- 25.1.5.1 Overview
- 25.1.5.2 Grand Jury Suspense
- 25.1.5.3 Unique Features
- 25.1.5.4 Civil Settlement
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This section discusses grand jury investigations.
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By Federal Rules of Criminal Procedure 6(e), information obtained during a grand jury investigation is secret and cannot be disclosed or used in any civil proceeding.
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CI may request a grand jury investigation by referring the matter to the Department of Justice Tax Division or the U.S. Attorney may request the assistance of the IRS.
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When a grand jury investigation has been approved, examiners must suspend all civil actions, terminate the examination and forward the file to grand jury suspense. Technical Support will update the case to AIMS Status Code 36, Grand Jury Suspense.
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An unagreed Revenue Agent Report (RAR) should be prepared identifying all known adjustments and applicable penalties. The workpapers should reflect the results of the examination as far as it has progressed and support all adjustments and penalties proposed. All documentation in the case file should reflect the date of receipt or preparation.
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Form 4665, Report Transmittal, should be prepared as explained in IRM 25.1.4.3.9, except the transmittal should not be labeled "Pre-Prosecution Report."
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The examiner should prepare a dated status memorandum establishing a demarcation between facts that existed prior to the grand jury investigation and facts developed as a result of the grand jury investigation. Otherwise, the examiner risks such information being tainted and not admissible for subsequent civil purposes.
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After notification of the grand jury investigation, the examiner should not establish AIMS controls for prior or subsequent periods.
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Prior to forwarding the case to grand jury suspense, the examiner should ensure all open statutes of limitation are protected and a minimum of 1 year remains on the statute of limitations for each open return.
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If the target of grand jury investigation is not currently under examination, AIMS controls should not be established and statute protection is not the responsibility of the cooperating grand jury agent.
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The grand jury revenue agent is prohibited from gathering information useful only to a civil proceeding. The agent must, however, remain cognizant of the civil ramifications of information received or developed during the grand jury investigation. Such information can be used in a civil case provided the information has been made a matter of public record or was obtained prior to the convening of the grand jury or independent of the grand jury. One of the agent's most important responsibilities is to assist in ensuring this information is made available for the successful civil settlement of the case.
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There are generally four critical stages of the agent's involvement with the grand jury investigation and subsequent criminal proceedings during which pertinent civil assessment information (specific taxable income information including the sources of income for each year included in the investigation) may be developed and preserved. During these four stages, the potential exists for securing pre-grand jury information and including grand jury information in the public record. The agent must take action to preserve all usable information for the subsequent civil closure of the case.
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Pre-Investigation Stage — Immediately after assignment as the grand jury agent, the revenue agent should identify the records, evidence and other documents secured to-date. Information secured prior to the grand jury should be identified. This information will be free of secrecy restrictions imposed by Rule 6(e) and may be used for civil purposes. Examples of information excluded from the secrecy restrictions include:
• Interviews conducted and documents obtained by CI prior to referral to the grand jury.
• Information obtained by search warrants issued and executed prior to the grand jury.
• Affidavits sworn by the special agent pursuant to securing a search warrant issued by the court. These affidavits reflect alleged offenses. -
Indictment Stage — An indictment is the formal written document which identifies the grand jury's charges against the defendant. The indictment is made a matter of public record. The agent in cooperation with the Assistant US Attorney (AUSA) should attempt to have complete civil assessment information included in the indictment. However, depending on the charges alleged in the indictment, the AUSA may or may not be able to include this information in the indictment. If the case does not go to trial, the next opportunity for the agent to ensure civil assessment information is preserved is the plea agreement.
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Plea Agreement Stage — Even though the revenue agent usually does not participate in this stage, it is important the agent convey to the AUSA the importance of including specific civil assessment information in the plea agreement. Plea negotiations generally result in agreements with the defendant pleading guilty to lesser charges. This sometimes leads to a problem if there was limited disclosure of specific information in the indictment. The absence of specific civil assessment information in the plea agreement may very well result in the defendant being incarcerated and not paying any tax or penalties due to lack of information in the public record. Discussion of this possible outcome with the AUSA demonstrates the importance of including specific civil assessment information in the plea agreement. If specific civil assessment information has not been made a matter of public record through the indictment or plea agreement, the last opportunity to achieve this objective is during formal sentencing proceedings.
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Formal Sentencing Proceedings Stage — There are many statements and documents entered into the public record during this stage. One of the most important documents entered in the public record is the Government's Version of the Facts. This document is often read into the record by the prosecuting attorney. This document usually summarizes what the government would have proven if the case had gone to trial and will also cover years and/or charges to which the defendant did not plead. Since the Sentencing Guidelines require for tax charges that the entire loss to the government be disclosed including years not included in the plea agreement or indictment, the revenue agent should request the AUSA to read this information into the record. This is necessary due to the fact this information is often sealed as part of the probationary report.
Note:
Information entered into the record during sentencing proceedings must be relevant to the question of guilt or assist the court in sentencing the defendant. In United States v. Alexander, 860 F. 2nd. 508 (2d. Cir. 1988) copious amounts of grand jury material were introduced by the prosecutor during the sentencing phase of a prosecution. The court ruled sealing of the record was needed after the hearing since the prosecutor had abused his discretion by using the hearing as a pretext for disclosing grand jury materials to other government attorneys as prohibited by Baggot and Sells.
