142 F. Supp. 3d 37
D.D.C.2015Background
- The United States seeks forfeiture of >$250 million held in multiple foreign accounts, alleging funds trace to fraud, extortion, bribery, misappropriation, and embezzlement by claimant Pavel Lazarenko (former Ukrainian PM) from 1992–1999.
- Government served Requests for Production Nos. 28–29 seeking tax returns, FBARs, financial disclosures, and communications from 1992 to present; Lazarenko objected generally and invoked §6103 and confidentiality for certain records.
- Government moved to compel production, arguing relevance (and waiver of Lazarenko’s relevance objections), and that §6103 and common-law privilege do not bar discovery from the claimant himself.
- Magistrate Judge Harvery (discovery magistrate) reviewed prior related rulings limiting discovery for post-1999 records and recognized the centrality of source-of-funds and income in 1992–1999 to the government’s forfeiture theory.
- The court ordered production in part: tax and financial records for 1992–1999 are discoverable; records from 2000–present are discoverable only to the extent relevant to Lazarenko’s standing to claim an interest in the defendant assets; §6103 and common-law privilege do not bar discovery from the claimant; Pretrial Services records and the Presentence Investigation Report from the N.D. Cal. are protected and need not be produced.
Issues
| Issue | Plaintiff's Argument | Lazarenko's Argument | Held |
|---|---|---|---|
| Relevance / Waiver of relevance objection | Lazarenko waived relevance by offering only a general objection; records are relevant to source and legitimacy of funds | General relevance objections preserved; many records irrelevant (esp. post-1999) | Court declined to decide waiver; on merits found requests relevant for 1992–1999 and limitedly relevant (standing) for 2000–present |
| Scope of production (1992–1999 v. 2000–present) | All tax/financial records 1992–present are probative of source/legitimacy; if none exist, claimant must say so | No records 1992–1999; post-1999 returns irrelevant to forfeiture merits | Compelled production of 1992–1999 records (including those in claimant’s control); 2000–present records only if they evidence or bear on claimant’s interest in the defendant assets (standing) |
| 26 U.S.C. §6103 (statutory protection) | §6103 governs IRS disclosure, not a bar to compelling a private litigant to produce his returns | §6103 prevents disclosure; claimant resists signing IRS release | §6103 does not bar civil discovery from the taxpayer; it restricts IRS disclosures. Court denied request to compel claimant to sign IRS release at this time |
| Common-law / qualified privilege for tax returns | Government says privacy interests outweighed; protective order mitigates concerns | Claimant asserts qualified/common-law privilege against disclosure of returns | Court found any common-law objection waived and, on merits, that government showed relevance and lack of alternative sources; no privilege bars production under protective order |
| Pretrial Services & Presentence Investigation Report confidentiality | Gov argued for production; relevance to finances not shown | Cites 18 U.S.C. §3153 and N.D. Cal. local rule protecting these records | Court refused to compel those documents, recognizing statutory/local-rule confidentiality and need for special showing for presentence reports |
Key Cases Cited
- Friedman v. Bache Halsey Stuart Shields, Inc., 738 F.2d 1336 (D.C. Cir. 1984) (broad Rule 26 relevancy standard)
- Commodity Futures Trading Comm’n v. Collins, 997 F.2d 1230 (7th Cir. 1993) (§6103 does not bar discovery from litigants in civil cases)
- United States v. $174,206, 320 F.3d 658 (6th Cir. 2003) (tax-filing failures probative in forfeiture proceedings)
- United States v. $30,670, 403 F.3d 448 (7th Cir. 2005) (comparing reported income to assets in forfeiture context)
- Robinson v. Duncan, 255 F.R.D. 300 (D.D.C. 2009) (framework for qualified/common-law privacy concerns for tax returns)