Case Title: Sears v. Gussin

Citation: 350 Md. 552

Docket Number: 117/97

State: maryland

Court: Maryland Supreme Court

Date: 1998-07-31T00:00:00Z

Document:
IN THE COURT OF APPEALS
OF MARYLAND
No. 117
September Term, 1997
______________________________________
SEARS, ROEBUCK & CO.
v.
PAUL GUSSIN et al.
______________________________________
Bell, C.J.
Eldridge
Rodowsky
Chasanow
Raker
Wilner
Cathell,
JJ.
______________________________________
Opinion by Raker, J.
______________________________________
Filed: July 31, 1998
  Unless otherwise indicated, all statutory references hereinafter are to Maryland
1
Code (1974, 1995 Repl.Vol., 1997 Supp.), Courts & Judicial Proceedings Article.
Appellant Sears Roebuck & Co., seeks documents reflecting investments, gifts, asset
transfers, trusts, income, and real property in the possession of Ernst & Young L.L.P.,
accountants for Appellee Paul Gussin.  We shall hold that the client did not waive the
accountant-client privilege found in Maryland Code (1974, 1995 Repl.Vol., 1997 Supp.), §
9-110 of the Courts & Judicial Proceedings Article  and, accordingly, shall affirm the
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judgment of the Circuit Court for Prince George’s County.
I.
Appellant Sears, Roebuck & Co., (hereinafter “Sears”) obtained a judgment in the
amount of $36,031.46 against Appellee, Paul Gussin, on August 7, 1995 in the Circuit Court
for Prince George’s County, Maryland.  After judgment was entered in Maryland, the
judgment was enrolled in Florida, where Mr. Gussin resides.  Sears proceeded with discovery
in aid of enforcement of that money judgment and Sears took Mr. Gussin’s deposition in
Florida on May 30, 1996.
At his deposition in Florida, Gussin produced his 1994 federal income tax return.  The
1994 tax return, filed jointly with his wife, showed $247,787 in investment income.  Gussin
testified that the return was prepared by his accountant, Ernst & Young L.L.P. (hereinafter
“Ernst & Young”) of Baltimore, Maryland.  Attached to the 1994 return was a printout
showing the companies, partnerships, trusts, and bank accounts that make up the reported
investment income.  Gussin testified that Ernst & Young had in its possession the K-1 forms,
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showing the income for each individual investment item.  Gussin stated that he had no bank
accounts, that he did not own the home in which he and his wife resided, and that he did not
know when the home was acquired.  The 1994 tax return also showed $161,000 in “other
gains and losses.”  Gussin denied ownership of any significant individual assets, despite the
fact that in the mid-1980s he received $6.7 million for the sale of a business.
At the deposition, Sears’s counsel questioned Gussin regarding his assets.
Q:
Now who has the papers that would reflect the actual
ownership of these various investments?
A:
Probably in— probably, I’m just trying to think,
probably in the office.
Q:
What office?
A:
That my son has.
*
*
*
*
*
*
Q:
All right.  Would Ernst & Young have the papers also?
A:
I imagine.  I don’t know.  They did the tax return.  You
could ask them.
(Emphasis added).  Sears also deposed Mr. Gussin’s wife, Jocelyn.  Ms. Gussin testified that,
“she was born into money,” and that she was involved in a shoe store business with her
husband.  The shoe business was sold in the mid-1980’s for $20 million, and, in return for
his one-third interest in the business, Mr. Gussin received approximately $6 million.  Ms.
Gussin testified that she had no idea what investments Mr. Gussin owned or presently owns,
and she had no idea what he did with the money he received from the sale of the shoe store.
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  The subpoena requested Ernst & Young to identify the individual(s) who
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prepared the tax returns, the individual(s) who have custody of Gussin’s documents and
any individuals who have personal knowledge of Gussin’s financial condition, including,
but not limited to, his assets and the sources of his income and investments.  The
subpoena commanded Ernst & Young to produce the following documents:
1.  All documents reflecting the legal ownership of all corporations,
partnerships, and other investment entities, as reflected in both the 1994 and
1995 federal 1040 income tax returns, in which Paul Gussin either then had
an interest and/or now retains an interest (either individual or joint
ownership interest).
