And when it comes to tax matters, the attorney-client privilege is narrow. Kovel Letter (Non-Attorney Communication) Summary. ought not destroy the privilege…; the presence of the accountant is necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege is designed to permit. More specifically, the attorney-client privilege may apply to confidential communications made to an accountant when the client is under the mistaken, but reasonable, belief that the professional from whom legal advice is sought is in fact an attorney. A Kovel Accountant is an accountant who is used by attorneys/clients in very limited situations in which the attorney and/or client must communicate with another non-attorney accountant such as a CPA or Enrolled Agent, but the Attorney wants to try to extend the privileged communications beyond the Attorney, and to the Tax/Accounting Professional. The addition of the tax evasion charges is significant for the government's arguments for waiver of privilege and work-product protection. The term Kovel accountant is based upon the case of United States v. Kovel, 296 F. Kovel accountants are hired when a tax attorney is concerned that conduct by his client, or in some cases lack of conduct, could result in criminal tax charges being brought. . Kovel: Extending the Privilege to Nonlawyers. It can temporarily (and for a limited-purpose) extend the Attorney-Client privilege for very specific communications. In many situations, an attorney may be able to utilize a "Kovel" agreement to cloak a conversation that is necessary to render legal advice with attorney-client privilege. The Purpose of A Kovel Accountant. First, the only way to bring the accountant under the cloak of the attorney-client privilege is through consummating a Kovel agreement. Accountant Retention Agreement (Kovel Letter) A Kovel agreement may extend attorney`s privilege to the disclosure of an accountant that has been established "confidentially for the purpose of obtaining legal advice from the attorney." See U.S. vs. Adlman, 68 F.3d 1495 (2d Cir. . In Part V, this Comment will briefly examine the protection that the work product doctrine affords accountants that are employed by attorneys. It appears that the taxpayer filed the amended returns at issue in late 2011 under advice of counsel, working with the taxpayer's accountant under a Kovel arrangement. This ensures that the accountant is working for the lawyer, and not for the client. Suggested Citation: What is a Kovel accountant? There is absolutely no protection for tax return preparation under a Kovel Letter. Because the tax lawyer or the client must disclose privileged information to the Kovel accountant in order for the accountant to assist the tax attorney in advising the client the court in Kovel held that the attorney client privilege extends to communications with the accountant. Under certain circumstances, a lawyer may shield a non-testifying accountant or other business expert under the Kovel rule. The Assistant United States Attorney informed the judge that Kovel had refused to answer "several questions * * * on the grounds of attorney-client privilege"; he proffered "respectable authority * * * that an accountant, even if he is retained or employed by a firm of . Under such circumstances, the attorney-client privilege extends to communications with the accountant for the purpose of assisting the attorney in rendering legal services to the client; this is known as the Kovel doctrine after United States v. Kovel [296 F. 2d 918 (2d Cir. 1961), the attorney-client privilege is extended to an accountant retained specifically to assist an attorney in rendering legal services to a client, both during the investigative stages of the case and if necessary, during trial. The Kovel Case Louis Kovel, a former IRS agent, was an accountant employed by a law firm to assist in representing clients with tax problems. The Attorney-Client Privilege The Accountant-Client Privilege The Kovel Doctrine The Kovel Agreement Kovel Agreement The Internal Revenue Service (IRS) has broad statutory authority to investigate and audit taxpayers. ATTORNEY-CLIENT PRIVILEGE EXTENDS to accountants under the Kovel rule when a CPA acts at the direction of the lawyer to provide information for the client. The Kovel letter (based on a case ruling, not statutory law) provides a limited protection in situations when an Accountant's knowledge is required for the Attorney to provide legal advice. ought not destroy the privilege…; the presence of the accountant is necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege is designed to permit. Evan Davis suggests how lawyers using Kovel accountants can minimize the risk of losing privilege protections and giving the government a window into the attorney-client relationship. Privilege only protects communications involving "tax advice." B. Beware! Basis for KovelPrivilege Louis Kovel was a former IRS agent who worked at a tax law firm, where he assisted the firm's attorneys in representing clients with tax issues. An accountant may be forced to divulge any information or documents that the IRS request if the matter is criminal. It is used in situations where you must communicate with a non-attorney accountant such as a CPA, but you want to extend the privileged communication beyond the attorney and to the tax or accounting professional should a tax controversy exist or occur. Accountants who engage clients in sensitive conversations risk turning themselves into a witness against their client and may expose themselves to unwanted liability exposure. Accountant Retention Agreement (Kovel Letter) by Practical Law Securities Litigation & White Collar Crime A sample Kovel letter agreement