Symposium: Forget about taxes: Mazars is a big case

Posted Thu, March 12th, 2020 11:04 am by Victoria Nourse

Victoria Nourse is the Ralph V. Whitworth Professor in Law at the Georgetown University Law Center.

Journalists have called these the “Trump tax cases.” The reference to tax should not fool anyone. Trump v. Mazars and Trump v. Deutsche Bank could be the most important legislative power cases in decades. Why? Congress’ ability to exercise oversight. Subpoenas to financial institutions are the bread and butter of congressional investigations. The president’s arguments, if accepted, would mean that congressional oversight authority shrinks dramatically. I doubt that the Supreme Court will adopt those arguments: It would open up a hornet’s nest of claims, and Supreme Court precedent heavily favors Congress. As the House of Representatives’ brief explains, “in more than twenty cases concerning the scope of Congress’s power to investigate, this Court has only once held that a Congressional inquiry exceeded its constitutional limits.” But it is important to understand why the president’s arguments, if accepted, would work deep damage to legislative power across the board.

Let’s focus on the congressional subpoenas to Mazars, an accounting firm, and Deutsche Bank. (I leave to others the separate questions raised by the Vance case involving a state subpoena). First, there is nothing unusual about congressional subpoenas of private parties, banks and accounting firms. Congress has issued and courts have enforced subpoenas to major companies and individual, private financiers from the 19th-century financial scandals that bred the antitrust laws to the regulation of the securities markets that followed the Great Crash of the 1920s. As the Supreme Court put it almost 100 years ago, in McGrain v. Daugherty (1927), “the power of inquiry—with process to enforce it—is an essential and appropriate auxiliary to the legislative function.” This explains why legislative subpoenas are “necessary and proper” to exercise “all legislative powers” granted to Congress under Article I of the Constitution.

The president’s lawyers admit that if there is a legislative purpose, Congress has subpoena power and courts must enforce those subpoenas. Their rebuttal: Congress has different motives here. The president’s lawyers write: “[T]hese Committees are not legislating; they are avowedly engaging in law enforcement.” Forget that during the impeachment, the president’s lawyers decried arguments based on parsing the president’s “motive.” Here, Congress’ motive is center stage. For the president’s team, the “real” purpose of Congress’ subpoenas is to determine whether the president has committed tax fraud or money laundering, despite Congress’ claims that the committees are conducting ongoing investigations to discover risky loan practices and foreign money laundering, to assess the efficacy of campaign finance regulation and to renew legislative efforts to thwart foreign financial influence in an election. As a general rule, the caselaw on congressional power presumes that the congressional purpose is legislative in character, even when there may be other motives. In Watkins v. United States (1957), a McCarthy-era case in which “bad” congressional motive—to embarrass individuals with ties to communists—was palpable, the court nevertheless held that “motives alone would not vitiate an investigation which had been instituted by a House of Congress if that assembly’s legislative purpose is being served.” In short, even if there is a mixed political motive, those opposing the subpoena have a heavy burden to bear.

The president’s lawyers argue that Congress cannot engage in what they term “law enforcement.” But that term is unbearably vague. If any law enforcement claim is outside Congress’ oversight jurisdiction, then congressional oversight is in serious trouble. Think about Enron. Think about the companies that sold mortgages to those who could not pay for them and precipitated the Great Recession. Investigations in these cases could all be characterized as law enforcement because fraud or obstruction of justice was involved. The president’s argument extends the idea of law enforcement to include information that might show criminal activity. But if potential criminal activity is the standard, then many of the long-held precedents of the court are wrong: McGrain (involving fraud), for example, and many a company subpoenaed — from Apple to Enron, Microsoft to Caterpillar, all of which have been subject to investigation (see Elise Bean’s 2018 book “Financial Exposure”) — could claim that Congress was acting outside its authority because it was engaging in law enforcement. The truth is that Congress cannot prosecute. It has no power to deprive any individual citizen of liberty; in that sense, it never “enforces” the law.

Given this, members of the court should tread cautiously. The phrase “law enforcement” does not appear in the Constitution, nor is it found in the Supreme Court’s caselaw. The law-enforcement argument should be seen for what it is: a “functional” claim depending upon a fictive “function.” (Conservatives generally dislike functional claims as a theoretical matter because they do not hew to the formal words of the Constitution). My suspicion is that the president’s lawyers are inspired by Justice Antonin Scalia’s famous dissent in Morrison v. Olson with its grave warning of a wolf in sheep’s clothing—a prosecutorial Congress. Elsewhere I have written that Scalia was correct in result there, but grievously wrong in reasoning, claiming contrary to the Constitution’s text that the president has all “functionally” executive power. The word “all” is most definitely not in Article II. Even if Scalia was right about the independent counsel statute at issue in Morrison, that does not mean that a new law-enforcement limit on congressional investigations is judicially administrable. Forget about the deep congressional ire that would be aroused by new judicially decreed limits on Congress’ power; just wait for the flood of litigation from private parties fighting congressional subpoenas by claiming Congress is improperly enforcing the law.

If the court rejects the law enforcement argument, the president’s claim comes down to a request for a “presidential exception” to congressional investigative power. The court treads on dangerous ground if it accepts that argument. The public would be right to ask: Why is every person and corporation in America subject to congressional subpoena, but the president is not? The president’s answer is that Congress has no legitimate legislative purpose here because Congress has no constitutional power to regulate the “office of the President.” That will come as extraordinary news to Congress, which regulates foreign gifts to the president, oversees the ethics of the office of the president and has created criminal laws barring the use of taxpayer funds for the president’s personal political use. No one should be confused about the president’s claim: The current occupant of the office is saying that he is immune from congressional legislation—or, to put it more vernacularly, “he is above the law.” Other presidents, from Richard Nixon to Bill Clinton to George W. Bush, have been rebuffed by the Supreme Court when asserting similar claims. Somehow, I think the public will notice if this court, with its two Trump appointees, comes out differently.

The guts of the president’s claim, the aspect that might appeal to some, is that he should have some privacy. But now is not the time for a conservative-leaning court to create a presidential “right to privacy” that does not exist in the Constitution. That would surely raise the ire of women who have been told for decades that they have no right to privacy because there is no text granting them one. Privacy hypotheticals will undoubtedly pepper the oral arguments: Can Congress order a blood test of the president, for example, or the production of his diary written as a 12-year-old? The best answer is that “it depends.” Change the circumstances and many apparently unreasonable requests turn out to seem quite reasonable. If all birth records of a president have disappeared and a diary written by a 12-year-old shows that the president was a “natural born citizen,” then the diary is fair game if the Congress seeks to enforce that constitutional provision through legislation. And, as for the blood, just remember that if the president’s blood is relevant to a topic of legislative importance—say because there is credible evidence she is spreading a blood-borne disease—then there is a far better case for Congress than one might think. Hypotheticals are imaginary cases to be met by smart lawyers with equally imaginary changes in circumstances. Public figures, as the Supreme Court has recognized in New York Times v. Sullivan, voluntarily enter the public realm: “[P]ublic men, are, as it were, public property.” If a man wants to keep his financial affairs private, best not to run for an office that asks him to serve at the pleasure of the American people.

Posted in Trump v. Vance, Trump v. Mazars USA, LLP, Trump v. Deutsche Bank AG, Symposium before oral argument in Trump v. Vance and Trump v. Mazars, Featured

Recommended Citation: Victoria Nourse, Symposium: Forget about taxes: Mazars is a big case, SCOTUSblog (Mar. 12, 2020, 11:04 AM), https://www.scotusblog.com/2020/03/symposium-forget-about-taxes-mazars-is-a-big-case/