2.  All documentation reflecting investments of any nature owned by Paul Gussin
either individually or jointly for as many years as you maintain such records.
3.  All documentation constituting or referring to tax returns filed by Paul Gussin
for 1993 and before, either jointly or individually, for as many years as you
maintain such records.
4.  All documentation reflecting any gift tax returns filed by Paul Gussin,
individually or jointly.
5.  All documentation which would reflect any transfers of any assets by Paul
Gussin to anyone from 1990 through the present, including, but not limited to,
Frederick Gussin (Paul Gussin’s son).
6.  All documentation reflecting any trusts or other entities either set up by Paul
Gussin or into which Paul Gussin transferred any assets since 1990.
7.  All documentation reflecting any income Paul Gussin has received from
employment, trade or profession, or from operation of a business, for as many
years as you maintain such records.
8.  All documentation reflecting any income received by Gussin other than from
employment, trade, profession or operation of a business, for as many years as you
maintain such records.
9.  All documentation reflecting or referring to any real or personal property
owned by Paul Gussin for as many years as you maintain such records.
10.  All documentation relied upon by you in your preparation of income tax
returns for Paul Gussin for as many years as you maintain such records.
She testified that Ernst & Young had all the papers that were used to prepare the tax returns.
Thereafter, Sears served a subpoena on Ernst & Young in Maryland in order to
discover the assets and general financial condition of Paul Gussin.   The subpoena directed
2
Ernst & Young to designate a representative to testify as to matters concerning Gussin and
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to produce documents, inter alia, relating to Gussin’s ownership interest in the investments
listed in his 1994 federal income tax return.  Ernst & Young filed an objection to the
subpoena, indicating that it would turn over the documents and comply with the subpoena
so long as a court order was entered to that effect.  Sears filed a written response to Ernst &
Young’s objection.  
On July 11, 1997, Judge Thomas Smith held a hearing in the Circuit Court for Prince
George’s County.  In response to Ernst & Young’s objection to the subpoena, Sears made
several arguments.  First, Sears argued that Gussin waived the accountant-client privilege by
his statement, “you can ask them,” at his deposition.  Second, Sears argued that Gussin made
a fraudulent conveyance, in violation of Subtitle 2 of Title 15 of the Commercial Law Article
of the Maryland Code (1975, 1990 Repl.Vol., 1997 Supp.), to his wife or some other
individual, thereby precluding Gussin from relying on the privilege.  
The record reflects that the waiver and fraud arguments were the only two issues
raised by Sears at the hearing before Judge Smith.  Sears did not argue that the documents
themselves were not privileged information.  The circuit court sustained Ernst & Young’s
objection and quashed the subpoena in its entirety, finding that Gussin asserted the
accountant-client privilege and that the privilege had not been waived.  Sears filed a timely
appeal to the Court of Special Appeals and we granted certiorari on our own motion prior
to consideration by the intermediate appellate court.
II.
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Before this Court, Sears contends that the accountant-client privilege established in
§ 9-110 of the Courts & Judicial Proceedings Article should not apply in this case for several
reasons: (1) Gussin expressly permitted Ernst & Young to disclose the information and/or
Gussin waived the privilege by his conduct at his deposition; and (2) the discovery Sears
seeks falls within the “fraud exception” to the privilege, recognized in Dixon v. Bennett, 72
Md. App. 620, 642, 531 A.2d 1318, 1329 (1987), cert. denied, 311 Md. 557, 536 A.2d 664
(1988).  Sears initially contends that Gussin’s statement, “you can ask [Ernst & Young],”
operated as express permission for disclosure, thereby waiving the accountant-client
privilege, because it gave Sears permission to deal with Ernst & Young regarding his
investment income.  Sears also argues that Gussin cannot rely on the accountant-client
privilege because there is evidence that he was involved in fraud.  Sears maintains that there
is evidence “that Gussin may be committing fraud, or has committed a fraud, to avoid paying
creditors.”  Sears’s fraud argument is based on Mr. and Ms. Gussin’s deposition testimony
that, notwithstanding both Gussin’s receipt of $6 million in the mid-1980s and the 1994 tax
return reporting investment income of $247,787, Gussin nonetheless testified, “I don’t have
any money.”  Sears concedes in its brief that it does not, and, indeed, cannot allege that Ernst
& Young participated in or furthered fraudulent activity, or was even aware of any fraudulent
conduct.  Sears simply argues that they are entitled to discover the documents under the fraud
exception because Ernst & Young has access to documents showing assets presently or
previously owned by Gussin.
