Attorneys – Attorney-Client Privilege – Crime-Fraud Exception – Securities Trading

Under Seal 1 v. United States (In re Grand Jury Subpoena) (Lawyers Weekly No. 006-001-16, 12 pp.) (James Wynn Jr., J.) Appealed from W.D.N.C. (Max Cogburn Jr., J.) 4th Cir. Unpub.

Holding: Two futures-traders’ communications with their lawyer were made in order to further the traders’ criminal scheme of misusing information about impending trades for personal gain; therefore, the crime-fraud exception to the attorney-client privilege applies.

We affirm the district court’s denial of the traders’ motion to quash a grand jury subpoena to the traders’ lawyer.

The attorney-client privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer’s being fully informed by the client. However, the attorney-client privilege is lost when a client gives information to the attorney for the purpose of committing or furthering a crime or fraud.

To overcome the attorney-client privilege and secure sought evidence, the government must convince the court (1) that the client was engaged in or planning a criminal or fraudulent scheme when he sought the advice of counsel, and (2) that the attorney’s assistance was obtained in furtherance of the crime or fraud or was closely related to it. It is the client’s knowledge and intentions that are of paramount concern in our analysis; the attorney need not be aware of any illegality.

The district court did not clearly err in determining that the government successfully made a prima facie showing that the traders engaged in a criminal or fraudulent scheme of misusing information about impending trades for personal gain. The district court’s determination that the traders intended to avoid detection and continue their scheme in communicating with the lawyer, not least by having the lawyer misrepresent their activities to the regulator, is likewise supported by the record.

Affirmed.