In United States v. Wessell (S.D. Fla. Case 22-cv-60988), Cl dkt entries here, the Government filed under seal a request for authorization of a John Doe Summons (“JDS”) to Kevin W. Wessell and related entities. The Government had filed similar JDS’s in other jurisdictions for related summonsees. The Government now files a petition to enforce the summons (JDS) issued to Wessell. (See dkt entry 1, dated 5/24/22, here.) The Government also filed a Brief in Support (dkt entry 3, dated 5/24/22, here(15 pages) with supporting documents including an IRS declaration here(124 pages) and certain other exhibits, including a privilege log of 482 pages).
The Brief summarizes the IRS’s concerns about Mr. Wessell as follows (pp. 1-2, footnotes omitted):
On September 26, 2018, the IRS served a summons on Mr. Wessell. Exhibit 1 (Cincotta Decl.) ¶ 10. The purpose of the summons is to identify the clients of the Wessell Group, a sprawling enterprise operated by Mr. Wessell whose activities bear “the hallmarks of offshore tax evasion.” Id., Attachment C ¶ 27.1
In particular, the Wessell Group creates foreign entities and bank accounts in tax havens such as the Cook Islands and Nevis in order to help United States taxpayers hide their money. Id. ¶¶ 19–49. The Wessell Group equips its customers with nominee directors and officers, and it even provides them with suggested avenues for circumventing court orders to repatriate funds. Id. ¶¶ 32–38. Based on extensive evidence outlined by the United States in a 2018 filing, this Court has already concluded that “there is a reasonable basis for believing” that the Wessell Group’s customers “may fail or may have failed to comply with the internal revenue laws,” which require taxpayers to report their worldwide income and pay associated taxes. See In re Tax Liabilities of John Does, No. 0:18-cv-62135- WPD, ECF No. 6 at 1 (S.D. Fla. Sept. 13, 2018).
The IRS summons required Mr. Wessell to produce all documents related to United States taxpayers who, between January 1, 2012 and December 31, 2017, used the Wessell Group to “establish, maintain, operate, or control: any foreign financial account or other asset; any foreign corporation, company, trust, foundation, or other legal entity; or any foreign or domestic financial account or other asset in the name of a foreign entity.” Exhibit 1 (Cincotta Decl.) ¶ 11 & Attachment D. The deadline for compliance was October 26, 2018. Id. ¶ 9.
Once the JDS was issued, the concern addressed in the petition to enforce is whether Wessell properly complied with the summons. The Government has concerned about whether Wessell produced the summonsed records or properly accounted for the summonsed records in a privilege log. Suffice it to say that the number of potential documents within the scope of the summons is quite large.
Things that caught my attention include the following:
1. The Government knows that Wessell did not fully comply because the production list does not identify some customers otherwise known to the IRS from other sources including the OVDP and voluntary disclosure initiatives and from productions on other JDS. (Brief 5-6.) In identifying some of these customers, the Government says (Brief 5 n. 3):
n3 The United States is withholding certain other examples, as well as the identity of the person or entity that produced the information, so that Mr. Wessell is not able to opportunistically supplement his production by turning over only those documents the United States already has reason to know about. The person or entity has access to only a limited universe of Wessell Group documents, so knowing the identity of that person or entity could lead Mr. Wessell to continue withholding documents outside that universe. The United States can make additional information available for in camera inspection if the Court desires.
2. The Government also argues that Wessell’s privilege log is inadequate. (Brief 7-14.)
Paragraphs 1 and 2 are standard summons enforcement stuff.
3. Interestingly, the Government recognizes that the scope of the documents requested in the JDS may create a problem under § 7602(d)(2) with respect to Wessell’s customers who have been referred to DOJ for criminal prosecution or further investigation. The Brief says (p. 14 n. 6):
n6 Section 7602(d)(2) of the Internal Revenue Code restricts enforcement of summonses in cases where there is a “Justice Department referral.” The IRS is aware of four Justice Department referrals from the relevant time period and will employ a filter team to ensure compliance with § 7602(d)(2). See Exhibit 1 (Cincotta Decl.) ¶¶ 42–43.
The related discussion in the agent’s affidavit is at p. 12, par. 43, here.
4. For an excellent description of how the IRS, in a massive document case, uses database techniques to extract information (and indications of missing information), see the agents Supplement Declaration beginning at par. 18 on p. 5, here. I love databases and have used them for years as a powerful tool in litigation and other uses (such as office management where I have created my own Access database to manage all aspects of office management). The database tool used here is Relativity which I have not used but I understand is quite powerful. I encourage those interested in litigation databases to read the description of how the tool was used in this case.
1. I inferred from the limited description of OVDP documents that not a lot of Wessell’s customers joined the various voluntary disclosure programs.