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GOVERNMENT’S MOTION FOR DETERMINATION OF CRIMEFRAUD EXCEPTION

GOVERNMENT’S MOTION FOR DETERMINATION OF CRIMEFRAUD EXCEPTION

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Published by François Pilet
Plaintiff, United States of America, through its undersigned counsel of record,
the United States Attorney for the District of Arizona, and the Tax Division of the
Department of Justice, hereby files its Motion For Determination of the Crime-Fraud
Exception to the attorney-client privilege (“Motion”) and respectfully moves the Court
for a determination that confidential oral communications between Christopher Rusch
and Stephen Kerr and/or Michael Quiel are not protected by the attorney-client privilege
because of the applicability of the crime-fraud exception. The motion is supported by
the below memorandum of points and authorities.
Plaintiff, United States of America, through its undersigned counsel of record,
the United States Attorney for the District of Arizona, and the Tax Division of the
Department of Justice, hereby files its Motion For Determination of the Crime-Fraud
Exception to the attorney-client privilege (“Motion”) and respectfully moves the Court
for a determination that confidential oral communications between Christopher Rusch
and Stephen Kerr and/or Michael Quiel are not protected by the attorney-client privilege
because of the applicability of the crime-fraud exception. The motion is supported by
the below memorandum of points and authorities.

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Published by: François Pilet on May 06, 2012
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05/13/2014

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ANN BIRMINGHAM SCHEELActing United States AttorneyDistrict of ArizonaMonica B. EdelsteinTimothy J. StockwellTrial AttorneysDepartment of Justice, Tax DivisionTwo Renaissance Square40 North Central Ave. Suite 1200Phoenix, AZ 85004-4408Monica.Edelstein@usdoj.govTimothy.J.Stockwell@usdoj.govAttorneys for Plaintiff United States of America
UNITED STATES DISTRICT COURTDISTRICT OF ARIZONAUnited States of AmericaPlaintiff,v.1. Stephen M. Kerr;2. Michael Quiel;3. Christopher M. Rusch,Defendants.11-CR-2385-JAT (DKD)GOVERNMENT’S MOTION FOR DETERMINATION OF CRIME-FRAUD EXCEPTIONPlaintiff, United States of America, through its undersigned
 
counsel of record,the United States Attorney for the District of Arizona, and the Tax Division of theDepartment of Justice, hereby files its Motion For Determination of the Crime-FraudException to the attorney-client privilege (“Motion”) and respectfully moves the Courtfor a determination that confidential oral communications between Christopher Ruschand Stephen Kerr and/or Michael Quiel are not protected by the attorney-client privilege because of the applicability of the crime-fraud exception. The motion is supported bythe below memorandum of points and authorities.
Case 2:11-cr-02385-JAT Document 67 Filed 04/27/12 Page 1 of 15
 
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INTRODUCTION/BACKGROUND
On December 8, 2011, Stephen Kerr (“Kerr”), Michael Quiel (“Quiel”), andChristopher Rusch (“Rusch”) were indicted for violating 18 U.S.C. §371, conspiracyto defraud the United States. Additionally, Kerr and Quiel were each charged with twocounts of willful filing of false returns for tax years 2007 and 2008 in violation of 26U.S.C. §7206(1) and two counts of willful failure to file Reports of Foreign Bank andFinancial Accounts (“FBARs”) in violation of 31 U.S.C. §5314, §5322(a). Theindictment remained under seal until January 30, 2012, when the defendants could betaken into custody.The indictment alleges that Phoenix businessmen Kerr and Quiel retained Rusch,a tax attorney, to assist them in defrauding the IRS through the use of secret offshore bank accounts held in the names of nominee entities. Specifically, beginning in or  before 2004, and continuing through at least December 2007, Kerr and Quiel obtainedcontrol of shares of stock of publicly traded domestic companies in a way thatconcealed their ownership of the stock. Kerr and Quiel then deposited the stock, or  proceeds from the sale of the stock, to multiple undeclared bank accounts set up withthe assistance of Rusch at UBS in Switzerland and at another Swiss bank. Accordingto the indictment Rusch assisted in setting up these accounts in the names of nomineeentities to further conceal Kerr’s and Quiel’s ownership. Kerr and Quiel also used theaccounts to conceal income earned from the subsequent sale of this stock from the IRS.Rusch set up the accounts, maintained signature authority over the accounts, anddirected transactions to and from these accounts in a manner that further concealedKerr’s and Quiel’s ownership interest.- 2 -
Case 2:11-cr-02385-JAT Document 67 Filed 04/27/12 Page 2 of 15
 
12345678910111213141516171819202122232425262728Although an in camera review of evidence is appropriate to determine theapplicability of the crime-fraud exception in some circumstances, the government is
1
not seeking in camera review here. The government did previously raise the crime-fraud exception issue concerning
documents
produced by Rusch in a Motion for InCamera Review filed pre-indictment. To the extent that the government will utilizesome of the documents produced by Rusch in support of its position that the crime-fraud exception to the attorney-client privilege applies to
oral 
communications betweenthe parties, some background may be helpful.Following Rusch’s production of documents pursuant to a grand jury subpoena,counsel for Kerr and Quiel raised the issue of attorney-client privilege. Counsel for Kerr and Quiel, however, refused to produce a privilege log or identify and return to thegovernment the non-privileged materials thereby requiring the government to utilize ataint team to review the documents and narrow down the universe of arguably privileged materials. The government moved the Court to conduct an in camerainspection of the allegedly attorney-client privileged materials produced by Rusch todetermine, as a threshold matter, if the materials were protected by the attorney-client privilege, and if so, to further determine that the crime-fraud exception applied. On or about August 19, 2011, the Court (J. Martone) ruled that the subpoenas were proper andthat defendants had failed to properly assert the attorney-client privilege in the first place. The Ninth Circuit declined to review the issue of whether the defendants had properly asserted the privilege. Consequently, the Court has not addressed theapplicability of the crime-fraud exception to any communications—in document formor otherwise—between Rusch and Kerr and/or Quiel.See, e.g., United States v. Zolin, 491 U.S. 554, 565-70 (1989); In re Grand
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Jury Subpoena 92-1(SJ), 31 F.3d 826, 829-30 (9th Cir. 1994); In re Grand JuryInvestigation, 974 F.2d 1068, 1072-74 (9th Cir. 1992).- 3 -
Case 2:11-cr-02385-JAT Document 67 Filed 04/27/12 Page 3 of 15

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