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D.C. Circuit Hands Blow to President Trump

Requires Accounting Firm to Comply with House Subpoena

By Karolyn Perry

In October, a divided federal appeals court panel decided that Mazars USA, LLP, an accounting firm used by President Trump, has to comply with a subpoena issued by a House of Representatives committee. Trump v. Mazars (D.C. Cir. Oct. 11, 2019).

The House Committee on Oversight and Reform issued a subpoena to Mazars after President Trump's former attorney Michael Cohen testified before the Committee earlier this year in February. Mr. Cohen testified that he believes President Trump improperly manipulates his financial documents. To support his claim, Mr. Cohen provided the Committee with several of President Trump's accounting documents, including 2011 and 2012 "Statements of Financial Condition" prepared by Mazars.

After Mr. Cohen's testimony, then-Chairman Elijah Cummings wrote a letter to Mazars, informing the accounting firm that its 2011 and 2012 work presented during Mr. Cohen's testimony was troubling to the Committee. The Chairman requested certain categories President Trump's financial documents spanning back to 2009, and Mazars rejected the Committee's request, stating that it would not produce the documents voluntarily.

Chairman Cummings responded by writing a memorandum to the Oversight Committee, in which he formally announced his intention to subpoena Mazars pursuant to the investigative power granted by House Rule X. In his memorandum, Chairman Cummings laid out four areas he believes the Committee should investigate: whether President Trump engaged in illegal conduct before and during his time in office, whether President Trump is complying with the Constitution's Emoluments Clauses, whether President Trump has unidentified conflicts of interest that impact his ability to make objective policy decisions, and whether President Trump has properly reported his finances to certain entities, including the Office of Government Ethics. According to Chairman Cummings, the Committee's purpose for investigating these matters was purely legislative—to "inform its review of multiple laws and legislative proposals under its jurisdiction."

In April, the Committee formally issued Mazars a subpoena seeking documents and communications from 2011 to 2018 that relate to the accounting firm's preparation of financial and accounting documents for President Trump and his businesses. President Trump's attorneys filed a lawsuit in the D.C. District Court to stall enforcement of the subpoena against Mazars, but the judge granted summary judgment in favor of the Oversight Committee. The court held that the subpoena is enforceable and that the legislative rationales laid out in Chairman Cummings's memorandum were subjects "on which legislation could be had."

President Trump appealed the decision to the D.C. Circuit Court of Appeals, alleging, among other things, that the Committee's stated legislative purpose was not "genuine," that the Committee's desire to "investigate whether the President may have engaged in illegal conduct before and during his tenure in office" constituted an "unlawful law enforcement purpose," and that the subpoena falls outside of the Committee's power.

Writing for the 2-1 majority, Judge Tatel rejected each of the Plaintiff-Appellants' arguments and affirmed the lower court's grant of summary judgment in favor of the Committee. The majority held that the Committee has power under both the House Rules and the Constitution to issue the subpoena to Mazars, that the Committee's legislative inquiry is legitimate, and that information sought by the subpoena is "'reasonably relevant' to the Committee's legitimate legislative inquiry."

In support of the majority's decision to uphold the Committee's subpoena, Judge Tatel repeatedly references the investigation's permissible "remedial legislative purpose." The court cites to Chairman Cummings' House memorandum and a letter that he wrote to White House counsel two months prior to the memorandum. According to the court, Chairman Cummings repeated the same legislative purpose in both documents, and this consistency further supports the legitimacy of the Committee's stated legislative purpose for investigating and issuing a subpoena to Mazars.

The majority also highlighted legislation currently pending in the House as support for the Committee's stated legislative purpose. "Although the House is under no obligation to enact legislation after every investigation," the court found the relevant pending legislation and the Chairman's correspondence to be "more than sufficient to demonstrate the Committee's interest in investigating possible remedial legislation."

Interestingly, the court sidestepped the Plaintiff-Appellants' argument against the Committee's rationale "to investigate whether [the President] may have engaged in illegal conduct" both before and after entering office. According to the majority, "even if such an investigation would not by itself serve a legitimate legislative purpose, [the court could] easily reject the suggestion that this rationale spoils the Committee's otherwise valid legislative inquiry."

Not surprisingly, the majority's approach to President Trump's "illegal conduct" argument was a major source of contention for the dissent. Judge Rao rejected the majority's rationale and found that the Committee could only pursue this inquiry by issuing a subpoena through its impeachment power. Judge Rao was unpersuaded by the Committee's argument that its investigation centered around future legislation. Even though the President's conduct was not the focus of the Committee's investigation, Judge Rao held that "[a]llegations [about] an impeachable official act[ing] unlawfully must be pursued through impeachment." Because the Committee wanted to investigate the President's potential illegal conduct, Judge Rao found that the investigation "naturally raises the specter of impeachment." As such, according to Judge Rao, the Mazars subpoena should have been issued pursuant to the House's impeachment power. Not its legislative power.

The Plaintiff-Appellants also alleged that the Committee does not have authority to subpoena the President's private financial records because the House did not "unequivocal[ly] grant" it this authority. The majority rejected this argument, and, to support its rejection, the court pointed to a House Resolution that was adopted in July. This resolution confirmed the House Oversight Committee's authority under House Rules X and XI to issue subpoenas like the one at issue.

This is not the first lawsuit involving President Trump and a House Committee subpoena. In April of this year, the House Committee on Financial Services and the House Permanent Select Committee on Intelligence issued subpoenas to Deutsche Bank and Capital One, two entities that provide financial services for President Trump. President Trump unsuccessfully sought to enjoin enforcement of the subpoena, and he appealed the denial to the Second Circuit Court of Appeals.

Several news organizations moved to intervene in the appeal and to unseal an unredacted version of a letter Deutsche Bank filed with the court. The sealed version of the letter includes names of certain taxpayers whose information was requested by the House subpoena, but these names are redacted in the unsealed public version. The Second Circuit granted the news organizations' motion to intervene, but it denied their motion to unseal the unredacted version of Deutsche Bank's letter. According to the court, the taxpayers' names were not "'judicial documents' relevant to any issue in the underlying appeal."

Karolyn Perry is an associate Waller Lansden Dortch & Davis LLP in Nashville.
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