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Case 1:18-cv-04061-ILG-PK Document 103 Filed 06/12/19 Page 1 of 4 PageID #: 1806

U.S. Department of Justice

Tax Division
Trial Attorney: Stephanie Weiner Chernoff Please reply to: Civil Trial Section, Northern Region
Attorney’s Direct Line: 202-307-2251 P.O. Box 55
Fax No.: 202-514-5238 Washington, D.C. 20044
DJ 5-52-20275
CMN 2017102332

Via ECF June 12, 2019

The Hon. Peggy Kuo

United States District Court
Eastern District of New York
225 Cadman Plaza East
Brooklyn, New York 11201

Re: United States v. Moshe Lax, et al., 18-cv-04061-ILG-PK (E.D.N.Y.)

Dear Judge Kuo:

After months of unsuccessfully attempting to obtain written discovery from defendant

Moshe Lax, the United States seeks an order (i) compelling Mr. Lax to respond to interrogatories
and document requests pursuant to Fed. R. Civ. P. 37(a)(3); and (ii) holding that Mr. Lax has
waived the attorney-client privilege as to certain communications with the law firm Porzio,
Bromberg & Newman P.C. (“Porzio”). The United States has conferred with Mr. Lax by
telephone in compliance with Local Civil Rule 37.3(a).

The Court may compel a party to answer an interrogatory or document request where the
party has failed to do so or has provided an “evasive or incomplete” response. Fed. R. Civ. P.
37(a)(3)(B)(iii) and (iv) and (a)(4). Where Mr. Lax has responded to the government’s requests
at all, his responses have been evasive and incomplete.

The United States served its First Set of Interrogatories on Moshe Lax on August 28,
2018. Ex. 1. These two interrogatories asked Mr. Lax to identify: (i) all entities affiliated with
him since May 1, 2007; and (ii) all financial accounts associated with Mr. Lax or an entity
affiliated with him since November 8, 2008. Almost nine months later, the government still has
not received a complete response. After repeated requests by government counsel, all Mr. Lax
has provided is a list of seven bank accounts that he does not claim is complete. Ex. 2.

The United States served its Second Set of Interrogatories and First Requests for
Production (the “RFPs”) on Mr. Lax on December 13, 2018. Exs. 3 and 4. These consist of 22
interrogatories and 30 document requests, which generally seek information regarding the assets,
receipts, dispositions, and expenditures of the Estate of Chaim Lax (the “Estate”), of which Mr.
Lax is executor, as well as various trusts and corporations over which Mr. Lax has control as
trustee, shareholder, or manager.
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Mr. Lax has provided little information in response to these requests. Mr. Lax initially
asserted that he could not obtain the responsive documents due to billing disputes with his
accountants and lawyers, who are in possession of the documents. Government counsel asked
him to provide a list of the individuals or entities in possession of the responsive documents, the
steps taken to obtain documents, and the responses received. On May 20, 2019, Mr. Lax
provided a list of various law firms and accounting firms as his response to Interrogatories 3-6
and 8-21, objected to Interrogatories 7 and 22, and included no response to Interrogatories 23 or
24. Ex. 5. After the United States asked Mr. Lax to clarify whether he intended the May 20th
document to be his response to the Second Set of Interrogatories, he provided an identical
document, except that it included a new paragraph addressing his privilege objection to
Interrogatory 22, and a response to Interrogatory 23 (which asks Mr. Lax to identify and describe
any litigation he has participated in as executor of the Estate). Ex. 6.

“[T]he Federal Rules of Civil Procedure require parties to produce items in their
‘possession, custody, and control,’ not simply those in their immediate possession.” Leser v. U.S.
Bank Nat. Ass’n, No. 09-CV-2362, 2010 WL 1945806, at *1 (E.D.N.Y. May 13, 2010)
(citing Fed. R. Civ. P. 34(a)(1)). “Documents are in a party’s control when the party has the
legal right, authority, or practical ability to obtain the documents.” Id. As representative of the
Estate, Mr. Lax is the best source of the requested information. His co-executor, defendant Zlaty
Schwartz, claims that nearly all responsive documents concerning the Estate’s activities are in
Mr. Lax’s possession or control. See Ex. 7 at 6-9. Yet Mr. Lax has taken no steps that the
United States is aware of to obtain the relevant documents. Nor has he attempted to answer the
United States’ interrogatories, some of which he could presumably answer on the basis of his
own knowledge or documents he does have in his possession. Mr. Lax has not even indicated
which documents reside with which third parties.

