United States v. Singhal ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
v_ Criminal Action 10-108 (HHK)
SHELLY s. SINGHAL,
Defendant.
MEMORANDUM OPINION AND ORDER
In April 2()10, a grand jury returned an indictment charging Shelly S. Singhal, owner and
Chairrnan of SBI USA, LLC ("SBI"), with criminal activity in connection with stock
manipulation schemes.‘ Before the Court is Singhal’s motion to dismiss the indictment [#4], in
which he argues that the government improperly received and used materials that should have
been protected by the attorney-client privilege in investigating his alleged wrongdoing and in
presenting its case against him to the grand jury. Upon consideration of the motion, the
opposition thereto, and the record of this case, the Court concludes that the motion should be
denied as to the materials now before the Court but Singhal shall have an opportunity to seek the
Court’s review of the motion’s merit as to documents not currently before the Court.
I. BACKGROUND
The government accuses Singhal of coordinating a variety of schemes to illegally
manipulate stock prices. ln particular, it alleges that Singhal’s company, SBI, paid for and
disseminated publications promoting certain companies of which SBI owned shares without, as
‘ Specifically, the indictment charges Singhal with conspiracy, 18 U.S.C. § 371,
mail fraud, 18 U.S.C, § 1341, and securities fraud, 15 U.S.C. § 78j(b), 78ff.
required by law, disclosing that ownership. ln so doing, Singhal allegedly inflated the stock
prices of those companies and, by selling the stock, profited from his illegal actions. The
government refers to this type of scheme as "sca1ping." In addition, the government alleges that
Singhal defrauded Xinhua Finance, a financial information products company based in China, by
using limited liability companies and false documents to hide his interest in certain transactions
and receive money from Xinhua Finance under false pretenses.
In carrying out these schemes, Singhal allegedly relied on the assistance of an individual
named Robert Brown. According to the govemment, Brown owned shares in several of the
companies involved in Singhal’s scalping schemes and assisted in transferring funds and
concealing the source of publications in furtherance of those schemes. Brown also, in the
government’s view, had interest in the companies involved in Xinhua Finance transactions and
assisted in executing the fraud perpetrated against Xinhua Finance, in part by preparing false
documents. The Federal Bureau of Investigation ("FBI") began investigating Brown in October
2007, and he pled guilty to obstruction of justice, 18 U.S.C. § 1503, in November 2009. Brown
had agreed to cooperate with federal authorities in their investigation of these schemes, and
through his counsel, he turned over to the govemment a variety of materials related to them.
Crucial to Singhal’s current motion is that, for a number of years preceding his
indictment, Brown served as counsel to Singhal and SBI. Singhal objects to the govemment’s
obtaining from Brown information and documents that Singhal believes are protected by the
attorney-client privi1ege. In the course of communications between Singhal’s current counsel
and the government about this issue, the government provided to Singhal the FBI reports that
resulted from interviews with Brown as well as all of the documents Brown produced. Most of
these documents are not before the Court, but they apparently include requests for and drafts of
documents pertaining to some of the allegedly illegal transactions as well as emails among
Brown, Singhal, and others. The govemment, aware of Singhal’s objections but convinced they
were not valid, proceeded with its investigation and indictment of Singhal using the materials
from Brown.
Before Singhal was indicted, he filed an emergency motion for a hearing "to disqualify
the prosecution team for presenting tainted evidence before the grand jury and to enjoin the grand
jury from rendering an indictment based on prosecutorial misconduct" arising from his allegation
that the govemment had improperly relied on privileged information Def.’s Emergency Mot. at
1, filed in Misc. Action 10-190 ("Def.’s First Mot."). Chief Judge Lamberth denied the motion,
concluding it would be more appropriate for a court to address the issues raised after indictment.
In rex Grand Jury Investigation, Misc. Action 10-190 (April 1, 2010). Singhal has renewed his
motion before this Court, now seeking "dismissal of the Indictment and disqualification of the
tainted prosecution team." Def.’s Mot. to Dismiss Indictment ("Def.’s Second Mot.") at 8.2
II. ANALYSIS
Singhal argues that the relief he seeks is warranted because "the government obtained
privileged information from Mr. Singhal’s attorney without following the [Department of
Justice]’s procedures for obtaining such privileged information and without following this
C0urt’s procedures for establishing an exception to the attorney-client privilege." Def.’s Second
Mot. at 8-9. In particular, he suggests that the government could have used what is called a "taint
2 Both parties have incorporated by reference in this case their briefing before Chief
Judge Lamberth as well as the exhibits attached to those filings.
