Anthony V. Bell V. Sigir

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IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA NEWNAN DIVISION : : : Movant, : : v. : : SPECIAL INSPECTOR GENERAL FOR : IRAQ RECONSTRUCTION, : : : : : Respondent. : ANTHONY B. BELL,

CIVIL ACTION NO. 3:09-mi-00003 and 3:09-mi-00002

RESPONSE TO MOTION FOR ORDER PURSUANT TO CUSTOMER CHALLENGE PROVISIONS OF RIGHT TO FINANCIAL PRIVACY ACT COMES NOW, the Respondent Special Inspector General for Iraq Reconstruction (“OIG-Iraq Reconstruction”), by its attorney, the United States Attorney for the Northern District of Georgia, files this response to Petitioner’s Motion for Order Pursuant to Customer Challenge Provisions of Right to Financial Privacy Act (“Motion”).

Petitioner’s Motion is the equivalent to a motion to

quash a subpoena issued by Respondent OIG-Iraq Reconstruction, for bank records pertaining to Petitioner’s account(s) and transactions.

There is reason to believe the law enforcement

inquiry is legitimate and that the records sought by the subpoena are relevant to the inquiry.

Therefore, the Court should dismiss

Petitioner’s challenge and order enforcement of the subpoena.

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FACTUAL AND PROCEDURAL BACKGROUND Anthony Bell is a former Colonel in the United States Army. Exhibit A, Declaration of Special Agency James J. Crowley (hereinafter referred to as “Crowley Decl.”), at ¶ 5.

From June

29, 2003 through March 15, 2004, Mr. Bell was the contracting officer for the Coalition Provisional Authority (“CPA”) in Baghdad, Iraq.

Crowley Decl., at ¶ 5.

As head of the

Contracting Activity, Mr. Bell entered into contracts for reconstruction projects in Iraq.

Crowley Decl., at ¶ 6.

These

contracts were funded by money designated by Congress for Iraq reconstruction.

Crowley Decl., at ¶ 6.

In 2004, OIG-Iraq Reconstruction received information from a confidential source that Mr. Bell and another individual were receiving kickbacks in connection with contracts for reconstruction projects in Iraq.

Crowley Decl., at ¶ 7.

confidential source was killed in Iraq.

The

Crowley Decl., at ¶ 8.

During the course of the investigation, OIG-Iraq Reconstruction learned that Mr. Bell may have accounts with Suntrust Bank and the National Bank of Commerce. at ¶ 10.

Crowley Decl.,

Because Mr. Bell’s bank accounts may reveal information

concerning the pending criminal investigation related to Mr. Bell, OIG-Iraq Reconstruction determined that it was necessary to review these accounts.

Crowley Decl., at ¶ 12.

On January 9, 2009 Inspector General Stuart Bowen issued two subpoenas on Anthony Bell, along with instructions regarding how to challenge the subpoenas, pursuant to the Right to Financial 2

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Privacy Act of 1978, 12 U.S.C. §§ 3401-3422.

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Crowley Decl., at ¶

13. On January 27, 2009, Anthony Bell filed the instant action challenging the subpoenas because the account number listed on the subpoena is incorrect. [Doc. 1].

Mr. Bell also challenged

the subpoena for records from the National Bank of Commerce asserting that he does not have any accounts at this financial institution. With respect to this claim, the Respondent acknowledges that Mr. Bell is correct and therefore, the subpoena with respect to the National Bank of Commerce is moot.

Besides

these technical arguments, Mr. Bell asserts no additional basis for his challenge. During the pendency of this action, OIG-Iraq Reconstruction has learned that Mr. Bell does not have any accounts with National Bank of Commerce.

Crowley Decl., at ¶ 14.

However,

with respect to Suntrust, OIG-Iraq Reconstruction has confirmed that Mr. Bell does have an account with Suntrust. at ¶ 16.

Crowley Decl.,

According to Suntrust, it has identified records

responsive to the OIG-Iraq Reconstruction subpoena and is holding the requested records pending the outcome of the above-styled action.

Crowley Decl., at ¶ 16. RELEVANT STATUTORY SCHEME

A.

Special Inspector General for Iraq Reconstruction The Office of the Special Inspector General for Iraq

Reconstruction was created in 2004, pursuant to P.L. 108-106, as amended, to investigate and audit funds made available for Iraq 3

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reconstruction.

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Crowley Decl., ¶ 2.

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Pursuant to P.L. 108-106,

as amended, the OIG-Iraq Reconstruction has the same authority and duties of an Inspector General as defined by the Inspector General Act of 1978, 5 U.S.C.A. App. 3.

Crowley Decl., ¶ 3.

