IRS May Demand Wellington Law Firm's Escrow, Trust Account Info
The law firm moved to quash IRS summonses for its escrow and trust accounts, claiming a constitutional right to protect client information.
July 20, 2018 at 02:21 PM
4 minute read
The original version of this story was published on Daily Report
The judge from the U.S. Court of Appeals for the Eleventh Circuit launched an opinion upholding U.S. District Judge Robin Rosenberg with a stirring recitation of the U.S. Olympic hockey team's “miracle” win over the Soviet Union in 1980, complete with a mini-profile — via footnote— of U.S. coach Herb Brooks. “Our history contains many such stories of triumphs over long odds,” Rosenbaum wrote with the concurrence of Circuit Judge Charles Wilson and Maryland District Judge Roger Titus, sitting by designation. “This, however, is not one of those.” Acknowledging the “creative arguments” Wellington lawyer Michael Presley and his firm raised in an effort to shield their escrow and trust account records, Rosenbaum proceeded to dismantle them. Presley and his family firm, Presley Law & Associates, sought to quash summonses for law firm accounts at Bank of America, arguing their clients' information was protected by the U.S. Constitution's Fourth Amendment and the Florida Constitution's right to privacy. Rosenbaum's opinion said long-settled U.S. Supreme Court holdings “completely foreclose plaintiffs' arguments." Presley's son and law partner, Robert Presley, said in an email that, while they were disappointed by the ruling, “ we are investigating our options of filing a motion for reconsideration as the court's decision may reveal a fallacy.” As detailed in the opinion and underlying court pleadings, the case began in 2016 when the IRS issued summonses for the financial records of Presley, his wife, Presley Law and the BMP Family Partnership as part of an audit. The records request extended to "bank statements, loan proceeds, deposit slips, records of purchase, sources for all deposited items, and copies of all checks drawn." Presley moved to quash the summonses in the Southern District of Florida, writing the Fourth Amendment's search and seizure provisions should shield the firm's client information because the clients were not under investigation. Florida federal court rulings also established that federal law does not preempt Florida's Constitution, which “protects the financial information of persons if there is no relevant or compelling reason to compel disclosure,” the plaintiffs' petition said. The government moved to dismiss, and Rosenberg in 2017 ruled the U.S Supreme Court's 1964 decision in U.S. v. Powell held that IRS summonses are “presumptively enforceable” if the information sought is for a legitimate and relevant purpose, is not already in the IRS's possession and the summonses were issued in accordance with the IRS Code. The Presley summonses complied, and neither Presley's firm nor its clients had a “reasonable expectation of privacy in records maintained by a third-party bank,” she wrote. In upholding the trial court, Rosenbaum wrote that although “some debate exists” over whether plaintiffs have standing to assert claims for the rights of third parties — in this case, the firm's clients— “settled precedent requires us to conclude that the plaintiffs' clients lack a reasonable expectation of privacy in financial records held by the bank,” and that the IRS had satisfied the Powell requirements. As to the state privacy claims, “there is no question that the constitutional provision granting a privacy interest in bank records would substantially impede the IRS's ability to summon bank records pursuant to the Internal Revenue Code,” she said. “State law does not apply here because under the Supremacy Clause, state laws that conflict with federal laws by impeding the 'full purposes' of Congress must give way as preempted.” In seeking to quash the summonses, the firm argued the case raised issues of first impression that should be explored, and Robert Presley said those issues remain. “This is a case involving trust accounts, and the money held within them do not belong to the investigated parties but their clients,” he said. “If their clients have no rights under the [IRS] Code and Powell test because of the focus being on the investigated parties, then the ability of the court to claim that the code preempts their rights guaranteed by the Florida Constitution appears tenuous, but that is an issue that will need to be investigated and researched before pressing forward.”
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