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The 2nd U.S. Circuit Court of Appeals has quashed a grand jury subpoena served on an attorney in a fraud investigation, citing work-product protection. The unanimous decision, written by Judge Pierre N. Leval, overturned a ruling by Southern District of New York Judge John F. Keenan because prosecutors revealed on appeal that they planned to use the attorney’s testimony in a way that might violate a privileged lawyer-client relationship. In 1997 the attorney, who along with the other parties in the case was not identified, was present during a meeting between her client, the general counsel of the “XY Companies,” and two Internal Revenue Service investigators. At the time, the attorney’s firm represented some or all of the companies and related individuals. When the companies recently became the subject of a tax evasion and fraud investigation by the U.S. Attorney for the Southern District of New York, the attorney was asked to testify before a grand jury about possible false statements made by her client to the investigators. The attorney, who now works for a different law firm, her client and her former firm sought to have the subpoena quashed on the grounds that it violated the work-product privilege, as outlined by the U.S. Supreme Court in Hickman v. Taylor, 329 U.S. 495 (1947). Judge Keenan denied the motion, ruling that the privilege could not be invoked to bar testimony limited to observing whether the general counsel made false statements. But on appeal, the prosecution produced papers that suggested it would also use the attorney’s testimony to support charges that the general counsel committed fraud before the 1997 interview. When asked during oral arguments if that was its intention, the prosecution said yes. Based on the prosecution’s two-fold intention, the appellate court overturned the lower court ruling in In Re: Grand Jury Subpoena, 01-6250. “It is one thing for a client to recognize that if he commits a crime in his attorney’s presence, the attorney may be compelled to testify to the criminal acts she witnessed,” Judge Leval wrote. “It seems to us quite different for the client to accept that if he hires an attorney to represent him with respect to his past commission of a crime, the attorney may be compelled to testify against him as to admissions (or denials) he made in his attorney’s presence that tend to prove his guilt with respect to that past crime,” he wrote. The panel did not suggest that the prosecution deliberately misled either the district or appellate court. It wrote in a footnote that “the government did no more than present its strongest arguments, perhaps without recognition that different results might follow depending on the scope of the use made of [the attorney's] testimony.” The court said that if the prosecution were to issue a new subpoena before a different grand jury to investigate only the allegation of false statements, the issue should be examined de novo by the district court. Judge Guido Calabresi and Southern District Judge Sidney H. Stein, sitting by designation, concurred with Judge Leval’s opinion. Robert G. Morvillo of Abramowitz, Grand, Iason & Silberberg and Henry Putzel represented the attorney under subpoena, as well as the general counsel and the companies. Assistant U.S. Attorney Stanley J. Okula represented the prosecution.

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