Among other things, OIG-Iraq Reconstruction is authorized to conduct criminal investigations related to funds used for Iraq reconstruction and to issue subpoenas in furtherance of its investigations. B.

Crowley Decl., ¶ 4.

The Inspector General Act The Inspector General Act of 1978 (IG Act), 5 U.S.C.A. App.

3, establishes the Inspector General’s authority to issue a subpoena.

The IG Act gives each Inspector General a mandate to

conduct investigations, and to prevent and detect waste, fraud and abuse in his or her agency’s programs and operations. U.S.C. Appx. 3 §§ 2, 4 (1988).

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Section 4(a) of the IG Act grants

broad authority to Inspectors General “to conduct, supervise, and coordinate audits and investigations relating to the programs and operations of the [agency within which the IG Inspectors General authority to issue subpoenas for purposes coextensive with the IG’s general investigative authority.1

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Id. at § 4(a)(4).

The

The IG’s investigative and subpoena authority extends to civil and criminal matters. See e.g., United States v. Aero Mayflower Transit Co., Inc., 831 F.2d 1142, 1146 (D.C. Cir. 1987)(“the Act gives the Inspector General both civil and criminal investigative authority and subpoena powers coextensive with the authority.”); United States v. Medic House, Inc., 736 F. Supp. 1531, 1535 (W.D. Mo. 1989)(“The courts have recognized the IG’s authority to conduct criminal investigations and to issue 4

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Inspector General of the Iraq Reconstruction must: *

Prevent and detect fraud and abuse related to the funds used for Iraq reconstruction activities. 5 U.S.C. App. 3 § 4(a)(1); Crowley Decl., ¶¶ 2 and 4.

*

Help identify and prosecute those participating in fraudand abuse related to the expenditures specifically allocated for Iraq Reconstruction activities. 5 U.S.C. App. 3 § 4(a)(5); Crowley Decl., ¶ 4.

*

Report to the Attorney General and possible violations of Federal criminal law that the Inspector General’s Office has discovered.

5 U.S.C. App. 3 § 4(d). Congress gave the Inspectors General broad subpoena power to carry out these mandates: [E]ach Inspector General, in carrying out the provisions of this Act, is authorized * * * to require by subpoena [sic] the production of all information, documents, reports, answers, records, accounts, papers, and other data and documentary evidence necessary in the performance of the functions assigned by this Act, which subpoena [sic], in the case of contumacy or refusal to obey, shall be enforceable by order of any appropriate United States district court. C.

Id. at § 6(a)(4).

The Right to Financial Privacy Act Congress enacted the Right to Financial Privacy Act

(“RFPA”)2 in response to United States v. Miller, 425 U.S. 435

subpoenas in conjunction with those investigations.”). 2

H.R. Rep. No. 1383, 95th Cong., 2d Sess. 33-34, reprinted in 1978 U.S.C.C.A.N. 9273, 9305-9306. 5

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(1976), which held that a bank customer had no constitutional right under the Fourth Amendment to privacy in banking records related to his accounts.

See Davidov v. U.S. Securities and

Exchange Commission, 415 F. Supp. 2d 386 (S.D.N.Y., Feb. 17, 2006).

In enacting RFPA, Congress gave bank customers protection

beyond what was afforded in the Constitution.

See Young v. U.S.

Department of Justice, 882 F.2d 633 (2d Cir. 1989)(cert. denied, 493 U.S. 1073; McDonough v. Widnall, 891 F.Supp. 1439 (D. Colo. 1985). The RFPA permits government authorities to obtain bank records by a subpoena authorized by law as long as there is reason to believe the records “are relevant to a legitimate law enforcement inquiry,” 12 U.S.C. § 3407(1), and appropriate notice is given to the bank customer whose records are sought. U.S.C. § 3407(2).

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See In re Grand Jury Subpoena, 41 F.Supp.2d

1026, 1032 (D. Alaska 1999).3

Appropriate notice under the

statute consists of a copy of the subpoena and reasonably specific notice of the nature of the law enforcement inquiry. U.S.C. § 3405(2).4

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The customer has the opportunity to challenge

the subpoena “within ten days of service or within fourteen days of mailing” of the subpoena or summons. 3

12 U.S.C. § 3410.

Any

Notice is not required for grand jury subpoenas.

Id.