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In response, Ernst & Young, on behalf of Gussin, argues that Gussin never waived
the privilege or gave express permission for the documents to be released.  Ernst & Young
argues that Gussin’s deposition statement, “you can ask them,” was merely Gussin
suggesting that Ernst & Young was more likely to know which documents were in its
possession than Gussin.  Furthermore, if Gussin’s statement was an invitation to approach
his accountant, Ernst & Young contends that this statement was merely an invitation to ask
Ernst & Young about whether the accountant had possession of the documents pertaining to
Gussin, not permission for Sears to discover the content of those documents.  According to
Ernst & Young, Gussin’s deposition testimony was not a partial waiver of the privilege.
Second, Ernst & Young argues that even if the accountant-client privilege could be waived
in a manner other than by express permission, nothing in Gussin’s testimony could be taken
as an implied waiver of the privilege.  Ernst & Young asserts that it is obvious that Gussin
intended to keep his financial affairs confidential.
Finally, as to any purported “fraud exception” to the accountant-client privilege, Ernst
& Young argues that the Court of Special Appeals erred in Dixon by recognizing a fraud
exception to the accountant-client privilege.  In addition, even if this Court were to adopt a
fraud exception to the privilege, this case would not fall within that exception because Sears
has not made the requisite prima facie showing of fraud.
III.
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The privilege against disclosure by a licensed, certified public accountant of the
contents of any communication made by a client who employs the accountant to audit,
examine, or report any account, book, record, or statement of the client, and any information
derived from the client while rendering professional services, is found in Courts & Judicial
Proceedings Article § 9-110.  The statute provides in pertinent part:
(b) Privilege — In general. — Except as provided in
subsections (c) and (d) of this section or unless expressly
permitted by a client or the personal representative or successor
in interest of the client, a licensed certified public accountant or
firm may not disclose:
(1) The contents of any communication made to the
licensed certified public accountant or firm by a client who
employs the licensed certified public accountant or firm to audit,
examine, or report on any account, book, record, or statement of
the client;
(2) Any information that the licensed certified public
accountant or firm, in rendering professional service, derives
from:
(i) A client who employs the licensed certified
public accountant or firm; or
(ii) The material of the client.
*     *     *     *     *     *
(d) Privilege — Exceptions. — The privilege against
disclosure required by subsection (b) of this section does not
affect:
(1) The bankruptcy laws;
(2) The criminal laws of the State; or
(3) A regulatory proceeding by the State Board of Public
Accountancy under §§ 2-317 and 2-412 of the Business
Occupations and Professions Article.
In construing a statute, the paramount objective is to ascertain and give effect to the
intent of the Legislature.  Lewis v. State, 348 Md. 648, 653, 705 A.2d 1128, 1130 (1998);
Harris v. State, 344 Md. 497, 510, 687 A.2d 970, 976, cert. denied sub nom. Koenig v. State,
-8-
       U.S.       , 118 S.Ct. 605, 139 L.Ed.2d 492 (1997).  “[I]f the plain meaning of the
statutory language is clear and unambiguous, and consistent with both the broad purposes
of the legislation and the specific purpose of the provision being interpreted, our inquiry is
at an end.”  Philip Electronics v. Wright, 348 Md. 209, 216-217, 703 A.2d 150, 153 (1997);
see Frank v. Baltimore County, 284 Md. 655, 661, 399 A.2d 250, 254 (1979).  In other
words, if the statutory language is clear, ordinarily this Court’s function is simply to construe
the provision in accordance with the plain meaning of the text.  The words of the statute
should be given their ordinary and commonly understood meaning.  Lerman v. Heeman, 347
Md. 439, 443, 701 A.2d 426, 428 (1997).  In addition, because the statute is in derogation
of the common law, it should be strictly construed.  MacBride v. Gulbro, 247 Md. 727, 729,
234 A.2d 586, 588 (1967); see United States v. Bowman, 358 F.2d 421, 423 (3  Cir. 1966)
rd
(strictly construing Pennsylvania statutory accountant-client privilege); McNair v. District
Court, 885 P. 2d 576, 578 (Nev. 1994) (construing accountant-client privilege narrowly).
