## Facts

- Jon Rutherford and Judith Bugaiski were senior officers of a nonprofit, tax-exempt organization.
- The IRS discovered the organization failed to file certain tax-withholding forms and failed to pay over employment taxes that had been withheld, including taxes withheld from Rutherford’s pay.
- Those findings suggested possible fraud, but they were not direct proof of fraud because noncriminal explanations were possible.
- From December 2003 through June 24, 2004, the IRS continued a civil examination and met with Rutherford and Bugaiski multiple times, including three meetings conducted under IRS summonses.
- During the civil examination, the IRS also obtained documents from Bugaiski.
- On July 20, 2004, the IRS referred the matter to the Department of Justice for criminal prosecution.
- On April 21, 2006, a federal grand jury indicted Rutherford and Bugaiski on a 22-count indictment charging various tax offenses, including conspiracy-based allegations tied to tax administration.
- Rutherford and Bugaiski moved to suppress statements and documents and to dismiss the indictment, arguing the IRS violated the Fifth Amendment Due Process Clause by continuing the civil investigation after “firm indications of fraud” arose, contrary to an Internal Revenue Manual (IRM) policy calling for suspension of civil activity and referral for criminal investigation.
- The district court, relying in part on Sixth Circuit language in *United States v. McKee*, ordered suppression of certain evidence.
- The United States appealed the suppression order.

## Issues

1. Whether the IRS’s continuation of a civil tax examination after internal “firm indications of fraud” arose—contrary to the IRM—violated the defendants’ Fifth Amendment due process rights so that their statements and produced documents had to be suppressed.

## Decision

- The Sixth Circuit held that the IRS’s negligent failure to follow the IRM’s referral policy did not, by itself, amount to a Fifth Amendment due process violation.
- The court rejected the district court’s reading of *McKee* as creating a per se constitutional rule requiring suppression whenever civil contacts continue after fraud indicators appear.
- The court applied a voluntariness/compulsion framework: the Fifth Amendment is triggered when government conduct actually compels a person to speak against their will.
- Because the record did not show coercion, compulsion, or constitutionally significant misconduct tied to obtaining the statements or documents, suppression was not warranted.
- Disposition: Reversed (the suppression order was set aside).

## Legal Principles

- Internal agency policies in the Internal Revenue Manual do not automatically create constitutional requirements; a policy violation does not automatically equal a Fifth Amendment violation.
- Due process challenges to the government’s obtaining of statements focus on whether the statements were involuntary—i.e., whether government conduct actually compelled speech.
- A bright-line rule converting every departure from administrative guidance into a due process violation is not required by the Constitution.
- *United States v. McKee* did not resolve whether post–fraud-indication civil contacts always violate due process; any discussion on that point was not controlling.
- Negligent continuation of a civil examination after fraud indicators arise, without deceptive or coercive tactics that overbear the will, does not justify suppression on due process grounds.

## Conclusion

In *United States v. Rutherford*, the Sixth Circuit reversed a district court order suppressing evidence obtained during an IRS civil examination that continued after internal fraud indicators appeared. The court held that an IRM policy breach, standing alone, does not establish a Fifth Amendment due process violation; absent proof that agents coerced or compelled statements or otherwise engaged in misconduct that made the evidence involuntary, suppression is not the proper remedy.


United States v. Rutherford, 555 F.3d 190 (2009)