of the subpena was meant to circumvent the statutory right of the party under investigation to make a claim of privilege. We wrote to the agency and notified them that it appeared that they had not followed their own statutory procedures and that we would not comply with the summons for that reason, among others, and we have heard no more from them.

The fourth case deals with an IRS, typical IRS criminal tax investigation. We notified the IRS special agent in connection with this investigation that we would not produce records in response to his summons unless he gave notice of the summons to the taxpayer and permitted the taxpayer to intervene in the summons enforcement proceeding.

Shortly thereafter we received a grand jury subpena requesting the records that the special agent had previously sought.

In addition to certain specified documents, the subpena requested all cashier checks purchased by or made payable to some 14 different individuals or entities during a 21-month period in 1972 and 1973. This presented a problem for a small branch which this particular case involved, and the cashier checks are not maintained that way, not by whom they are made payable to or by whom they are purchased.

Thus, to go through the records required a manual review of every cashier check that had been issued during that 21-month period. I was unable to contact the customer or his attorney in this case. Once we received the grand jury subpena, I went to the district court and moved to quash the subpena. I moved that the subpena could be interpreted to require all branches of the bank to search records for requested documents. Crocker has over 360 branch offices in California and offices in other parts of the United States and outside of the United States. If we had been required to search every branch, the cost would have been some $28,000, according to my estimate. The judge limited the scope of the subpena and said that it would apply only to the branch which had

been served.

Unfortunately, my objections on the grounds that the customer was entitled to notice under the Burrows case because he had a privileged interest and a standing to intervene in the proceedings, was overruled by the judge, and he ordered compliance. He did order payment of the cost involved of copying the records of $85.

The fifth case I would like to get into was the grand jury subpena served out of New York City on an office of a bank located in New York, and I will read what it requested :

Any and all records, including but not limited to transcripts of accounts, loans, placements, ledgers, foreign exchange contracts, credit files, legal files, customer files, correspondence files, checks and deposits, credit and debit memorandums, records of telephone messages, and messages sent by electronic or radio means and other memorandums and correspondence for the period June 1, 1972, through February 28, 1975, relating to the following.

The subpena then listed some 29 different individuals or companies, any of which appeared to be foreign companies by their name. I certainly hope that this is as bad an example of an overly broad subpena as I will see.

In addition, I think by requesting legal files, the subpena apparently was trying to obtain attorney-client privilege documents. Fortunately, we were able to resolve this problem by protesting the subpenas being

overly broad and representing that the particular branch served had no records of any nature relating to any of the individuals or entities involved.

I would point out that the cost of compliance with that subpena, as I estimated then, would be in excess of $70,000. In addition, this case raises two problems which none of the proposed legislation to date seems to deal with. That is how is service to be affected, how is jurisdiction to be obtained over a branch office or a location other than the one served. The second problem area is what to do about production of documents from a foreign office of a U.S. bank or a foreign office of a bank located in another country doing business in the United States.

The problems there are that the current law seems to be that compulsory production of the documents from the foreign country will be required even though it will violate clearly the civil law of that country and subject the bank to liability from its customer for such production. Indeed, it is not even clear that if it violated the criminal law of the foreign country, that the court would not order production of the records.

I believe the answer which is emerging as to the question of how to effect service over more than one branch or a different branch than that to which the subpena is directed that the subpena or summons itself must specify that it is requesting information from another specific branch. However, even that question is unclear.

Case No. 6 involves an entirely different situation in connection with attempts to collect or obtain information to assist in collection of tax liabilities. We have received very informal requests and standard IRS forms purportedly under section 6333 of the Internal Revenue Code. These forms demand or appear to demand immediate production of information regarding a customer's bank account balance, account number, whether or not a particular person is in fact a customer of the bank. However, the section only authorizes the IRS to obtain information or examine records regarding the customer's finances if a levy has been made or is about to be made. Neither of the requests I have mentioned were accompanied by a notice of levy or any representation that one had been made or was about to be made. I returned them to the IRS and requested that they provide us with a notice of levy or a written representation from the district director that a levy was about to be made in order to comply with the request. Otherwise I contended that it was not authorized under that section.