Note:
The grand jury agent should segregate all documents in the case file prepared by the revenue agent assigned to the case prior to identification of the case as a grand jury case (administrative revenue agent). This information should be forwarded to the field territory manager designee for inclusion in grand jury suspense.
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The grand jury revenue agent has the responsibility of assembling and forwarding documents and evidence necessary for a civil tax closing of a grand jury investigation. The grand jury agent in preparing to close the case following completion of the grand jury investigation should complete the following actions:
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If the investigation is discontinued and/or no indictment is returned and nongrand jury information was previously forwarded to the field territory manager designee, the agent will prepare a memorandum informing the designee that the grand jury aspects of case have been concluded and the case should be released for civil settlement.
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If the investigation was conducted entirely using grand jury procedures and as a result there are no pre-grand jury documents, the agent will prepare a memorandum to the file so stating.
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Segregate and assemble nongrand jury documents that will be utilized in the civil settlement.
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Immediately following sentencing of the defendant, a Form 5346, Examination Information Report should be prepared addressing the civil aspects of the case. Form 5346, should include the following information:
a) A narrative summarizing the history of the case and the results of the investigation.
b) An index of documents included in the case file briefly describing the source of the documents and their content.
c) A copy of the indictment, information and/or plea agreement.
d) Copies of documents, i.e., jury books, evidence admitted during trial, trial transcripts, if available.
e) Grand jury agent's workpapers and schedules admitted or referenced and discussed specifically in open court.
f) Grand jury agent's trial notes, if appropriate and useful to civil settlement.
g) Tax computations.
h) Any other pertinent and relevant public documents available.
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The completed information item package should be forwarded through the first-line manager to the territory manager designee for civil disposition. If appropriate, the package should be associated with the case in suspense to be released for civil settlement.
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IRS relinquishes control of a grand jury case to the U.S. Attorney. The examiner assigned to the grand jury investigation assists the U.S. Attorney with the consideration, resolution and review of technical issues related to the criminal charges being investigated.
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Evidence obtained during a grand jury investigation is protected under the secrecy provisions of Rule 6(e) of the Federal Rules of Criminal Procedure. Therefore, an examiner cannot disclose in a civil case any information obtained by the grand jury, unless the grand jury information has been made a matter of public record.
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An examiner assigned to a grand jury investigation is "tainted" for any subsequent civil examination.
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Examiner’s time should be charged to the applicable activity code:
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Activity Code 815 Grand Jury — Non Narcotics Related
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Activity Code 816 Grand Jury — Drug Enforcement Task Force Case
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Activity Code 817 Grand Jury Narcotics Related — Other
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During a grand jury investigation, examiners should identify themselves as assistants to the U.S. Attorney and not an IRS employee. IRS credentials may only be used for identification purposes.
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Grand jury materials should be kept in a separate work area inaccessible to other IRS personnel not assisting the U.S. Attorney.
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The examiner’s workpapers will be part of the Cl grand jury files. These files will not be available for the civil examination without a Rule 6(e) court order. Workpapers, however, admitted or referenced and specifically discussed in open court are available for civil settlement. Workpapers referred to are usually the charts used for testimony.
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Upon completion of the grand jury investigation, cases originating in an examination function will be released from Grand Jury Suspense and returned for civil settlement. Examiners who had access to grand jury information are "tainted" for civil settlement and cannot be assigned to the case. Rule 6(e) precludes the use of " matters occurring before the grand jury" in any subsequent civil action. Per Rule 6(e)(3)(B), Any person to whom matters are disclosed under subparagraph (A)(ii) of this paragraph shall not utilize that grand jury material for any purpose other than assisting the attorney for the government in the performance of such attorney's duty to enforce federal criminal law.
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The examiner may use information in public record, including the search warrant affidavit, indictment, plea agreement and other information in the court file. As discussed above, the grand jury revenue agent will gather this information during the grand jury investigation and at the conclusion of the grand jury investigation, forward the information to the territory manager designee.
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Since the taxpayer may not be convicted for all years in the indictment, information available may not be complete. A Rule 6(e) order may be obtained through the U.S. Attorney’s Office to disclose grand jury information when the information is needed "preliminarily to or in connection with a judicial proceeding." There must be a "particularized need" in that the information cannot be obtained from some other source. An IRS civil examination does not meet this requirement. There must be specific litigation, such as a Tax Court or District Court proceeding.
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The touchstone of Rule 6(e)’s applicability is whether the disclosed material would "elucidate the inner workings of the grand jury." The "inner workings" test would preclude disclosure of evidence which tended to reveal the identity and/or testimony of witnesses, the direction of the investigation and the deliberation of the grand jurors.
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The examiner should ask Cl if they have possession of specific documents known to be non-grand jury evidence. A memorandum from the field territory manager to the SAC should be prepared providing a brief explanation of the situation and the specific documents requested.
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Grand jury evidence cannot be released even when the taxpayer volunteers to execute a waiver authorizing disclosure. The taxpayer could furnish records in their possession even though the grand jury subpoenaed those very records.
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If a court determines the IRS has improperly used grand jury material, the court may refuse to admit the evidence, reverse the burden of proof and/or require the IRS to proceed with evidence not derived from the grand jury. Further, the court may decide to dismiss the case, without prejudice, due to government misconduct. If the court determined the IRS intentionally used grand jury material, attorney and legal fees could be awarded to the taxpayer.