United States v. Okun , 281 F. App'x 228 ( 2008 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-5069
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
INVESTMENT PROPERTIES OF AMERICA, LLC,
Intervenor - Appellee,
v.
EDWARD H. OKUN,
Intervenor - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. Robert E. Payne, Senior
District Judge. (3:07MS167-1)
Argued: May 13, 2008 Decided: June 11, 2008
Before WILKINSON, NIEMEYER, and MOTZ, Circuit Judges.
Affirmed by unpublished opinion. Judge Niemeyer wrote the opinion,
in which Judge Wilkinson and Judge Motz joined.
ARGUED: Guy Richard Strafer, Miami, Florida, for Appellant. Brian
Lee Whisler, OFFICE OF THE UNITED STATES ATTORNEY, Richmond,
Virginia; Patrick Hugh O’Donnell, KAUFMAN & CANOLES, PC, Norfolk,
Virginia, for Appellees. ON BRIEF: Michael J. Rosen, Miami,
Florida, for Appellant. Chuck Rosenberg, United States Attorney,
Alexandria, Virginia, for Appellee United States of America.
Unpublished opinions are not binding precedent in this circuit.
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NIEMEYER, Circuit Judge:
On August 27, 2007, a federal grand jury sitting in the
Eastern District of Virginia issued a subpoena to Eric Perkins,
formerly the Chief Legal Officer of Investment Properties of
America, LLC (“IPA”), a company engaged in the acquisition and
management of commercial real estate. The grand jury sought
Perkins’ testimony as it related to transactions involving the
misuse of funds by IPA and its CEO and sole shareholder, Edward H.
Okun. Okun filed a motion in the district court to quash the grand
jury subpoena, asserting personal attorney-client privilege and
“common interest” privilege. The district court denied the motion,
finding that Okun did not have standing to challenge the subpoena
served on Perkins because Okun had not established that he had a
personal attorney-client relationship with Perkins giving rise to
any privilege. We affirm.
I
Edward H. Okun was, at the relevant time, the sole shareholder
and CEO of IPA, as well as the sole shareholder of the 1031 Tax
Group, LLC, a business facilitating the exchange of properties
under Section 1031 of the Internal Revenue Code. Section 1031 of
the Internal Revenue Code allows owners of investment property to
defer capital gains taxes that would be due upon sale of a property
if the sale proceeds are deposited in a “Qualified Intermediary”
until the seller is ready to close on a like-kind replacement
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property. The grand jury’s investigation deals with the alleged
misuse of funds held by Qualified Intermediaries that were the
subsidiaries of the 1031 Tax Group, through improper loans to both
IPA and Okun individually.
IPA’s legal staff began looking into the allegedly improper
loan transactions in October 2006, first obtaining a memorandum
from outside counsel that discussed investment restrictions
applicable to funds held by Qualified Intermediaries. After
receiving this memorandum from outside counsel, IPA’s in-house
counsel Eric Perkins began investigating the loan transactions
himself, requesting information from various IPA employees.
Thereafter, Perkins prepared two memoranda for IPA, one dated
November 7, 2006 (the “November 7 Memo”) and the other dated
November 21, 2006 (the “November 21 Memo”). The November 7 Memo
outlined Perkins’ understanding of the fund transfers made through
loans from the 1031 Tax Group subsidiaries to both IPA and Okun
personally. In the November 7 Memo, Perkins repeatedly referred to
himself as “in-house counsel” and recommended actions that IPA
should take going forward. In the follow-up November 21 Memo,
Perkins stated that he was “obligated to advise the company that
continuing this course of conduct will likely result in both civil
and criminal liability (in multiple jurisdictions) to the entities
and individuals involved with such conduct.” (Emphasis added). He
also clarified his role as Chief Legal Officer of the company,
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stating that he “represent[ed] the company [IPA] as opposed to its
sole owner, officers, managers, or individual employees.” He
stated that such individuals “should understand that their personal
interests may be in conflict (currently or in the future) with
those of the company and/or other involved individuals” and advised
that they therefore “may wish to obtain independent legal
representation to protect their individual interests.”
On August 27, 2007, the grand jury issued a subpoena to
Perkins, commanding him to testify before it in connection with its
investigation into misuse of the funds held by the 1031 Tax Group
and the Qualified Intermediaries. Both IPA and Okun moved for
leave to intervene in the proceedings and to quash the subpoena
served upon Perkins, asserting attorney-client and “common
interest” privileges. Okun asserted that Perkins had represented
him personally, not merely IPA as corporate in-house counsel, and
alternatively that he and IPA shared a “common interest” privilege.
On November 2, 2007, IPA, then represented by different counsel,
withdrew its motion to quash the subpoena and waived any claims of
privilege it had as to communications with Perkins. Thereafter,
the district court denied Okun’s motion.
In denying Okun’s motion, the district court found that Okun
did not have standing to challenge the subpoena served on Perkins
because he had not established the existence of a personal
attorney-client relationship giving rise to privilege. The
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district court held that “[a]ny claims of privilege belong to
Perkins’ client, IPA,” which had by then withdrawn all such claims.
The district court rested its holding on its finding that Okun had
not established a “subjective belief that a[] [personal] attorney-
client relationship existed [that] was reasonable under the
circumstances,” as required by In re Grand Jury Subpoena: Under
Seal, 415 F.3d 333, 339 (4th Cir. 2005), cert. denied, 546 U.S.
