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UNITED STATES v. NEILL

January 17, 1997

UNITED STATES OF AMERICA
v.
DENIS M. NEILL, JAMES P. NEILL, Defendants.



The opinion of the court was delivered by: GREEN

 Pending before the Court is the defendants' Motion to Dismiss due to the Government's Invasion of Their Attorney-Client Privilege ("Motion to Dismiss"). After determining that the defendants had made the requisite preliminary showing under United States v. Kelly, 252 U.S. App. D.C. 308, 790 F.2d 130, 137 (D.C. Cir. 1986), the Court ordered an evidentiary hearing on this issue. See United States v. Neill, Memorandum Op. at 21 & 24 (JHG) (D.D.C. Oct. 10, 1996). Upon consideration of the evidence introduced and testimony offered at the evidentiary hearing, in light of the credibility and demeanor of the witnesses, as well as the in camera submissions offered by both parties, *fn1" their post-hearing briefs and the entire record in this matter, the Motion to Dismiss will be denied.

 I. Findings of Fact

 On October 27, 1993, federal agents executed four search warrants at the office of Neill and Company, and the homes of Defendants James and Denis Neill. On October 28th, a fifth warrant was executed to search Defendant James Neill's safe deposit box at Columbia First Bank in Washington, D.C. See Mem. Op. at 1-5. Approximately sixty boxes of materials were seized, including computers, computer files and data. Id. at 6. The seized items were stored in a locked space at the IRS Office, 500 N. Capitol St., N.E., Washington, D.C.

 While the affidavits to the search warrants and the search execution memorandum stated that the federal agents were not to seize documents on the letterhead of the defendants' attorneys, these "letterhead documents" were in fact seized over the oral and written objections of the defendants. *fn2" The agents also seized other documents that were not "letterhead documents" but some of which were later claimed to be protected by attorney-client privilege. *fn3"

 The seizure of potentially privileged documents was handled differently at different search sites. At Denis Neill's home, after offering Denis Neill's counsel the option of sealing the materials for off-site review or of having the PLA conduct an immediate on-site review in counsel's presence, counsel (over standing objection) selected the latter. The PLA then reviewed each document for which counsel claimed privilege, seizing some and returning others to counsel. At the offices of Neill & Company, without reviewing the potentially privileged materials in James Neill's seized briefcase, the PLA sealed those materials. At no time did the defendants' counsel seek judicial intervention or file a motion for a protective order. Nor did counsel ever file a motion under Fed.R.Crim.P. 41(e).

 Because materials asserted to be subject to the attorney-client privilege had been seized, on October 28th, Deputy Chief of the Fraud Section Peter Clark directed trial attorney Elisabethanne Stevens and her supervisor, Barbara Corprew, to review those materials. Stevens and Corprew formed what the Department of Justice called a "taint team," meaning that their actions would be "walled off" from the prosecution team thereby ensuring that the prosecution team remained free of the "taint" arising from exposure to potentially privileged material. Stevens and Corprew's mandate was to review documents for which the defendants claimed attorney-client privilege, determine whether the crime-fraud exception might be applicable, and, if necessary, litigate the existence of the privilege or the application of the crime-fraud exception. *fn4" On October 29th, before he met with the defendants' counsel, prosecutor Richard Poole (Senior Trial Attorney, Fraud Section) was advised that Ms. Stevens would act in this capacity.

 On November 1, 1993, the defendants' counsel met with Poole to voice their objections to the seizure of materials for which they claimed privilege and to demand the return of the same. *fn5" While the defendants' counsel contend that the government promised to return without review any documents seized contrary to the search affidavits and Search Execution Memorandum, Poole recalled telling counsel that such documents would be returned, but only after review by someone other than a "prosecution team" member: "We discussed the fact that the fraud section had identified a review team who would be looking at the issues raised by the claims of privilege and would -- would be responsible for resolving them, including litigation." Hearing Transcript ("Transcript") at 74 (Vol. I-B). *fn6"

 In a follow-up letter, the defendants' counsel requested the return of thirteen items, none of which they claimed were privileged but which were of a personal nature to the defendants or their family. See Joseph Jones' letter of Nov. 4, 1993, at 1-2, Defendants' Exhibit ("DE") # 5. The letter also stated:

 
With regard to the privileged items, we propose to designate someone from our office to immediately review these items with Attorney Elisabeth (sic) Stevens of your office in order to segregate those items which were clearly seized in contravention of your instructions to seize no correspondence, memoranda, etc., emanating from our offices or those of James Neill's counsel, Martha P. Rogers, Esq. There may be other materials which are privileged communications between Denis or James Neill as clients, and others (sic) attorneys." Id. at 2. *fn7"

 On November 2nd, Stevens received two boxes which included materials that the defendants claimed were protected by the attorney-client privilege. While Defendant Denis Neill's counsel did not designate anyone pursuant to his letter of November 4th until approximately one month later, Stevens was contacted directly by Defendant James Neill's counsel, Martha Rogers, on November 3, 1993. Rogers demanded the return of the materials in James Neill's briefcase. She testified that she was advised by Stevens that such materials would be returned without review as soon as they were located. However, Stevens testified that on or about November 8th, she advised Rogers that she would be reviewing those documents before she could make a determination whether they should be returned. Still, the defendants made no request for judicial intervention.

 During the course of the next several months, Stevens and Corprew reviewed the initial delivery of potentially privileged materials as well as other potentially privileged documents later discovered among the seized items. In two instances, IRS Special Agent Fort, a member of the prosecution team, discovered documents that were marked "attorney-client" privilege among the seized items. *fn8" Fort testified that, on or about December 1, 1993, after one of the defendants' counsel had reviewed the seized materials and made an inventory, see Transcript at 83 & 104 (Vol. I-B), he began reviewing the materials. While going through a three-ring binder, he happened upon a tab that was labeled "Earl Glock-Attorney/Client." After opening the notebook to the tab, he discovered what appeared to him to be a legal opinion. He then removed that section, without reading the potentially privileged material, sealed the document and delivered it to Stevens. See Transcript at 80-86 (Vol. I-B). Agent Brown, who was present when Fort discovered and sealed the document, *fn9" corroborated Fort's testimony. See Transcript at 84-85 (Vol. II-B). Fort testified persuasively that he neither showed the document to Poole nor did he discuss what he may have gleaned of its content or even the fact of its existence. See Transcript at 86 (Vol. I-B). The document was later returned to the defendants by Stevens.

 Another set of potentially privileged materials was discovered by Fort on or about January 24, 1994. Fort testified that while again reviewing documents that had already been inspected and inventoried by defense counsel, he opened a manila envelope for Federal City National Bank which included documents that were labeled as "attorney/client privileged." See Transcript at 87 (Vol. I-B). Fort testified that he did not show the documents to anyone or read them. See id. at 87-88 & 101. Instead, he immediately sealed them and then ...


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