Unfortunately, however, the only decided case under section 6333 involves a situation where an agent came into a bank branch, asked to examine the records, said that he was attempting to find assets for collection purposes, sat out and wrote out a form requiring the production of the records, the classic pocket summons approach. The authority, as I have stated, had been there only if a levy had been made or was about to be made. The court's opinion made it clear that no levy was being made and none was subsequently being made. The court felt that there was a waiver, so to speak, of the customer's rights by producing the information in response to the request, even though the request was unauthorized.

Now that situation may illustrate the need for some other aspects of the Right of Financial Privacy Act. Those would be penalties which

would apply to law enforcement personnel and indeed to bank personnel for violations of the non-disclosure provisions.

These six cases are typical of the demands which are being made by law enforcement agencies for the production of bank records. You will note I did not include a single instance involving a search warrant and that illustrates a problem with H.R. 214. Search warrants have only occasionally been used to request bank records.

During the first six months of this year I have had up until yesterday only two instances in which a search warrant was used to make a demand. They involved so-called routine crimes such as murder and theft. The deficiency in 214 is that it deals only with search warrants and only in instances when Federal law enforcement agencies can establish probable cause that a crime has been committed. The reasons law enforcement agencies seek bank records is it simply does not fit that pattern.

As illustrated in case six many demands are made for information in connection with attempts to collect tax liabilities. The other cases demonstrate that law enforcement agencies are seeking bank records to determine if a crime has been committed, frequently solely to determine the taxpayer's civil tax liability.

These types of activities have been sanctioned since 1964 in the U.S. Supreme Court decision in the United States v. Powell in which it held that there was no requirement that the IRS establish probable cause in order to enforce its section 7602 summons.

I do not believe it is necessary or desirable to impose a probable cause requirement. I do believe it is essential that procedures be developed that will insure that requests for bank records are made only in connection with proper governmental functions. Procedures whereby the bank customer who may be adversely affected may challenge the request and which places the financial burden on the party seeking production of the records I believe would provide such insurance.

Let me talk briefly about cost, if I may. I would like to refer to the testimony of Mr. Richard L. Wood, vice president of First National Bank of Chicago. Last week before the Subcommittee on Oversight of the House Committee on Ways and Means he stated the average to the First National Bank of Chicago in complying with IRS summons was approximately $225. If this cost is multiplied by a conservative estimate of a number of similar demands upon a bank the size of Crocker during the course of a year, which we estimate to be more than 2,000, the cost is more than $650,000 per year. Although these estimates are just that, it appears that the average cost of compliance with a summons for subpena for a large, medium, and small bank is in the range of from $225 to $350. Indeed, a very large bank, such as the Bank of America, may receive 5,000, 6,000 IRS summons during the course of a year for compliance costs of $1 million to $2 million.

In my office we have four attorneys in charge of reviewing these matters and we have many others who assist us on a particular project. Our time records for the months of February through May of this year show we devoted approximately 300 hours to these problems. If you charge those hours at a purely hypothetical rate of $50 per hour, we have a legal fee associated with these requests of almost $4,000 per month.

Those costs are almost the tip of the iceberg. Three vice presidents for operations screen matters before they are referred to us. We have also trained 12 operations officers throughout the State of California to assist in screening demands for information.

Beyond that we have prepared instructions on the process of preparing a manual for each branch manager to have available to instruct him in the procedures to be followed when demands for information are made.

The accumulated daily time of all these people is staggering, I think the most important point is that these are substantial efforts. Even if they were 100 percent efficient, they do not accomplish the objective of providing fairness to the bank customer. I believe only by providing him notice of standing do you give him a fair chance to protect his right of privacy.

With regard to the magnitude of cost, I think that one reason they are so large is because of the unclear state of the law. I believe that if legislation were enacted that clearly defined the types of procedures which could be used to compel the production of bank records, that the cost would be substantially reduced both for the banks, their customers, and for the law enforcement agencies.

