UNITED STATES v. AMERICAN TARGET ADVERTISING, INC., ET AL.
No. 00-1384 (4th Cir., July 11, 2001)

One of our members recently litigated a case of interest involving the question of the legitimacy of subpoenas issued by a federal agency, purportedly under the authority of the Inspector General Act, which demonstrates the helplessness of the citizenry in many cases when it is confronted by government investigative power.

The case concerned administrative subpoenas issued by the Inspection Service of the United States Postal Service, for documents in the possession of three related companies serving as professional fundraising counsel for several nonprofit organizations. The Postal Service justified the subpoenas on the theory that it was investigating a possible violation of the Cooperative Mailing Rule — a Postal Service regulation reinforcing the grant of discounted nonprofit postal rates in 39 U.S.C. Section 3626, by expressly providing that an authorized organization may only mail its "own matter" at those rates. The Postal Service’s theory was that the mailings of the nonprofit organizations would not constitute their "own mail" if they did not bear the risk of financial loss on the mailings or if anyone, including their professional fundraising counsel, could be considered to have made too much money for their work in producing the mailings.

The targets of the subpoenas, American Target Advertising, et al. ("ATA"), were related through the common ownership of Richard Viguerie. ATA resisted the subpoenas on the ground that the Cooperative Mailing Rule ("CRM"), as interpreted by the Postal Service, was contrary to the federal statute providing for nonprofit rates, and was contrary to the CRM as originally established and previously interpreted by the Postal Service. ATA also argued that it was being unfairly pursued because of hostility against Mr. Viguerie and/or political pressure brought to bear by certain influential persons on the Postal Service, and that it should be allowed to pursue discovery against the Postal Service to develop the true facts. On appeal, ATA also argued that the subpoenas were issued without authority by the Postal Service in that, at the time they were issued, the Postal Inspection Service had no authority under the Inspector General Act.

The United States Court of Appeals for the Fourth Circuit refused to reach the substantive question presented by ATA, affirming the District Court’s order enforcing the subpoenas, and effectively saying that ATA could later argue the substantive question on the correct meaning of the Cooperative Mailing Rule if the Postal Service pursued ATA for postal revenue deficiencies. The appellate court also refused to grant discovery or reach the question of the Postal Inspection Service’s authority to issue the subpoenas under the Inspector General Act.

Although the Fourth Circuit’s decision may not seem unusual in light of the numerous cases enforcing administrative subpoenas, except where irrelevant or overbroad, where subpoena power exists and the investigation is within the agency’s authority, it serves to illustrate the helplessness of those forced to open up their files to government agencies, even where they believe the object of the government’s investigation is illegal.