that counsel may use to retain an accounting firm to aid counsel in providing legal advice or services while maintaining the attorney-client privilege and attorney work product doctrine protections. Kovel Privilege rule also extends to the work product developed when the accountant is hired in conjunction with the legal services. Join Timothy W. Hoover and Michelle Merola of Hodgson Russ LLP as they discuss advanced issues surrounding the use of Kovel accountants and the protection of the attorney-client privilege. The client-accountant communication has limited privilege under the current Tax Code. The Kovel Rule is an extension of the legal principles of lawyer-client privilege and confidentiality. The government recognized that "the privilege covers communications to non-Attorney employees with a 'menial or Here the parties continue to take generally the same positions as below -- Kovel, that his status as an employee of a law firm automatically made all communications to him from clients privileged; the Government, that under no circumstances could there be privilege with respect to communications to an accountant. or if the advice sought is the accountant's rather than the lawyer's, no privilege exists"). This rule extends the attorney-client privilege to accountant-client communications and to work product when the accountant is hired to help in rendering legal services. Kovel was subpoenaed to testify at a grand jury investigation of one of the law firm's clients but refused to answer several questions on the grounds of attorney-client privilege. The party claiming the privilege bears the burden of proving the existence of the factors required to sustain it . (Internal quotations and citations omitted). It does not apply to "dual purpose" documents (those that have a legal purpose and an accounting purpose) or communications not essential to However, both federal and state courts have since split over the proper scope of theKoveldoctrine. Second, as a matter of procedure, the attorney should engage the Kovel accountant, rather than the client. The Kovel Accountant Key Limitations of Section 7525 (1) The privilege is only as broad as the attorney-client privilege. If the accountant is appropriately engaged by counsel, the common law attorney-client privilege should apply to all communications rendered in furtherance of the legal services being provided to the client, both during the examination stages of the audit and, if necessary, during any subsequent civil or criminal proceedings. Attorney informed the judge that Kovel had refused to answer 'several questions * * * on the grounds of attorney-client privilege'; he proffered 'respectable authority * * * that an accountant, even if he is retained or employed by a firm of attorneys, cannot take the privilege.' The judge answered 'You don't have to give me any authority on that.' First, the only way to bring the accountant under the cloak of the attorney-client privilege is through consummating a Kovel agreement. There is a way that the taxpayer, the tax attorney, and the accountant can all be protected under attorney-client privilege—the Kovel letter. The Internal Revenue Service (IRS) has broad statutory authority to investigate and audit taxpayers. The presence of the accountant (or any third person) is presumed to mean that the communications were not made in confidence. However, a federal court will not apply a state-based accountant-client privilege to any criminal matter or to a civil matter based on a federal law. A Kovel Agreement is used for the very limited purpose of a situation in which an Attorney (typically not a tax attorney) requires assistance from an accountant in order for the attorney to provide legal advice to the client. The letter, named after the case United States v. Under the attorney-client privilege, communications amongst attorneys and their clients are generally not subject to disclosure. On September 7, the grand jury appeared before Judge Cashin. What is a Kovel Accountant? 50 Sample Engagement Letters In Pdf Ms Word The Kovel letter based on a case ruling not statutory law provides a limited protection in situations when an Accountants knowledge is required for the Attorney to provide legal advice. In non-criminal tax matters, privilege applies to any communication that would be considered privilege if it were between the taxpayer and an attorney. "[Kovel] recognized that the inclusion of a third party in attorney-client communications does not destroy the privilege if the purpose of the third party's participation is to improve the comprehension of the communications between attorney and client."10 "Attorney-client privilege may also extend to third party communications if said . Here the parties continue to take generally the same positions as below — Kovel, that his status as an employee of a law firm automatically made all communications to him from clients privileged; the Government, that under no circumstances could there be privilege with respect to communications to an accountant. Despite this reliance, whether the attorney-client privilege protects the communications between an attorney and a . 