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Foregone Conclusion: Law Firm Must Hand Over Hot Potato Records

By Robyn Hagan Cain on January 08, 2013 3:08 PM

The IRS is investigating San Ramon, California, attorney Mary Nolan for tax shenanigans. As part of that investigation, it wants Nolan's tax documents for 2005 to 2008.

In 2010, the IRS executed a search warrant looking for the documents at Nolan's residence, her business, and in her car. The IRS failed to locate the documents, but did find references to Nolan's income tax preparer, accountant Mary Fouts. So the feds went to Fouts, who said she had given the records to Nolan's civil tax attorney, Richard Guadagni. Guadagni had given the documents to Jay Weill, Nolan's counsel for the IRS criminal investigation.

Weill claimed that producing Nolan's tax documents would be testimonial, in violation of Nolan's Fifth Amendment rights. This week, the Ninth Circuit Court of Appeals disagreed.

In Fisher v. United States, the Supreme Court explained that when an individual transfers documents to his or her attorneys to obtain legal assistance in tax investigations, those documents, "if unobtainable by summons from the client, are unobtainable by summons directed to the attorney by reason of the attorney-client privilege." Thus, Sideman & Bancroft (Weill's firm) wouldn't have to produce the tax records if doing so would violate Nolan's Fifth Amendment rights.

But that's not the end of the case.

In 2010, the Ninth Circuit found that handing over such documents doesn't infringe upon a target's constitutional rights if "the existence and location of the papers are a foregone conclusion and the taxpayer adds little or nothing to the sum total of the Government's information by conceding that he in fact has the papers." For the "foregone conclusion" exception to apply, the government must establish its independent knowledge of three elements: the documents' existence, the documents' authenticity and respondent's possession or control of the documents.

Here, the IRS had "precise knowledge" of the "sixty-six inch stack" of "four bankers boxes and three accordion folders" it wanted.

Concluding that the district court had not clearly erred in finding that the IRS could independently authenticate Nolan's records, the Ninth Circuit upheld the lower court's order that Sideman must turn over the documents.

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