Client communications to accountants are privileged in approximately one-third of
the states.  See 8 WIGMORE, EVIDENCE § 2286, at 533-34 n.22 (McNaughton rev. ed. 1961 &
1998 Supp.) (citing and summarizing statutes); Francis M. Dougherty, Annotation, Privileged
Communications Between Accountant and Client, 33 A.L.R.4th 539 (1984 & Sept. 1997
Supp.) (listing judicial decisions recognizing existence of accountant-client privilege by
virtue of specific statutory enactment); see generally 1 MCCORMICK ON EVIDENCE § 76.2,
at 288 (J. Strong ed. 4  ed. 1992).  At common law, no accountant-client privilege existed,
th
perhaps because the activities of the accounting profession were very limited in the
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seventeenth and eighteenth centuries when the common law recognized many of the present
day privileges.  See In re Special Investigation No. 202, 53 Md. App. 96, 100, 452 A.2d 458,
460 (1982).
The purpose of the accountant-client privilege is to encourage free and open
communication between the accountant and the client.  See id. at 103, 452 A.2d at 462
(noting that the purpose of the privilege is to “protect the expectation of privacy of
individuals in matters involving contracts, domestic disputes, and other civil matters and
equity controversies”); see also Gearhart v. Etheridge, 208 S.E.2d 460, 461 (Ga. 1974)
(noting that the purpose of the privilege is to ensure an atmosphere where the client will
transmit all relevant information to the accountant without fear of future disclosure, thereby
enabling the accountant to adequately perform his or her services); People v. Paasche, 525
N.W.2d 914, 918 (Mich. Ct. App. 1994) (noting that the purpose behind the Michigan statute
recognizing the accountant-client privilege “is to protect from disclosure the substance of the
information conveyed by the client to the accountant”).  In creating the privilege, there is no
indication that the Legislature intended to create an absolute privilege.  Indeed, the privilege
is subject to the statutory exceptions found at § 9-110(b), which provide that the privilege
does not affect the bankruptcy laws, the criminal laws, or a regulatory proceeding by the
Public Accountancy Board. 
Section 9-110 regulates the conduct of the accountant, not the client, and is implicated
when the accountant either voluntarily seeks to disclose, or is commanded to disclose,
matters covered by the privilege.  The plain language of the statute creating the privilege
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states that the accountant cannot disclose the contents of any communication or any
information derived from the client without express permission by the client, by the personal
representative of the client, or by the successor in interest of the client.  BLACK’S LAW
DICTIONARY 580 (6  ed. 1990) defines the word “express” as follows: “Clear; definite;
th
explicit; plain; direct; unmistakable; not dubious or ambiguous.  Declared in terms; set forth
in words.  Directly and distinctly stated.  Made known distinctly and explicitly and not left
to inference . . .  Manifested by direct and appropriate language, as distinguished from that
which is inferred from conduct.  The word is usually contrasted with ‘implied’.”  Similarly,
WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 803 (3  ed. 1963), defines “express”
rd
as “directly and distinctly stated or expressed rather than implied or left to inference.”
The language of § 9-110 is clear and unambiguous.  The statute dictates that, absent
a valid waiver which we discuss, infra, protected information may not be released by the
accountant without the express permission of the client.  Permission may not be implied.
Courts may not create ambiguity in a statute where none exists, nor as a general rule,
“surmise a legislative intention contrary to the plain language of a statute or insert exceptions
not made by the legislature.”  Coleman v. State,  281 Md. 538, 546, 380 A.2d 49, 54 (1977);
see Wright, 348 Md. at 217, 703 A.2d at 153.
Gussin did not expressly permit Ernst & Young to disclose the information sought by
Sears.  Taken in the context of the deposition and the lawsuit as a whole, it is clear that
Gussin did not intend to reveal any information or documents that he was not required by
law to disclose.  Thus, Gussin’s actions cannot be interpreted as express permission. 
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Gussin’s statement, “you could ask them,” merely permitted Sears to inquire whether Ernst
& Young held the documents, but did not permit Ernst & Young to disclose the contents of
those documents.  See Harrison v. State, 276 Md. 122, 150-51, 345 A.2d 830, 846 (1975)
(“[W]e do not think that [Harrison]’s reply to the trial court when he stated ‘I told my lawyer
all about it’ in response to the court’s question concerning any attempt to further converse
with [a witness], can be considered as constituting waiver of the [attorney-client] privilege.
