US Treasury Attacking Attorney-Client Privilege In Tax Shelter Probe

by Glen Shapiro, for LawAndTax-News.com, New York

17 July 2003

US Government agencies are becoming more aggressive in their drive to penetrate attorney-client privilege, a report from the National Law Journal has revealed.

According to the NLJ, the Treasury Department is currently trying to force Dallas-based law firm, Jenkens & Gilchrist to disclose the names of around 600 of its clients who took advantage of 'abusive' tax shelters, in order to allow the Internal Revenue Service (IRS) to audit them.

However, speaking with regard to the summons obtained by the tax agency last month in Chicago's District Court, Jenkens & Gilchrist managing partner, William P. Durbin announced that:

'We have advised the IRS that we simply cannot comply with that request, because to do so would be a violation of our ethical, moral, and legal duties.' He went on to explain to the NLJ that:

'Without a strong attorney-client relationship, the quality and accuracy of legal advice could be severely compromised, and the relationship between a client and attorney would be forever changed.'

The IRS has argued that the firm is merely 'choosing to disobey a court order', and is said to be considering seeking an enforcement action.

According to the NLJ, the trend for seeking to pierce attorney-client privilege - a tactic which has been adopted by other other government and regulatory bodies such as the Securities and Exchange Commission, the Department of Justice, and the Federal Trade Commission - appears to have begun in earnest with the adoption of the Sarbanes-Oxley Act, which rewards companies that are under investigation for voluntary disclosure.

Speaking on condition of anonymity to the National Law Journal, one securities lawyer summed up the current mood within the industry, arguing that:

'The idea that a company has to squander a valuable asset such as attorney client privilege to get a fair hearing is just wrong. And breaking privilege has gone from being something extraordinary to becoming the new tool of the minute.'

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