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The RFPA requires only “substantial complaince.” 12 U.S.C. § 3410(a)(2). This standard is intended to ensure that minor violations do not prevent access to records sought. H.R. Rep. No. 1383, 95th Cong., 2ds Sess. 224 (1978)(additional views of Mr. LaFalce), reprinted in 1978 U.S. Cong. & Ad. News 9354. 6

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such challenge “shall contain” an affidavit or sworn statement that the “the applicant is a customer of the financial institution from which financial records pertaining to him have been sought,” and also stating the petitioner’s “reasons for believing that the financial records sought are not relevant to the legitimate inquiry stated by the government” in its notice or that the government authority has not substantially complied with the RFPA.

12 U.S.C. § 3410(a)(1) and (2).

The challenge provisions were drafted “‘in a fashion that minimizes the risk that the customers’ objections to subpoenas will delay or frustrate agency investigations.’” Irani v. United States, 448 F.3d 507, (2d Cir. May 11, 2006)(quoting SEC v. Jerry T. O’Brien, Inc., 467 U.S. 735, 745-46(1984).

The court shall

deny such a challenge if it finds that ‘there is a demonstrable reason to believe that the law enforcement inquiry is legitimate and a reasonable belief [by the agency] that the records sought are relevant to that inquiry.”

12 U.S.C. § 3410(c).

The customer has the initial burden of showing a prima facie case of impropriety.

In other words, the customer must show a

“factual basis for his conclusion that the records are irrelevant.”

In re U.S. SEC Private Investigation., 1990 WL

119321 (S.D.N.Y. August 10, 1990), citing and quoting Hancock v. Marshall, 86 F.R.D. 209, 211 (D.C.D.C. 1980)).

Absent such a

showing, th court may deny the motion without further inquiry. Even if the customer makes such a showing, the RFPA “does

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not require the agency to show that the records are relevant, but only that there is ‘a reasonable belief that the records sought are relevant’ . . . What need be shown is not probable cause, but good reason to investigate. reasonable belief is.”

A mere belief is not enough, but a

Id. ARGUMENT

A.

Introduction The court should deny Bell’s motion because (1) the

investigation and the issuance of the subpoena are within the authority of the agency; (2) the documents sought are reasonably related to the inquiry; and (3) the demands are not unduly burdensome or unreasonably broad.

United States v. Morton Salt

Co., 388 U.S. 632, 652 (1950); Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 208-209 (1946); Endicott v. Perkins, 317 U.S. 501, 509 (1943).

See also United States v. Florida Azalea

Specialists, 19 F.3d 620, 623 (11th Cir. 1994)(“an administrative subpoena should be enforced ‘if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant’”). B.

The Supoena Satisfies the RFPA Standards When a financial institution subpoena is challenged under

the RFPA, the court’s inquiry is limited to determining whether: (1) the RFPA procedures were followed; (2) the law enforcement inquiry is legitimate; and (3) there is a reasonable belief that the records sought are relevant to the inquiry.

See 12 U.S.C. §

3410(c); Douglas v. United States, 410 F. Supp. 2d 294 (S.D.N.Y. 8

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Jan. 25, 2006).

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The subpoena passes muster on all three fronts.

First, the OIG-Iraq Reconstruction followed the RFPA procedures by serving a copy and all the relevant forms to Bell. See Crowley Decl. ¶ 13. Second, the law enforcement inquiry is legitimate.

The

Inspector General has broad authority under the IG Act to conduct audits and investigations related to agency programs and operations, and subpoena records in connection with such inquiries.

5 U.S.C. app. 3 §§ 4(a)(1), 6(a)(4).

In establishing

the Inspector General, “Congress conferred very broad audit, investigatory, and subpoena powers on each department or agency, to help promote efficiency and prevent fraud, waste, abuse and mismanagement in federal government programs.”

Winters Ranch

Partnership v. Viadero, 123 F.3d 327, 330 (5th Cir. 1997). The investigation into allegations of fraud concerning the expenditure of money allocated for Iraq reconstruction falls well within that broad grant of authority.

Investigations of this

nature safeguard the integrity of government funds and programs. An investigation is legitimate if it is one the agency is authorized to make and is not being conducted solely for an improper purpose, such as political harassment or intimidation, or is otherwise in bad faith. 708, 709 (S.D. Tex. 1983).

Pennington v. Donovan, 574 F.Supp.

An investigation into whether a

former Colonel of the United States Army received kickbacks while he was performing his duties as a contracting officer responsible for safeguarding the funds allocated for Iraq reconstruction 9

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satisfies this standard. Third, the OIG-Iraq Reconstruction has a reasonable belief that the subpoenaed records are relevant to the investigation. See Crowley Decl., ¶ 12.

The bank records are likely to show the

source and amount of money received by Bell and that information is directly relevant to allegations that Bell received kickbacks while he was performing his duties as a contractor officer in Iraq.

The agency’s belief that the documents are relevant to its

inquiry into possible fraud is reasonable and entitled to deference.

