.

Over the years since World War II, as we all know, the Bureau has assumed the power to investigate "domestic subversives.” These are often people who attract the FBI's attention because they do not share the Bureau's political views.

Should the Government have the right to scrutinize their bank accounts? Should their financial books be opened without court order, just because they are nonconformist and the FBI wants to keep track of their activities and whereabouts ?

Of course, the bankers tell us they would never do such a thing without the necessary legal papers-usually a subpena. But I can testify, Mr. Chairman, that many bankers informally cooperate with the FBI, and I can document it.

I have brought with me copies of five FBI memorandums which show, beyond any reasonable doubt, that some of the largest banks in the country readily make available

to the FBI the bank records of private citizens accused of no crimes. I hereby submit them for the record, with the suggestion that they be handled carefully, as they contain many unsubstantiated allegations which could prove harmful to the individuals concerned.

Three of the memorandums concern movie actress Jane Fonda. The first document is dated April 30, 1971, and is stamped “Top SecretNo Foreign Dissemination, No Dissemination Abroad."

The memo, which was so lengthy as to require a table of contents, lists five checks drawn on two of Miss Fonda's accounts at the Morgan Guaranty Trust Co., 15 Broad Street, New York. Details include the check numbers, dates, payees, amounts, and banks of deposit and/or endorsers. One of the checks, in the amount of $3,300, was written to the National Council of Churches.

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