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team"_attorneys who are not involved in the case-~to review the documents before the active
prosecution team is permitted to see them and make use of the information they contain.
Furthermore, he asserts that pursuant to Um``ted States v. Zolz'n, 491 U.S. 554 (1989), the Court,
rather than the attomeys prosecuting the case, must determine whether the crime-fraud exception
to the attorney-client privilege applies to any particular document. Singhal has provided the
Court with two sets of documents in support of his arguments: the first contains some documents
the govemment received from Brown and the second, filed ex parte, contains documents the
government does not possess.
The govemment responds that it "has not received information protected by the attomey-
client privilege from Robert Brown." Gov’t’s Opp’n to Def.’s Second Mot. at 3. lt asserts that
"[t]he information disclosed by Brown . . . concerned the administrative and business roles that
[he] played in the transactions," so the privilege does not apply. Id. The government argues in
the alternative that if the Court determines that any materials it received from Brown are subject
to the attorney-client privilege, the crime-fraud exception to that privilege should apply. The
govemment attached to its opposition to Singhal’s original motion several documents it received
from Brown, which it asserts demonstrate that Singhal’s arguments lack merit.
The Court concludes that, as to the documents currently before it, Singhal is not entitled
to any relief. Although it is correct that an intrusion on the attorney-client privilege "may result
in a constitutional violation" that could merit relief, United Stales v. Neill, 952 F. Supp. 834, 840
(D.D.C. l997), no such intrusion occurred here. The D.C. Circuit has held:
The [attomey-client] privilege applies only if (1) the asserted holder of the
privilege is or sought to become a client; (2) the person to whom the
communication was made (a) is a member of the bar of a court or his subordinate
and (b) in connection with this communication is acting as a lawyer; (3) the
communication relates to a fact of which the attorney was informed (a) by his
client (b) without the presence of strangers (c) for the purpose of securing
primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in
some legal proceeding, and not (d) for the purpose of committing a crime or tort;
and (4) the privilege has been (a) claimed and (b) not waived by the client.
In re Sealed Case, 737 F.2d 94, 98-99 (D.C. Cir. 1984) (quoting United States v. Um``ted Sh0e
Mach. Corp., 89 F. Supp. 357, 358-59 (D. Mass. 1950)). Accordingly, not all communications
between a lawyer and client are privileged. For example, if an attorney gives advice of a non-
legal nature or otherwise acts as a business partner rather than as a lawyer, her communications
are not subject to the privilege. Boca Investerings P ’ship v. Um``ted States, 31 F. Supp. 2d 9,
ll-12 (D.D.C. 1998) (noting that "communications made by and to [an] in-house lawyer with
respect to business matters, management decisions or business advice are not protected by the
privilege" (citations omitted)). Based on these principles, the documents before the Court fall
outside the category of communications to which the privilege applies.
The Court first addresses the documents Singhal provided for its review. Several of these
documents cannot be protected by the privilege because they are communications between
Brown, acting as Singhal or SBl’s attorney, and third-parties. Cf Meaa’ Data Cem‘., Inc. v. U.S.
Dep ’t of Air Force, 566 F.2d 242, 253 (D.C. Cir. 1977) ("If the information has been or is later
shared with third parties, the [attorney-client] privilege does not apply." (citations omitted)).3
The other documents Singhal has attached to his motion are correspondence between
Singhal’s current counsel and the govemment as well as between Brown’s attorney and the
3 This category of documents includes those submitted as Exhibits 1, 4, 5, 6, 7, and
8 to Singhal’s original motion to Chief Judge Lamberth.
