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While disapproving of the government’s handling of the matter, a Southern District of New York judge found that the bulk of client files seized from an attorney’s office during an investigation into staged automobile accidents are not protected by the attorney-client or work-product privilege. Judge Deborah A. Batts found that the crime-fraud exception to the privileges justified the use of files seized in 2002 from the offices of attorney Solomon Kaplan, who is accused of helping to file false and fraudulent claims with medical insurers. But Batts also used her opinion in United States v. Kaplan to criticize government procedures for reviewing potentially privileged materials that have been seized from a lawyer’s office during a criminal investigation. The judge said she disapproved of the way materials are reviewed by Assistant U.S. Attorneys who are supposed to be “walled off” from the prosecutors and FBI agents working on the criminal case. Kaplan was one of eight people charged in a government investigation into hundreds of accidents that were staged to defraud medical insurers. One key witness was Alexander Galkolvich, a former attorney who was allegedly part of the scheme until his arrest in 2001 and subsequent agreement to cooperate with the government. Kaplan, operating from his office on 86th Street in Bensonhurst, Brooklyn, was accused of being part of a conspiracy that spanned about two years, as he allegedly joined with the operators of a medical clinic to defraud insurers through phony claims between January 2000 and February 2002. The case files seized by the government were among those referred to Kaplan by the Kinto Medical Clinic on 83rd Street, which was operated by Dr. Josef Sherman and his brother, Yegveny Sherman. While Kaplan purchased the law office in 2001, it was allegedly controlled by the Shermans, with the clinic referring more than 40 percent of the car accident cases handled by the office. Kaplan moved to suppress about 74 files seized from his office, claiming both attorney-client and attorney work-product privilege. The government opposed, saying 57 of the seized files fall within the crime-fraud exception to the privileges, and that 14 other files contain documents that were not privileged. The government also argued that a procedure for having an independent “privilege team” of prosecutors review seized materials has been accepted in the Southern District. Judge Batts said the government had cited five cases “in which an ‘ethical wall,’ has been employed” by prosecutors in the district, but she added “there is no indication that this practice has been approved.” Kaplan had argued that the law disfavors the use of a privilege team to screen potentially privileged documents, and he asked for the appointment of a special master to determine what files were actually privileged. He cited the case of indicted criminal defense attorney Lynne Stewart, who is charged with providing material support to a terrorist organization. In the Stewart case, Judge John G. Koeltl approved the use of a special master to review files taken from the law offices of Stewart. Judge Batts, however, said that “ Stewart is of little aid to Defendant here, since in this case, Defendant is a civil litigation attorney, the seized filed are materials pertaining to civil cases, and the Sixth Amendment concerns implicated in Stewart are clearly not present here.” But the judge said it was “apparent that the procedures used by the Government in this case were of little use in protecting any privileged materials seized by the government.” The FBI case agent, she said, saw the seized files even before the applicability of the crime-fraud exception was determined and, in fact, made that determination. “For a law enforcement agent involved with the prosecution and investigation of the case to have made determinations about whether or not materials are privileged,” she said, raises “serious concerns” about admissibility, “and eviscerates any claim that an ‘ethical wall team’ with the Government effectively screens the prosecution team from privileged materials.” Batts, while ruling that the bulk of files seized from Kaplan’s office will not be suppressed, said her opinion “should be counted among those disapproving the Government’s use of an ethical wall team to ‘protect’ the attorney-client and work-product privileges or to determine whether the crime-fraud exception applies.” Assistant U.S. Attorney Miriam E. Rocah represented the government. Frederick P. Hafetz represented Kaplan.

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