Does Crime-Fraud Exception Apply To Advice On Legality Of A Scheme?

In racketeering trial involving illegal gambling schemes, defendant (who was second-in-command of the conspiracy) forfeited any claim that a conversation with his attorney during the charged conspiracy was privileged because, under the crime-fraud exception of the attorney-client privilege, the communications disclosed "his motive [to commit the]. . . crime of arson and his intent to facilitate its commission," to enforce the alleged racketeering scheme, in United States v. Albertelli, __ F.3d __ (1st Cir. June 29, 2012) (Nos. 09–2213, 09–2478, 09–2606, 10–1214)

Under FRE 501 and FRE 502, the attorney-client privilege is a protected feature of the federal evidence system. Like many traditional privileges, the attorney-client privilege is subject to a "crime-fraud" exception that excludes from its coverage communications between attorney and client for advancing criminal or fraudulent purposes. While the legal system may feel that the restriction of evidence admissibility is justified if the ultimate outcome is to preserve the attorney-client confidential relationship, such is not the case when that contact is used for illegal measures. The First Circuit recently examined a case that explored the application of the crime-fraud exception.

In the case, defendant Albertelli was tried with others, including his wife, with operating a racketeering conspiracy. The defendant's scheme involved "different flavors of continuing illegal gambling business-sports betting." One way that the scheme operated was by extorting legitimate local enterprises in the Boston region. One tool of choice for those who did not cooperate with the scheme was to subject their business to arson. The defendant was convicted after a lengthy trial. In his appeal of the conviction, the defendant sought to exclude testimony by the defendant's former attorney that had been admitted at trial. Albertelli, __ F.3d at __.

The trial judge ageed that the statement was probative of the defendant's motive. The circuit noted that this was relevant to "[a] contested issue at trial [which] was the motive underlying the attempted arson; the government's case on certain of the counts required proof that the motive, as charged in the indictment, was to extort control over the [victim] Lynnfield restaurant project.... The defense countered by urging that at worst the motive was merely revenge." The circuit opined that the defendant's communications to the attorney should be admitted. As described by the circuit:

Over objection based on privilege, Mark O'Connor, an attorney and long-time friend of Albertelli, testified about a conversation he had with Albertelli about “various strategies that might be employed to get control” of the Lynnfield restaurant from the “guys on the other side”:

[Albertelli said] [i]f they could cut off their funds, wouldn't they then fall faster in a financial house of cards? And I said, Sure, but how is that going to happen? And Mr. Albertelli said, Well...—what if there was a fire at the Big Dog North Reading and they weren't able to take any income out of the place?

As O'Connor vehemently discouraged such an effort, Albertelli inquired, “[H]ow illegal is arson?”

Albertelli, __ F.3d at __.

The First Circuit affirmed with only a brief discussion. It did not address "whether or not O'Connor was acting as Albertelli's lawyer in the conversation or merely as a friend." It made little difference in the case outcome. Noting the crime-fraud exception, the circuit referred to its basic elements. The attorney-client privilege was forfeited by operation of the crime-fraud exception to the hearsay rule. This exception forfeited the privilege of communications because the client: "(1) ... was engaged in (or was planning) criminal or fraudulent activity, and (2) with the intent to facilitate or conceal the criminal or fraudulent activity." Albertellii, __ F.3d at __ (citing In re Grand Jury Proceedings (Gregory P. Violette), 183 F.3d 71, 74–76 (1st Cir. 1999)).

The circuit explained in basically two sentences how these elements were satisfied:

In some situations, nothing sinister is implied by asking about the legality of conduct, possible penalties or both; but Albertelli certainly knew that arson was illegal, and his threshold question—“If they could cut off their funds ...”—revealed his motive for the crime and the intent to facilitate its commission through his inquiries of O'Connor. Once a plan to commit a crime is conceived, disclosing that to an attorney waives the privilege.
Albertelli, __ F.3d at __.

One of the principle features of the court in Albertelli was its focus on the nature of the supposed-privileged conversation. It was a matter not necessarily resolved by the formal words of the communication to be shielded from disclosure, also by the content of those communications.


Federal Rules of Evidence