Crime-Fraud Exception to Attorney-Client Privilege

Its Applications and Limitations

The attorney-client privilege is not absolute, of course. Michael Volkov discusses the crime-fraud exception to attorney-client privilege, including when it may be applied.

The attorney-client privilege is an invaluable tool that is used to encourage frank and open communications between a client and an attorney. Clients rely on the privilege when communicating with attorneys. It is important to remember that the attorney-client privilege applies only to communications between a client and an attorney for the purpose of seeking legal advice.

A company’s reliance on the attorney-client privilege provides a critical cloak of protection for attorneys to investigate potential misconduct and to remediate problems without any fear that the government or third parties will gain access to such information.

As everyone knows, however, the attorney-client privilege is not absolute. Prosecutors regularly seek access to attorney-client communications using the crime-fraud exception, especially in white-collar cases.

In basic terms, the crime-fraud exception applies to attorney-client communications in furtherance of a contemplated or ongoing crime or fraud. The crime-fraud exception distinguishes between forward-looking and past communications. Of course, such an exception is not easily applied, and there are numerous gray areas that occur when dealing with crime-fraud exception claims.

In Special Counsel Mueller’s investigation, the issue has come up on numerous occasions when dealing with Michael Cohen’s communications and with the investigation of Paul Manafort and Rick Gates.

In a lengthy and interesting decision (here), Judge Beryl Howell required Manafort and Gates’ former attorney to testify before the grand jury concerning limited aspects of her legal representation of Manafort and Gates relating to alleged misleading representations made to the Department of Justice concerning their work on behalf of the Ukraine government.

To meet the crime-fraud exception, the government must make a prima facie showing to establish the elements of an ongoing or imminent crime or fraud. The government is not required to prove beyond a reasonable doubt the elements of an ongoing or imminent fraud; the court will often look at the claimed privilege materials in camera to resolve such a claim.

There are numerous situations in criminal law when these situations occur. Assume that a client requests his or her lawyer to prepare a document for filing with the government based on false information. Even if the attorney did not know that the document included false information, the attorney may be required to testify about what the client told the attorney when preparing the document. (Of course, I am assuming that if the attorney knew the document contained false information, the attorney would not have filed the document).

When the government seeks to prosecute the client for the false document, the government will seek to obtain the attorney’s testimony about what the client told the attorney in preparing the document. This is a case where the crime-fraud exception can be applied.

Given the myriad number of ways in which white-collar criminals can employ lawyers to assist in the furtherance of fraud, money laundering or Ponzi schemes, it is easy to envision how attorneys can be turned into witnesses against their clients. But in many cases, the perpetrator does not make incriminating statements to the attorney, since the attorney would (and should) decline to participate in the conduct if he or she knows that the project is part of a criminal scheme.

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.