1131 (2006). The court explained that “Okun’s testimony [that he
had such a reasonable, subjective belief] makes no logical sense,”
because (1) the “November 7 and the November 21 Memos, by their
terms, are not addressed to him as an individual, notwithstanding
that he is mentioned in them”; (2) “Okun testified that he
continued to entrust confidential information to Perkins after
Perkins had allegedly breached both Okun’s previous confidences and
his specific instructions” -- which “simply defies logic and common
sense”; and (3) “Okun’s demeanor as a witness further undercuts his
credibility.”
From the district court’s ruling, Okun filed this appeal and
an emergency motion to stay compliance with the subpoena. We
earlier denied Okun’s stay request.
II
As noted, Under Seal (2005), 415 F.3d at 339, established that
to assert attorney-client privilege, an individual must have a
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“subjective belief” that is “reasonable under the circumstances”
that an attorney-client relationship existed.
Here, the district court found that Okun did not have such a
“subjective belief” that Perkins was his personal attorney, despite
Okun’s testimony that he so believed. The district court
discredited Okun’s testimony based on legitimate credibility
determinations, finding that Okun’s claim that he believed Perkins
was his personal attorney was belied by the context in which Okun
claimed that Perkins was his personal attorney, by Okun’s demeanor,
and by inconsistencies within his testimony. We agree with the
district court’s findings. Moreover, we conclude that even if Okun
could establish that he held a subjective belief that Perkins was
acting as his personal attorney, such a belief would not have been
reasonable in the circumstances of this case.
As a preliminary matter, in choosing between two versions of
relevant events, the district court credited Perkins’ testimony
rather than Okun’s, and we defer to such credibility
determinations, especially where, as here, the testimony of Okun
was directly contradictory to that of Perkins. When a factfinder
is confronted with “two permissible views of the evidence, the fact
finder’s choice between them cannot be clearly erroneous.” Sheet
Metal Worker’s Int’l Ass’n v. Sweeney, 29 F.3d 120, 126 (4th Cir.
1994) (quoting Anderson v. Bessemer City, 470 U.S. 564, 574
(1985)). Thus, we accept the district court’s findings that (1)
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Okun did not speak with Perkins prior to the distribution of the
November 7 Memo; (2) Okun in fact never spoke to Perkins regarding
his personal conduct; and (3) Okun never told Perkins that he was
upset because he believed Perkins breached his confidentiality by
distributing the Memos to people other than Okun.
With these determinations of fact, there could be no
objectively reasonable basis for Okun -- a sophisticated
businessman who, as the record reveals, had an understanding of the
nature of personal attorney-client relationships -- to have had a
belief that Perkins was acting as his personal attorney. In
addition, in the November 21 Memo, Perkins affirmatively stated
that he was not acting as Okun’s personal attorney.
Okun argues that Perkins’ circulation of the November 7 and
November 21 Memos to R. David Field, who was neither an officer nor
employee of IPA or 1031 Tax Group at the time but the prospective
Chief Financial Officer of Okun Holdings, a holding company yet to
be formed for all of Okun’s legally separate companies, would have
been improper if Perkins represented only IPA because Perkins would
have had authority to circulate the Memos to only IPA’s officers
and directors. But this argument fails first because IPA had an
interest in circulating the relevant Memos to Field, who was set to
become the Chief Financial Officer of IPA’s prospective parent
company and would likely be involved in dealing with this issue.
Morever, Okun’s assertion that Perkins’ circulation of the two
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Memos to Field somehow supports Okun’s belief that Perkins was his
personal attorney makes no sense. If Perkins was Okun’s personal
attorney, he still would have lacked authority to distribute the
Memos to Field, and circulation to Field provides no evidence of a
personal attorney-client relationship between Okun and Perkins.
In sum, we conclude that the district court properly denied
Okun’s motion to quash the subpoena issued to Perkins on the basis
that Okun lacked standing because he failed to establish a personal
attorney-client privilege.
Okun contends alternatively that, even if we affirm the
district court’s finding that he did not have a personal attorney-
client relationship with Perkins, we must nonetheless grant his
motion to quash on the basis that there is a “common interest”
privilege between him and IPA. In In re Teleglobe Communications
Corporation, 493 F.3d 345, 364 (3d Cir. 2007), the court explained
that the common interest privilege “allows attorneys representing
different clients with similar legal interests to share information
without having to disclose it to others.” But in this case, Okun
failed to establish that he and IPA were represented by separate
legal counsel engaged in a joint strategy. Moreover, “[a]n
employee’s cooperation in an internal investigation alone is not
sufficient to establish a common interest; rather some form of
joint strategy is necessary.” Under Seal (2005), 415 F.3d at 341
(internal quotation marks and citation omitted).
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Here, not only does the record indicate that Okun likely
refused to cooperate with Perkins’ internal investigation, but he
also has not demonstrated any common interest between the parties
as part of an ongoing legal enterprise or strategy. Thus, Okun’s
motion to quash also fails to be supported by the common interest
privilege.
Accordingly, the district court’s denial of Okun’s motion to
quash the grand jury subpoena issued to Perkins is
AFFIRMED.
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