There is one judicial opinion with regard to costs that I just must call to your attention. That is the opinion of Judge Teitlebaum of the western district of Pennsylvania in the United States v. Pittsburgh National Bank.

The case involved six summonses that were served on three banks by an IRS special agent. Judge Teitlebaum ordered the IRS to pay the cost of compliance. I would like to quote to you his language and reasoning as to why the IRS should pay those costs.

I think we must also closely examine the due process factor of requiring banks or other institutions to go to the considerable expense of assembling such documents. It seems to me that what is not fair is not due process and that the government should pay the costs of such search as a condition precedent to obtaining any documents.

It is my belief that before these banks, or indeed any others, are required to spend thousands of dollars in employees' time in response to a Section 7602 summons, the IRS should have some basis to believe that, one, the records do exist and are in the possession of the bank; two, the records sought do have some bearing on the customer's income tax liability; three, the IRS has exhausted all other less costly alternatives to obtain the same documents.

Toward that end, in this instance I feel that the best means to insure compliance with each of the three elements set forth above is to obligate the IRS to pay the bank the actual costs of searching their records.

I find his reasoning quite persuasive. If the requesting agency must bear the costs of the search and production of the records, they will be more careful in making certain that they can demonstrate a need to receive the information requested.

In similar situations, Congress has provided in the Freedom of Information Act, the Fair Credit Reporting Act, that the requesting party, in those cases the citizens should bear the cost. I see good reasons why the Government should bear the cost of requesting production.

At this time, frankly, bank records are cheap, fair game for any law enforcement agency. They are comprehensive, as Congressman Stark described, in terms of the types of affairs that can be discovered by review of the bank records, and they are free. An IRS agent can walk

in and get more information with one summons served upon a bank than any other possible way to get information available to him.

Unfortunately, the case I cited to you was contrary to the prevailing view. The prevailing view is set forth in a case, the United States v. Continental Bank, which is discussed in my statement.

One aspect of the Continental Bank case I would like to call your attention to is by comparison with the Burbank case. In addition to protesting the costs, the bank tried to claim its customer's right of privacy as a grounds for objection to compelling response to a summons. They said that they could not require, because of no standing. If you compare that with the Burbank case, the customer had no standing to assert his right of privacy.

Thus, if you combine those two cases you have, the bank may only protest a summons or subpena on technical grounds. The customer has no standing to object whatsoever.

I should now like to speak to the specific proposed legislation very briefly. I think the restrictions in the bill before you, H.R. 214, are quite appropriate in the area of wiretaps and surreptitious investigation. I do not feel that they are adequate or reasonable as applied to requests for bank records.

I discussed the standard of probable cause that a crime has been or is about to be committed. I think that is much too stringent a requirement to impose on our law enforcement agencies' efforts to obtain bank records.

The chairman noted earlier that the subject, the general subject of privacy is before several other committees or subcommittees of Congress during this session. I would suggest that, perhaps if the Ways and Means Committee is looking into the IRS summons procedures, that the best way of solving the problem would be by amendments to the Internal Revenue Code provisions themselves.

I would like to talk now about some problems which arose earlier. This is departing from my prepared statement. Similar legislation has been before Congress in prior years. There were hearings approximately 3 years ago. That is the last time, to my knowledge, that statements were submitted on behalf of the Treasury Department, at which time they objected strenuously to either the approach of H.R. 214 or the approach of Congressman Stark's bill.

As I recall, Eugene Rossitis, who was then Assistant Secretary of the Treasury, opposed the legislation on the grounds that it would impede civil and criminal investigations and because there was no showing that law enforcement agencies were abusing bank customers' right of privacy. He alleged that if you provided notice to the customer-and usually the customer is the party under investigation-it might endanger the safety of informers, undercover agents, that records may be destroyed, funds may be concealed, or that the suspect may flee.

I submit such hazards are simply unreal in the vast majority of cases. The only criminal tax investigations I have been involved in on behalf of the bank as the custodian of the records, or as the representative of the suspected taxpayer. It was never the situation that the request for the bank records was the first notice to the taxpayer that he was under criminal investigation. He always knew well in advance