Mr. Lax also inappropriately asserts attorney client privilege over much of the
information. For example, in response to Interrogatories 3, 4, and 5, which seek information
regarding the assets, receipts, and expenditures of the Estate, Mr. Lax responded: “All info is at
[t]he attorneys.” He then provided contact information for an attorney, followed by the
statement “Any info with above attorneys are privileged as attorney client privilege.”
Interrogatories 3, 4, and 5 seek only non-privileged factual information, which must be produced
even if it is in the possession of an attorney. Upjohn Co. v. United States, 449 U.S. 383, 395,
(1981) (“[T]he protection of the privilege extends only to communications and not to facts.”)
(emphasis in original).

Additionally, Mr. Lax has waived the attorney-client privilege as to certain

communications with Porzio. In his answer, Mr. Lax repeatedly defends the transactions that the
government asserts to be fraudulent on the basis that his attorneys and accountants advised him
that the transactions were proper and legal. See Ex. 8 at 2-3. He highlights an August 2, 2018
meeting with Porzio attorneys at which they assured him that the transactions involving Dynamic
Diamond LLC were “right and just.” Id.

“Courts have repeatedly held that, where a party places matters which would be covered
by the attorney client privilege at issue, such as by asserting a reliance on counsel defense, the
attorney-client privilege will be waived in order to prevent the privilege from being used for the
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purpose of prejudicing an opponent’s case by providing only selective disclosure.” United States
v. Locascio, 357 F.Supp.2d 536 (E.D.N.Y. 2004) (citing United States v. Bilzerian, 926 F.2d
1285, 1292 (2d Cir. 1991)). “[A] party cannot partially disclose privileged communications or
affirmatively rely on privileged communications to support its . . . defense and then shield the
underlying communications from scrutiny by the opposing party.” In re Grand Jury
Proceedings, 219 F.3d 175, 182 (2d Cir. 2000).

Mr. Lax asserts that he relied upon his attorneys, who advised him that the transactions at
issue were proper, and thus he lacked the intent that the United States must show to prevail on its
fraud claims. Accordingly, Mr. Lax, individually and on behalf of the Estate, has waived any
privilege over communications between himself and Porzio regarding the transactions in the
complaint. Mr. Lax should be compelled to respond to Interrogatory 22—which seeks
information about the August 2, 2018 meeting with Porzio—as well as produce communications
with Porzio that are otherwise responsive to the RFPs.

Finally, Mr. Lax refused to respond to Interrogatory 7 on the ground that it is unduly
burdensome. Ex. 6 at 3. This interrogatory asks whether the Estate disputes the amounts of its
tax liabilities. Given that he represented the Estate in an IRS audit and tax court litigation, it
should not be burdensome for Mr. Lax to disclose whether he disputes the liabilities.

The United States has spent months attempting to work with Mr. Lax in good faith to
obtain his discovery responses. The government has done what it can in the absence of Mr.
Lax’s cooperation, including subpoenaing documents directly from Porzio and DDK & Co.
These subpoenas have been met with resistance, particularly in the case of Porzio. At the very
least, Mr. Lax must authorize and facilitate third party discovery from the relevant entities.

Mr. Lax’s pro se status does not relieve him of his discovery obligations. Mr. Lax is a
sophisticated executive who has operated several businesses and participated in dozens of
lawsuits as both plaintiff and defendant. See, e.g., Capital One, N.A. v. Lax, et al., Index No.
611263/2015 (Sup. Ct. N.Y. Cty); CitiMortgage, Inc. v. Lax, et al., Index No. 504537/2013 (Sup.
Ct. Kings Cty); Brunner v. Lax, et al., Index No. 651013/2014 (Sup. Ct. N.Y. Cty); KGK Jewelry
LLC v. Madison Ave. Diamonds LLC, Index No. 654470/2012 (Sup. Ct. N.Y. Cty); Lax, et al. v.
Zakarian, et al, Index No. 650474/2010 (Sup. Ct. N.Y. Cty). Moreover, Mr. Lax has no trouble
seeking the services of professionals when it serves his interest. His wife, Shaindy Lax, has
engaged counsel to defend her. Mr. Lax is free to proceed pro se, but he may not use that status
as a means to defeat discovery in this case. He wove an extensive and complex web of financial
transactions over the course of ten years in order to appropriate assets from the Estate. The
Federal Rules require him to disclose the details of those transactions.

The United States respectfully requests an order compelling Mr. Lax to provide complete
responses to the United States’ discovery requests, including communications with Porzio
regarding the transactions that are the subject of the complaint, as well as initial disclosures
pursuant to Fed. R. Civ. P. 26(a)(1), which he has not yet provided.
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Respectfully submitted,

/s/ Stephanie Weiner Chernoff

Trial Attorney
Civil Trial Section, Northern Region

Cc: All counsel (via ECF)

Moshe Lax (via e-mail to