The July FBI raid at the home of former Trump campaign chairman Paul Manafort tells us a great deal about the status of special counsel Robert Mueller’s investigation.
Based on my years of experience conducting complex white-collar investigations as a federal prosecutor, it suggests to me that Mueller has already obtained tax returns as part of his investigation.
As a starting point, the fact that Mueller obtained a search warrant indicates that he presented evidence to a federal judge, who concluded that there was probable cause — in other words, a good reason to believe — that a federal crime was committed and that evidence of that crime was in Manafort’s home.
{mosads}That tells us that at least one aspect of Mueller’s investigation is far enough along that he has gathered enough evidence to prove that there is probable cause. Typically taking an aggressive, public action like sending the FBI to search a subject’s home is not an early step in an investigation. A prosecutor would first take steps that can be done covertly, without the subject knowing, to gather evidence that can serve as the basis for more aggressive actions like search warrants.
One typical step that federal prosecutors take near the beginning of white-collar investigations is obtaining tax returns. I worked with federal prosecutors who obtained tax returns in every single white-collar investigation they worked on. I didn’t do that, but I obtained tax returns in most white-collar cases I investigated, particularly cases involving financial transactions.
Obtaining a subject’s tax returns can be a useful tool in almost any investigation. They tell you where the person invests their money, where their bank accounts are, where they have debts and who they’ve given money to. Often the information found in a tax return can tell a prosecutor which financial institutions and corporate entities to subpoena for records.
At times, obtaining tax returns can lead to evidence of tax offenses. If an individual receives money that is not reported in the tax return or is misrepresented, that can be charged as a separate federal crime. Hiding financial transactions also can be used as evidence that the subject knew that the underlying source of the money was illegal.
A federal prosecutor obtains tax returns by seeking an ex parte order from a federal judge. That means that the person who is being investigated doesn’t know that the tax returns are being sought or if the judge issues the order. Basically, it’s done in secret. That’s why tax returns are often sought in the early stage of an investigation, before the subject knows exactly what the prosecutor is looking at.
The statute permitting a prosecutor to obtain tax returns in a non-tax investigation requires a senior Justice Department official to sign off on obtaining a tax return, but Mueller has authority to do so because the statute permits “United States attorneys” to obtain tax returns and he has the power of a “United States attorney” pursuant to the special counsel regulations. In my former office, a person designated by the United States attorney routinely approved requests for tax returns.
In my former office, a person designated by the United States attorney routinely approved requests for tax returns.
So what does a prosecutor need to show the judge to obtain a tax return? The statute requires the prosecutor to show three things.
First, the prosecutor has to show “there is reasonable cause to believe” that a specific criminal act has been committed. That’s where the recent news of the Manafort search warrant comes in. We know that Mueller had enough evidence to establish “reasonable cause” that a crime was committed because he got a search warrant.
Mueller would also have to establish that he could not “reasonably” obtain the tax return from another source, like the person’s accountant. Generally speaking, that is an easy thing for a prosecutor to prove. If they can’t prove that, it means they will just get the tax return elsewhere.
Finally, Mueller would have to establish that “there is reasonable cause to believe” the return “may be relevant” to his investigation. That is a very low bar, much lower than what Mueller had to establish to obtain a search warrant for Manafort’s home. To obtain the search warrant, Mueller had to establish that there was probable cause to believe there was specific evidence of a crime at a specific location — Manafort’s home.
All that he has to show is that the tax return might help him in his investigation. That means that even the tax return of someone other than Manafort would be helpful to Mueller as he conduct his investigation. At this point, we don’t know what other evidence Mueller has and exactly whom he is focusing his investigation upon. But given that all he has to show is that the tax return “may be relevant” to his investigation, which has a very broad mandate, he could have tax return information for many individuals.
That brings us to the obvious question — does Mueller have the president’s tax returns? There is not enough public information for us to know. Public reports of subpoenas relating to Trump Organization financial records could suggest that Mueller may have sought tax return information of those business entities, if not the president himself. Given how broad the statute is, Mueller could seek the president’s tax returns even if he is not investigating the president.
Because Mueller has the authority to secretly obtain tax returns for any individual with a judge’s permission if he needs them for his investigation, I would be surprised if Mueller hadn’t obtained some tax returns by now. The question is just whose tax returns he has.
Renato Mariotti is a former federal prosecutor in the Securities and Commodities Fraud Section of the United States Attorney’s Office in Chicago and he has prosecuted federal obstruction of justice cases. Follow him on Twitter @renato_mariotti.
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