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govemrnent." These similarly do nothing to support his arguments. The letters written by the
government’s attomeys demonstrate that the govemment has consistently taken the position that
the materials it received were not covered by the attorney-client privilege. See, e.g. , Def.’s First
Mot., Ex. 2; ia'., Ex. 11. The letters written by Brown’s attorney, contrary to Singhal’s
misleading description, state that "we do not believe that any of the documents being produced
herewith . . . are subject to the attorney-client privilege because they do not contain
communications made for the purpose of either seeking or rendering legal advice." Id. , Ex. 3 at
l-2; see also z'd., Ex. 16 at 1.5
The documents Singhal submitted ex parte, which the Court notes are communications
between Brown, Singhal, and other SBI employees but will of course not further describe,
support the general proposition that Brown acted as Singhal and SBl’s attorney, But these
documents have no bearing on the question of whether the materials Brown provided to the
govemment contained communications in which Singhal was seeking or Brown was providing
legal services or information obtained from such communications. That the govemment has not
4 In this category of documents are Exhibits 2, 3, 9, 10, 11, 12, l3, 14, 15, and 16 to
Singhal’s original motion to Chief Judge Lamberth. The Court need not address Singhal’s
remaining exhibit, Exhibit 17, because it is a filing in an unrelated case rather than a document
that goes to show any fact relevant here.
5 Singhal’s motion quotes only the sentence that follows, which reads: "Moreover,
to the extent that any of the communications might arguably fall within the confines of the
attorney-client privilege, we believe that the Govemment’s position is that they should be
produced because they are subject to the crime-fraud exception to the privilege." Def.’s First
Mot., Ex. 3 at 2; id., Ex. 16 at 1. Although it may be that different procedures would have been
necessary had the government or Brown’s attorney thought the disclosures were appropriate
based solely on the crime-fraud exception, it is clear from the letter that they relied primarily on
their position that the privilege did not apply at all.
6
seen them is evidence that Brown properly withheld documents subject to the attomey-client
privilege when making disclosures.
The documents the government submitted to the Court are also not subject to the
attomey-client privilege. Contrary to Singhal’s assertions, the summaries of FBI interviews of
Brown6 do not indicate that Brown revealed privileged information to FBI agents. They
demonstrate that Brown discussed topics such as specific wire transfers between companies and
individuals; dealings involving a company Brown had registered in his father’s name and used to
invest in other companies; payments for publications of the type used in scalping schemes, see
Gov’t’s Opp’n to Def.’s First Mot., Ex. l; investments Brown made at Singhal’s suggestion;
financial transactions in which Singhal was involved; Brown’s familiarity with another lawyer
the FBI was investigating, see ia'., Ex 2; Brown’s limited understanding of the schemes in which
Singhal was involved; and events related to Singhal’s dealings with Xinhua Finance, see id., Ex.
3. The summaries contain no indication that any of these topics are related to legal services
Brown provided to Singhal or SBI.
Singhal suggests that Brown read publications Singhal used in the alleged scalping
schemes in order to provide legal advice about necessary disclosures on those documents, but the
interview summaries refute that contention. Brown told FBI agents that his review of such
publications consisted of removing language he did not like from the substantive text, which
demonstrates that he was acting as a business partner rather than a legal advisor when he read
them. See id., Ex 2 at 4, 6, 7 (explaining that Brown "recalls marking up the text [of one
These are Exhibits 1, 2, and 3 to the goveriiment’s opposition to Singhal’s original
motion,
publication] quite a bit, meaning that he struck out some of the more outlandish statements";
noting that Brown told his interviewer that he "thoroughly reviewed each" publication regarding
another company and that he thought "some of the flowery stuff makes your skin crawl" so he
"toned down that kind of verbiage in his edits"; and reporting that Brown "again stated"
regarding another publication "that he recalls receiving the text . . . and positively marking out
the flowery statements"). At one point he even directly said that as to one publication, he "[did]
not recall seeing or reviewing any disclaimers included in the text that he reviewed, but does
know that disclaimers are required." Id., Ex. 3 at 6.7
The government has also provided several email chains that have as their subject
"Attomey Client Confidential."g The Court agrees with the govemment’s assessment that these
emails, despite what their subject lines suggest, are not the communications "for the purpose of
securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some
legal proceeding." In re Sealed Case, 737 F.2d at 98-99. Instead, they are communications
about the movement of funds between companies and individuals in which Brown acts as a
business associate.°
7 ln addition, the portion of an interview in which an FBI agent questioned Brown
about the disclosure on a particular publication and its accuracy contains no indication that
Brown wrote, reviewed, or had ever read the disclosure or that he had ever discussed its
legitimacy with Singhal. See Gov’t Opp’n to Def.’s First Motion, Ex. 2 at 7.