It was a general statement which did not disclose, or purport to disclose what words were
used— or what the conversation was— nothing which was confidential was thereby
revealed.”).  Nothing in Gussin’s statement expressly permitted disclosure of the contents
of any communication.
Sears argues that Gussin’s express permission to speak to his accountants was a partial
disclosure of privileged information, and as such, waives the statutory privilege
notwithstanding the absence of express permission.  See Tofani v. State, 297 Md. 165, 173,
465 A.2d 413, 417 (1983) (“Where . . . the reporter voluntarily and intentionally revealed the
names of her sources in published news articles, nothing remains to be protected under the
statute.”).  Sears argues that it is unfair to permit Gussin to insist on the privilege after such
disclosure.  Sears also contends that because Gussin “chose to be an obstructionist,” and
failed to answer the questions truthfully and in a straightforward manner, he waived the
privilege by his actions.  In response, Ernst & Young contends that unlike other privileges,
such as the attorney-client and doctor-patient privileges, the accountant-client privilege may
be expressly waived only by the client.
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The accountant-client privilege, like all other personal privileges, may be waived by
the client’s conduct.  See, e.g., Tofani, 297 Md. at 173, 465 A.2d at 417 (holding that
reporter shield law, § 9-112 of the Courts & Judicial Proceedings Article, may be waived
when reporter acts in a manner inconsistent with the statutory privilege or the intention to
rely on it); Harrison, 276 Md. at 137-38, 345 A.2d at 839 (recognizing waiver by implication
for attorney-client privilege); see also In re Matthew R., 113 Md. App. 701, 707-09, 688
A.2d 955, 957-58 (1997) (addressing argument regarding waiver by implication for
psychiatrist-patient privilege); LYNN MCLAIN, MARYLAND EVIDENCE § 501.1, at 464 (1987)
(“All privileges may be waived, but only by their holder . . . .”).  For example, the privilege
may be waived by the client’s disclosure to third parties.  The accountant-client privilege
may also be waived by issue injection by the client in a lawsuit, when the client injects the
professional activity or the advice of an accountant as an issue in a particular case.  See In
re Hillsborough Holdings Corp., 176 B.R. 223, 238-40 (M.D. Fla. 1994).
Ernst & Young’s broad interpretation of the privilege is not supported by law or
policy.  Were we to accept Ernst & Young’s argument that the accountant-client privilege
can be waived solely by express permission, the result would be to elevate the accountant-
client privilege to a higher status than most other privileges in Maryland, which may be
waived by implication.  The fair inference is that the General Assembly did not intend such
an anomalous result when it enacted the accountant-client privilege.  See Lewis, 348 Md. at
662, 705 A.2d at 1135 (“We shall not interpret a statute to produce unusual or extraordinary
results, absent the clear legislative intent to enact such a provision.”).  Accordingly, we
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conclude that, although § 9-110 of the Courts & Judicial Proceedings Article regulates the
circumstances under which an accountant must or must not divulge information possessed
on behalf of a client, that statutory provision does not provide the governing principles
regarding the client’s waiver of the privilege.  To discern the latter, we instead turn to
common law principles regarding waiver.  See MCLAIN, supra, § 511.1, at 596 (“Like other
privileges, the accountant-client privilege may be waived by its holder’s disclosing or
consenting to disclosure of the privileged information to third parties outside the context of
the privileged relationship.”) (footnote omitted).
In Savino v. Luciano, 92 So.2d 817 (Fla. 1957), the Supreme Court of Florida reached
a similar conclusion.  In that case, the plaintiff (“Savino”) filed a suit against the defendant
(“Luciano”) for an accounting of profits allegedly due Savino under an employment contract.
Id. at 818.  Luciano filed both a cross-claim and a counterclaim, alleging that Savino had
embezzled funds and “had manipulated the books to show a net income where none existed.”
Id.  In conjunction with his claims, Luciano averred that it would be necessary to engage a
certified public accountant to “reconstruct the books” of the business.  Id.  Accordingly,
Luciano requested an award of damages as compensation for the fee charged by the
accountant.  Id.
