Paul L. Caron

Monday, September 17, 2012

9th Circuit Sounds Skeptical on Privilege Claim for Tax Records

The Recorder:  9th Circuit Sounds Skeptical on Privilege Claim for Tax Records:

The U.S. Court of Appeals for the Ninth Circuit sounded ready Thursday to order a San Francisco law firm to hand over a client's tax records, despite the firm's protest that doing so would violate attorney-client privilege.

"By us producing the documents to the government, we are in effect incriminating our client," Sideman & Bancroft partner Jay Weill pleaded to the court in U.S. v. Sideman & Bancroft.

But Ninth Circuit Judge Susan Graber suggested U.S. District Judge William Alsup did not err in ordering production under an exception to the privilege recognized by the U.S. Supreme Court. "Where's the clear error?" she asked.

Two years ago the IRS subpoenaed a laundry list of tax records from San Ramon family law attorney Mary Nolan. It included check ledgers, client billings, credit card statements and day planners that Nolan had supplied to her accountant to prepare her tax return. When the IRS executed a search of Nolan's home and office, the accountant gave the documents — contained in four banker boxes and three accordion folders — to her civil tax attorney, who in turn provided them to Sideman, which is representing Nolan in the IRS' criminal investigation.

Weill, who was the longtime chief of the Tax Division at the U.S. attorney's office in San Francisco, acknowledged Thursday that the documents themselves aren't privileged, but maintained that the act of culling through the boxes and folders to produce them would be, absent a grant of use immunity. "She's going to have to represent through me that these are the pieces of paper" sought by the IRS, he said, adding that they can't otherwise be authenticated.

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