Fraudulent conveyance litigation is an important component of bankruptcy. An unscrupulous debtor might attempt to shield his or her assets by engaging in an intentional fraudulent conveyance. An intentional fraudulent conveyance is defined as a transfer made by a debtor, whether voluntarily or involuntarily, made with actual intent to hinder, delay, or defraud any present or future creditors. See 11 U.S.C. §548(a)(1); N.Y. Debt. Cred. Law §276.
An important issue that arises in intentional fraudulent conveyance litigation is the application of the crime-fraud exception to the attorney-client privilege. A client might structure an intentional fraudulent conveyance in such a manner that he or she needs the assistance of an attorney to effectuate the intentional fraudulent conveyance because a component of the intentional fraudulent conveyance might relate to the commencement of a legal proceeding, the preparation of a trust or the preparation of a transaction. The attorney might not be aware of the client’s intentional fraudulent conveyance because the client has concealed his or her true intent on retaining the attorney’s legal services. Ordinarily a bankruptcy trustee is not entitled to delve into communications between a debtor and his or her attorney because of the attorney-client privilege. However, as set forth herein, the crime-fraud exception to the attorney-client privilege provides a basis for a bankruptcy trustee to examine counsel for a debtor who has provided legal services related to the effectuation of an intentional fraudulent conveyance.