Before trial, Savino sought discovery of the audit and report prepared by the
accountant on behalf of Luciano.  The latter resisted, on the ground that the accountant’s
-14-
  Since the decision in Savino v. Luciano, 92 So.2d 817 (Fla. 1957), the
3
accountant-client privilege has been substantively modified under Florida law.  That
privilege is now codified under two similar, yet not identical, statutory provisions.  See
FLA. STAT. § 90.5055 (1997 Supp.); FLA. STAT. § 473.316 (1997 Supp.).  
audit and report were privileged and confidential.  At that time, Florida recognized an
accountant-client privilege as follows:3
“[N]o . . . certified public accountant or public accountant shall
be permitted to testify with respect to any of said matters, except
with the consent in writing of [the] client or [the client]’s legal
representative.”
FLA. STAT. § 473.15 (1955) (emphasis added).
In resolving Luciano’s claim of accountant-
client privilege, the court noted that “[a]s in the case of all personal privileges, the
accountant-client privilege may be waived by the client.”  Savino, 92 So.2d at 819.  Although
the audit and report compiled by Luciano’s accountant might, ordinarily, have been
privileged under Florida law, the court reasoned that proof of Luciano’s allegations would
necessarily require the introduction of the audit and report into evidence.  Id.  The court held
that Luciano had “either expressly or impliedly waived the right to insist upon the privileged
nature . . . of the audit and report.”  Id.  The Supreme Court of Florida concluded that,
regardless of the degree of confidentiality generally afforded the client of an accountant, if
a party engaged in activity which was clearly inconsistent with the exercise of a legal
privilege, then that party waived the right to claim the privilege through his or her conduct.
Sears bears the burden of establishing any waiver of the accountant-client privilege.
As a general rule, a party does not waive the privilege by denying the opposing party’s
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accusations, or by acting in an obstreperous manner.  In addition, a “‘Court cannot justify
finding a waiver of privileged information merely to provide the opposing party information
helpful to its cross-examination or because information is relevant.’”  In re Hillsborough
Holdings Corp., 176 B.R. at 239 (citing Cox v. United States Steel & Carnegie, 17 F.3d
1386, 1418 (11  Cir. 1994) (quoting Remington Arms Co. v. Liberty Mut. Ins. Co., 142
th
F.R.D. 408, 415 (D. Del. 1992)), cert. denied, 513 U.S. 110, 115 S.Ct. 900, 130 L.Ed.2d 784
(1995)).  Although it has often been said that “[w]hen a party himself ceases to treat a matter
as confidential, it loses its confidential character,” Savino, 92 So.2d at 819, neither Gussin’s
conduct nor his statement suggest in any way that Gussin ceased to treat the documents as
confidential.  Merely “being difficult” is insufficient to waive the privilege.  Moreover,
Gussin’s statement permitting Sears to ask Ernst & Young if it had the records was not in the
nature of a disclosure such that fairness would require that the privilege cease.  We hold that
Gussin did not waive the accountant-client privilege.
IV.
Sears next argues that Gussin cannot rely on the accountant-client privilege because
there is evidence of fraudulent activity by Gussin.  Sears relies on the Court of Special
Appeals opinion engrafting a “crime-fraud” exception on the statutory accountant-client
privilege.  See Dixon, 72 Md. App. 620, 531 A.2d 1318 (1987), cert. denied, 311 Md. 557,
536 A.2d 664 (1988).  Sears argues that the fraud exception recognized in Dixon should be
extended to apply to the facts of this case.
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In Dixon, the Court of Special Appeals considered the applicability of the “fraud
exception” to accountant-client communications and noted that “[f]ederal courts have
frequently held that communications that would otherwise be protected by the attorney-client
privilege are not protected if they involve client communications in furtherance of
contemplated or ongoing criminal or fraudulent conduct.”  Id. at 639, 531 A.2d at 1327-28.