1961), in which a law firm hired an accountant to assist in its representation of a client under investigation for tax fraud. It is clear that the Kovel privilege does not apply to communications between an accountant and a client when the accountant has only been providing tax return preparation . Koveland Attorney-Client Privilege Fundamentally, attorney-client priv- ilege protects communications where legal advice is sought from a professional adviser in his or her capacity as an attor- ney. Kovel Rule Shields Accountant-Client Emails from the Government By Mark Leeds and Bruce Wilson 1 . [11] Kovel, 296 F.2d at 922 ("if what is sought is not legal advice but only accounting service . The Attorney-Client Privilege The attorney-client privilege is the oldest common law privilege recognized by the courts. In effect, the accountant is doing your tax accounting and return preparation, but reporting as a subcontractor to your lawyer. THE LANDMARK KOVEL DECISION In United States v.Kovel (296 F. 2d 918 [2d Cir. accountant or other business expert under the Kovel rule. The Kovel letter, named after United States v. Kovel, enables an attorney to hire an accountant to prepare your returns and brings them under the attorney-client privilege umbrella. Attorney Client Privilege and Use of Kovel Arrangements FAQs. . • Post data-breach litigation lessons learned and to be applied. Second, as a matter of procedure, the attorney should engage the Kovel accountant, rather than the client. KOVEL AGREEMENTS Because there is no federal accountant-client privilege, accountant-client communications are often not protected from disclosure in federal courts. This rule extends the attorney-client privilege to accountant-client communications and to work product when the accountant is hired to help in rendering legal services. This ensures that the accountant is working for the lawyer, and not for the client. A Kovel letter (named after a Second Circuit Court of Appeals case by such name) is a letter by which an attorney may extend the protection of the attorney-client privilege to an accountant's work, provided that the accountant is retained to assist in providing legal services to the attorney's client. 1995). Kovel, 296 F.2d 918 (2nd Cir. In the course of representing a client that was the target of a grand jury investigation for various income tax offenses the taxpayer conveyed information to the accountant, which the accountant communicated to an attorney in the firm to aid in the client's defense. 1961), a law firm employed an accountant on its own staff. There is no contemporaneous proof of a Kovel agreement for communications with [the accountant] after June 10, 2010. Information was provided on a confidential basis by the client directly to the accountant. In Adams, a federal district court applied the Kovel Rule to shield emails from being disclosed to the Government. The seminal case is U.S. v. Kovel1where the court extended the attorney-client , privilege to cover client communications to an accountant engaged by legal counsel to assist on the case. 1961), extended the attorney-client privilege to accountants who are assisting attorneys. A. Kovel protects the attorney-client privilege only where the accountant has been hired to explain or interpret certain concepts to the attorney and to help the attorney better represent the client, it will be very important to distinguish that, notwithstanding the third party's prior engagement, the attorney retains an accountant (where the privilege may exist). the privilege. This rule extends the attorney-client privilege to accountant-client . Kovel Letter and Attorney-Client Privilege when Hiring a CPA/Accountant A Kovel letter is used in very-limited situations, in which an attorney wants to try to extend the attorney-client privilege on matters involving highly-complex accounting/tax situations only. 1961)]. The accountant is then, in essence, working for the attorney and not the ultimate client. Although the law firm informed the prosecutor that This form is a Kovel Letter. A Kovel arrangement is premised on the notion that the accountant's communications were "made in confidence for the purpose of obtaining legal advice from the lawyer." See United States v . The record reveals nothing as to what occurred on September 6. Kovel was subpoenaed to testify before a Manhattan federal grand jury that was investigating one of the firm's clients. When Kovel is not used correctly, it jeopardizes the attorney-client privilege. And, the Kovel agreement arises under this privilege. This series of frequently asked questions (FAQs) explain several privileges and protections that are relevant to a CPA who provides tax services, including the concept of attorney-client privilege, its implication on CPAs and the use of Kovel arrangements in the course of client . Kovel. What is a Kovel Accountant? Thus, pre-existing relationships between the accountant and the ultimate client before the Kovel agreement can be prickly. In particular, courts have applied both accountant—commonly known as a Kovel accountant—is brought within the attorney- client privilege and his work is protected from discovery. Louis Kovel, a nonattorney, was a former IRS agent who was employed at a law firm that specialized in . Under the principles of Kovel, any of the work product of the accountant should be subject to the attorney-client privilege protection. After Kovel had undertaken accounting work for the firm's client during a government investigation, he was called to testify against the client before a federal grand jury. Finally, this Comment will call upon courts to reinstate the holding in Kovel, due to the limited applicability of section 7525. The contours of the Kovel privilege--when the attorney-client privilege includes communications that include an accountant--can be somewhat confusing, even to the courts. Such professionals can include the accountant who is consulted by the client or indirectly through the client's attorney. United States v. Boffa, 513 F.Supp. The communications made in con- fidence with the client are permanently protected from disclosure unless the cli- ent waives that privilege. We're not talking about tax advice given by a tax preparer. As discussed in this