Resolution Trust Corp. v. Walden, 18 F.3d 943, 946

(D.C. Cir. 1994)(court should defer to the agency’s relevancy assessment as long as it is “‘not obviously wrong.’”). In view of the well-established principle of deference to agency discretion in issuing subpoenas and in the absence of contrary legislative history, we believe Congress intended that the court’s accept the Inspector General’s determination of what information is “necessary to carry out the functions assigned by this Act.” so long as th information is relevant to an Inspector General’s function. United States v. Westinghouse Electric Corp., 788 F.2d 164 at 171 (3d Cir. 1986); see also Oklahoma Press Publishing Co. v. Walling, 327 U.S. at 214 (agencies generally are granted broad deference in determining scope of their investigative authority). Moreover, as the Supreme Court has stated, production of evidence will be ordered unless the documents are “plainly incompetent or irrelevant to any lawful purpose” of the agency. Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 509 (1943);

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accord, United States v. Aero Mayflower Transit Co., Inc., 831 F.2d 1142, 1145 (D.C. Cir. 1987); Westinghouse Electric Corp., 788 F.2d at 170.

A court will enforce a subpoena for records

that may simply lead to other evidence which, in turn, will establish violations of law.

Pennington, 574 F.Supp. at 709.

In the context of a challenge to a RFPA subpoena, courts have adopted a “strictly limited role” when they review administrative subpoenas. 878 F.2d 879.

See Sandsend Fin. Consultants Ltd.,

The Act itself was crafted cautiously to limit a

customer’s right to challenge an administrative subpoena: [The RFPA] carefully limits the kinds of customers to whom it applies, §§ 3401(4), (5), and the types of records they may seek to protect, § 3401(2). A customer’s ability to challenge a subpoena is cabined by strict procedural requirements. For example, he must assert his claim within a short period of time, § 3402(a), and cannot appeal an adverse determination until the Government has completed its investigation, § 3410(d). Perhaps most importantly, the statute is drafted in a fashion that minimizes the risk that customers’ objections will delay or frustrate agency investigations. Jerry T. O’Brien, Inc., 467 U.S. at 745-46. Bell’s challenge to the subpoena rests solely on the ground that the account number identified in the subpoena is incorrect.5 Bell does not deny, however, that he has an account at Suntrust. Indeed, Bell admits that his financial records are held by

5

Moreover, Mr. Bell also challenges the subpoena for records from the National Bank of Commerce asserting that he does not have any accounts at this financial institution. With respect to this claim, the Respondent acknowledges that Mr. Bell is correct and therefore, the subpoena with respect to the National Bank of Commerce is moot. 11

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Suntrust Bank and lists his bank routing number. [See Doc. 1]. Assuming that Bell is correct and the bank routing number on the subpoena is incorrect, this is not a basis for quashing the subpoena.

Both Suntrust and Mr. Bell have confirmed that he has

an account with Suntrust.

In fact, the bank has identified the

relevant records related to Mr. Bell and is ready and able to produce them as soon as this action is resolved. In sum, Bell has failed to establish any basis for his challenge to the subpoena and the OIG-Iraq Reconstruction has established the legitimacy of its investigation and the relevancy of the records.

Therefore, the court should deny Bell’s motion

and order that the subpoena be enforced.

Respectfully Submitted this 2nd day of March, 2009. DAVID E. NAHMIAS UNITED STATES ATTORNEY /s/ Aileen Bell Hughes AILEEN BELL HUGHES ASSISTANT U.S. ATTORNEY Georgia Bar No. 375505 600 Richard B. Russell Bldg. 75 Spring Street, SW Atlanta, Georgia 30303 (404) 581-6133 (404) 581-6150 (facsimile) [email protected]

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CERTIFICATE OF COMPLIANCE I certify that the documents to which this certificate is attached have been prepared with one of the font and point selections approved by the Court in Local Rule 5.1B for documents prepared by computer. /s/ Aileen Bell Hughes AILEEN BELL HUGHES Assistant U.S. Attorney

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CERTIFICATE OF SERVICE I certify that I have caused to be mailed a copy of the RESPONSE TO MOTION FOR ORDER PURSUANT TO CUSTOMER CHALLENGE PROVISIONS OF RIGHT TO FINANCIAL PRIVACY ACT

by depositing a

copy thereof, postage prepaid, in the United States Mail addressed as follows in the mail addressed: Anthony B. Bell 103 Marks Style Peachtree City, Georgia 30269 This 2nd day of March, 2009.

/s/ Aileen Bell Hughes AILEEN BELL HUGHES Assistant United States Attorney

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