The intermediate appellate court concluded that the same policy considerations underlying
the decision to invalidate the accountant-client privilege in the face of potential criminal
-17-
  In Dixon v. Bennett, 72 Md. App. 620, 531 A.2d 1318 (1987), cert. denied, 311
4
Md. 557, 536 A.2d 664 (1988), the appellant, an unsecured creditor of Richard Rice (a
third party to the suit) alleged that transfers of funds made by Rice to the appellee (Rice’s
accountant), were fraudulent under the Maryland Uniform Fraudulent Conveyance Act,
then codified in the Commercial Law Article of the Maryland Code (1975, 1983
Repl.Vol., 1987 Supp.).  Dixon filed suit to recover assets transferred fraudulently or
damages.  During the discovery stage of the litigation, appellant sought production of
documents from Rice’s accountant.  The court ordered production of those documents
and the accountant sought a protective order, which was granted, based on the
accountant-client privilege.
The Court of Special Appeals held “[t]he rationale supporting the Federal
repudiation of the attorney-client privilege under fraudulent circumstances is equally
persuasive when applied to the accountant-client privilege.  Communication between an
accountant and a client in furtherance of fraudulent or unlawful ends in no way serves to
promote informed and intelligent financial advice.”  Dixon, 72 Md. App. at 640, 531
A.2d at 1328.  The court in Dixon compared the privilege granted to lawyer-client, priest-
penitent, and doctor-patient and held that the court should not grant greater protection to
the statutorily based accountant-client privilege because the accountant-client privilege by
statute is already subject to exceptions based on the criminal and bankruptcy laws of the
State.  In recognizing the fraud exception to the accountant-client privilege, the court
held:
To overcome a claim of privilege using the fraud exception, the
seeker of the documents does not have to prove that the fraud
has actually taken place.  What is required is simply a prima
facie showing that the advice related to the documents sought
has been obtained in furtherance of a fraudulent activity, or the
presentation of a reasonable basis for believing that the
objective was fraudulent.
Id. at 642, 531 A.2d at 1329 (citations omitted).  The Dixon court reasoned that the
purpose of the accountant-client privilege “was not to enable either the client or the
accountant to use it as a shield when charged with perpetrating a fraud in violation of the
laws of the State.”  Id.
violations apply when the client may be involved in the perpetration of a fraud.   Id. at 640,
4
531 A.2d at 1328.
This Court has not had the occasion to consider whether a fraud exception is
applicable to the accountant-client privilege.  In this case, we need not reach the question of
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whether a “fraud exception” to the accountant-client privilege exists inasmuch as the facts
in this case would not satisfy the application of the exception.  Sears argues that it has made
a prima facie showing of fraud.  We disagree.
Sears has not shown that there is a reasonable basis to suspect the perpetration of
fraud or that the communications between Gussin and Ernst & Young were in furtherance
of any fraud.  Sears was unable to show that there was any ongoing fraud, or that there had
been any transfer of assets in violation of the Maryland Uniform Fraudulent Conveyance Act
or any other violations of the criminal or bankruptcy laws, as was the case in Dixon.  The
mere fact that in 1994, Gussin and his spouse reported $247,787 in investment income and
that, in the mid-1980s, Gussin received $6.7 million, but now claims to have no assets, is not
an adequate showing by Sears to sustain its burden of pleading a prima facie showing of
fraud.
V.
We make no finding as to whether the documents in the possession of Ernst & Young
are in fact covered by the accountant-client privilege.  Neither party argued below that the
particular documents were not privileged and the trial court did not make any findings of fact
on this issue.  We note, however, that a client may not immunize otherwise discoverable
materials from the reach of another party by transferring possession of those materials to an
accountant.  See McNair v. District Court, 885 P.2d 576, 579-80 (Nev. 1994) (holding that
accountant must produce documents because client would be compelled to produce the
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requested documents); Paper Corp. of America v. Schneider, 563 So.2d 1134, 1135 (Fla. Ct.
App. 1990) (holding that “[f]inancial records and data which are not privileged in the hands
of the client cannot be shielded from discovery deposition or subpoena by transferring them
to the client’s accountant”); cf. Ashcraft v. Harvey, 315 So.2d 530, 531 (Fla. Ct. App. 1975)
(noting that a client’s documents must be delivered from attorney if the client would be
compelled to give up possession of the documents (citing 8 WIGMORE, EVIDENCE § 2307, at
591 (McNaughton rev. ed. 1961))).
JUDGMENT 
OF 
THE 
CIRCUIT
COURT FOR PRINCE GEORGE’S
COUNTY AFFIRMED.  COSTS TO BE
PAID BY APPELLANT.