article, it is important for counsel to take care to ensure that the accountant's work in fact falls within the Kovel doctrine and that the privilege is not waived. [i] In many cases, the IRS attempts to fulfill this statutory authority through seeking communications made between taxpayers and third parties, such as tax return preparers and CPAs. USA NationalFederalA sample Kovel letter agreement and counsel cannot use to quality an. Definition. Although the disclosure of attorney-client communications to third parties generally waives the attorney-client privilege, Kovel privilege is not expansive. A Kovel letter is used in very-limited situations in which an attorney wants to try to extend the attorney-client privilege. It can temporarily and for a limited-purpose extend the Attorney-Client privilege for. David Gannaway a principal in Citrin Cooperman's Valuation and Forensic Services Group and a former special agent with the IRS' Criminal Investigation Division explores the role of a Kovel . 1961), a Kovel arrangement describes a process whereby an attorney engages an accountant to aid the attorney in the provision of legal services. Your tax lawyer hires an accountant. Kovel was later subpoenaed to provide grand-jury testimony against Hopps, but refused to answer any questions on grounds that the attorney-client privilege protected his discussions with Hopps. . Under such circumstances, the attorney-client privilege extends to communications with the accountant for the purpose of assisting the attorney in rendering legal services to the client; this is known as the Kovel doctrine after United States v. Kovel [296 F. 2d 918 (2d Cir. Kovel, an accountant and former IRS agent, was employed by a law firm that specialized in tax law. As with all privileged relationships, if the government seeks to discover the Kovel accountant's work, the taxpayer will bear the burden of establishing that the communications Kovel, 296 F.2d 918 (2nd Cir. By the same token, if the lawyer has directed the client, either in the specific . Properly executed, it. Remember, there is no federal accountant-client privilege, so the attorney-client privilege was his only avenue for relief. A Kovel arrangement allows the attorney-client privilege and work-product doctrine to extend to communications with a third-party expert — like an accountant — so long as that expert was hired "for the purpose of obtaining [confidential] legal advice from a lawyer." 10 A Kovel arrangement is created when a client's lawyer hires an . II. Kovel, the U.S. Court of Appeals for the Second Circuit held that certain kinds of work done by such an accountant is privileged. Kovel, 296 F.2d 918 (2d Cir. In Kovel, the IRS was trying to obtain certain information from an accountant (Kovel) that was an employee of a law firm. In criminal tax matters, no privilege applies to communication between the client and their accountant. The lesson here is clear. The Attorney-Client Privilege The Accountant-Client Privilege The Kovel Doctrine The Kovel Agreement Kovel Agreement The Internal Revenue Service (IRS) has broad. Ad Make Your Reference Letter Using Our Step-By-Step Process. In U.S. v. Kovel 296 F.2d 918 (2nd Cir. Topics to be discussed: • Review of decisions involving privilege and Kovel accountants. Kovel is premised upon the notion that the accountant's communications were "made in confidence for the purpose of obtaining legal advice from the lawyer.". In today's marketplace, the way that corporations conduct business is drastically changing, and lawyers are increasingly relying on third-party consultants, such as accountants or investment bankers, to facilitate them in providing accurate legal advice to corporate clients. client privilege affords accountants. 3. A Kovel arrangement is premised on the notion that the accountant's communications were "made in confidence for the purpose of obtaining legal advice from the lawyer." See United States v. Adlman, 68 F.3d 1495 (3d Cir . Kovel: Extending the Privilege to Nonlawyers. Kovel, 296 F.2d 918 (2d Cir. 1961)]. 517, 523 (D.Del.1981) Under certain circumstances, a lawyer may shield a non-testifying accountant or other business expert under the Kovel rule. Kovel, 296 F.2d 918 (2d Cir. Kovel, the Second Circuit found that the attorney-client privilege extended to communications between an attorney and a third-party consultant who acted as an interpreter. How does attorney-client privilege work? To formalize those arrangements, a special - purpose engagement letter, called a Kovel letter, is often used to memorialize the arrangement between the attorney, the accountant, and the taxpayer client. 5 1961 Brief Fact Summary. The party claiming the privilege bears the burden of proving the existence of the factors required to sustain it: Therefore, communications with [the accountant] following O'Shea's termination fall outside the scope of privilege and must be disclosed. A Kovel letter (based on the 1961 case) can be drafted and signed by the accountant and attorney which essentially extends the attorney-client privilege to the accountant. Inadvertent disclosure of confidential information may lead to loss of the privilege. By the same token, if the lawyer has directed the client, either in the specific . The Kovel Rule extends the attorney-client privilege to communications between accountants and their clients, as well as communications between lawyers and accountants. 1961), the attorney-client privilege is extended to an accountant retained specifically to assist an attorney in rendering legal services to a client, both during the investigative stages of the case and if necessary, during trial. 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