8 These are Exhibits 6 through 11 to the govemment’s opposition to Singhal’s
original motion. This opinion does not address Exhibits 4A, 4B, 5A, and 5B to that filing
because they are indictments of Brown and another attorney about whom the FBI asked Brown in
his interviews, not documents Brown provided to the government.
9 One chain begins with an email sent from Singhal to Brown and two other
individuals, one who also appears to be an SBI employee and another whose email address
suggests that he is not, describing a series of transfers and payments between several companies
8
Because the Court concludes that the attorney-client privilege does not protect any of the
documents before it, it need not address Singhal’s arguments regarding the procedures the
government should have followed in the first instance or the Court should follow now. The
methods of handling information to which the govemment believes the crime-fraud privilege
might apply are not relevant here because where there is no privilege, there is no need to assess
whether a document fits within an exception to it. Furthermore, the Court need not reach the
question of what sort of relief is appropriate because the govemment correctly deterinined, as far
as the Court can at this point ascertain, that it could properly use the infonnation Brown
provided. Because a breach of the attomey-client privilege is not to be taken lightly and because
and asking if “we have paperwork for all these transactions." Gov’t Opp’n to Def.’s First
Motion, Exs. 6, 10, ll. In the second email, from Brown to Singhal, Brown replies yes or no as
to each transfer or payment and adds details about the paperwork, including as to two items "I
can prepare." Id., Exs. 6, ll. In response to Singhal’s indication that "SBI USA, LLC’s monthly
income will be taxed at the LLC level," Brown responded "l understand your conclusion." Ia'.,
Exs. 6, ll. The final,email in the chain is from Singhal and Brown and reads only "Bob, Can
you put all the paperwork together in one email and send it over. 1 think the wire is going to hit
on Monday. Thanks Shelly." Id., Exs. 6, ll. This set of emails are the only documents before
the Court that give it pause. But the Court does not believe that this correspondence, in which
Singhal asks for no legal advice or opinion and Brown provides none, can reasonably be said to
fall under the attorney-client privilege. Although the emails contain a reference to "paperwork,"
which might mean contracts, the first email, which contains essentially all of the substantive
infonnation in the chain, went to a third party. Furthermore, it seems that Brown is acting as a
business associate assisting with transactions rather than as an attorney providing legal services.
Cf Boca Investerings Partnershzp, 31 F. Supp. 2d at 12 ("When a lawyer acts merely to
implement a business transaction or provides accounting sei'vices, the lawyer is like any other
agent of the corporation whose communications are not privileged." (citations omitted)). The
second chain begins with correspondence from a third party to Singhal, the substance of which
apparently concerns shares of a company. ]a'., Exs. 7, 9. lt then includes a series of emails
between Singhal, other SBI employees, and Brown regarding to what company or person various
amounts of money is to be or has been wired. Id. , Exs. 7, 9. The third chain similarly begins
with correspondence between Singhal and third parties and then includes emails between
Singhal, Brown, and SBI employees that discuss wiring certain amounts of money to certain
companies and individuals. Id., Ex. 8.
the Court does not have before it any of the correspondence regarding draft documents Singhal
alleges are legal in nature, the Court will permit Singhal to identify and provide to it any
particular documents the Court has not seen that he believes are subject to the privilege. Should
the Court determine that those documents are protected by the privilege, the Court will then
determine to what relief Singhal is entitled.
III. CONCLUSION
For the foregoing reasons, it is this 27th day of July, 2010, hereby ORDERED that
Singhal’s motion to dismiss the indictment [#4] is DENIED as to the materials currently before
the Court.
lt is further ORDERED that by no later than August 4, 20l0, Singhal may identify and
provide to the Court any documents the govemment received from Brown, not attached to any
filing currently before the Court, to which he believes the attorney-client privilege applies.
lt is further ORDERED that the status conference currently scheduled for July 30, 2010,
is cancelled and shall be rescheduled after the Court has had an opportunity to review any
additional documents Singhal submits.
Henry H. Kennedy, Jr.
United States District Judge
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