In United States v. Procknow, 14-1398, the Seventh Circuit reviewed the appropriate use of administrative subpoenas by the IRS to further a criminal investigation. In Procknow, IRS agents issued administrative subpoenas to initiate a criminal investigation based on information provided by the local police. After issuing the administrative summonses, and after receiving some responsive documents, a Department of Justice criminal investigation was opened. The agents then destroyed any records received from the administrative subpoena, issuing grand jury subpoenas in their stead.
The Procknow Court does not actually decide the issue, but notes that the majority of circuits have found that issuing administrative subpoenas to further a criminal investigation is not improper. However, such use must cease once a Department of Justice criminal investigation is initiated. See generally 26 U.S.C. 7602. Rather than resolve the issue, the Court skipped to available remedies. The Court noted that quashing administrative summonses may be available, but that remedy was not applicable to Procknow as the IRS ultimately gathered the evidence through grand jury subpoenas and not through administrative subpoenas. Procknow sought suppression of the evidence gathered by the grand jury process. Acknowledging that ‘theoretically’ such an argument may have merit, the record before the Court did not support such a remedy because the IRS clearly had probable cause to initiate a criminal investigation with our without any information gained from the administrative summonses.
At the end of the day, Procknow likely presents an opportunity for a pyrrhic victory. Procknow might provide support for quashing administrative summonses issued by the IRS to further a criminal investigation. But if a litigant were successful in that effort, the government’s next step would be to open a criminal investigation, which likely would make matters only worse.