Court Opinion

ID: 185226
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:29:14+00
Date Added: 2024-06-11T17:26:14.116639
License: Public Domain

223 F.3d 775 (D.C. Cir. 2000)
In re:  Sealed Case
No. 99-3125
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 25, 2000Decided July 14, 2000

Appeal from the United States District Court for the District of Columbia(No. 98ms00003)
Before:  Williams, Ginsburg and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Williams.
Williams, Circuit Judge:

1
A lawyer resisted compliance  with a federal grand jury subpoena on grounds of privilege,  and the government filed a motion to compel compliance. Finding the documents privileged, the district court reviewed  them in camera and found them subject to the crime-fraud  exception.  Accordingly it ordered them produced.  We reverse:  the understanding of the federal elections laws supporting application of the crime-fraud exception is erroneous.

2
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3
Because this case is under seal we endeavor to provide no  more information than is necessary to our disposition.  Principles governing the relationships of courts and agencies, however, compel us to address--and, indeed, ultimately defer  to--a civil enforcement recommendation issued by the Federal Elections Commission ("FEC") when the matter was before it.  See In re RNC, Alec Pointevint, and Haley Barbour,  Matter Under Review ("MUR") 4250.  We thus divulge facts  of the case to the extent they appear in the Statement of  Reasons associated with the MUR, Statement of Reasons of  Commissioners Wold, Elliott and Mason, MUR 4250 (Feb. 11, 2000), a document that 11 CFR S 4.4(a)(3) requires be made  public.  Of course, the subject of this case might theoretically  be different from that of the Commission proceeding, but the  factual similarity is so obvious that it would be pointless to  suppress the actual names.

4
In May 1993 three officials of the Republican National  Committee ("RNC"), including the Chairman Haley Barbour,  founded the National Policy Forum ("NPF"), a separately  incorporated, not-for-profit think tank.  Through September  1994 NPF received loans totaling $2,345,000 from the Republican National State Elections Committee ("RNSEC").RNSEC is a "nonfederal" account of RNC and thus is not a  "political committee" for purposes of certain disclosure requirements and contribution rules of the Federal Election  Campaign Act of 1971 ("FECA"), 2 U.S.C. § 431 et seq.  See,  e.g., id. § 433 (registration requirements of political committees), § 434(a)-(b) (reporting requirements of political committees), § 441a(1)-(2) (limitations on contributions to and by  political committees).

5
In September 1994, when NPF still owed RNSEC  $2,145,000, Barbour and other NPF and RNC officials arrived  at an agreement with Ambrous Young, a foreign national. Young's corporation, Young Brothers Development, Ltd. Hong Kong ("YBD-Hong Kong"), would provide $2,100,000 in  collateral through its U.S. subsidiary to secure a loan of that  amount from Signet Bank to NPF.  On October 17, 1994  Signet disbursed the loan to NPF, and on October 20 NPF  used $1,600,000 of the proceeds to repay a portion of the  original loan from RNSEC.

6
The FEC's General Counsel recommended that the Commission find probable cause to believe that RNC and its  officials had violated 2 U.S.C. § 441e(a)--a prohibition on  receipt of contributions from foreign nationals.  The Commission split 3-3, and because a majority of commissioners is  required to find probable cause, 2 U.S.C. § 437g(a)(4)(A)(i),  the vote precluded Commission enforcement action.  In re  RNC, Alec Pointevint, and Haley Barbour, MUR 4250.  The  three commissioners who voted for no-action provided a  Statement of Reasons, details of which will follow.

7
NPF's loan repayment also drew the attention of the  Department of Justice, which here rests its crime-fraud exception claim on the theory that the repayment transaction  amounted to solicitation and receipt of foreign contributions  by the RNC in violation of § 441e(a), and conspiracy by  various RNC officials to defraud the United States for failing  to disclose the transaction, 18 U.S.C. §§ 371, 1001.

8
On September 8, 1997 a grand jury subpoenaed the lawyer  who had served as general counsel of RNC in the period  surrounding the loan repayment.  He declined to produce a  number of documents that he claimed were subject to the  attorney-client and work-product privileges.  The government  filed a motion to compel compliance, and the RNC intervened  to oppose the motion.  Finding that the privileges did not  attach, the district court ordered the general counsel to  produce some of the withheld documents;  on appeal by the  RNC, this court reversed.  In re Sealed Case, 146 F.3d 881,  888 (D.C. Cir. 1998).  On remand the district court ordered  the documents produced, holding that those privileges,  though applicable in the first instance, were subject on the  facts here to the crime-fraud exception.  Not discussing the  alleged "crimes" in detail, the district court said simply that  "the evidence shows that the RNC sought the advice of [the  general counsel] in an effort to construct the loan guarantee  transaction in a manner designed to conceal from the FEC  the source of the funds used to acquire the loan," and "to  evade federal election campaign laws."  Concluding that the  government has failed to allege any conduct that is criminal  under FECA, we reverse.

9
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10
Appellant RNC first argues that the case is moot.  The  theory is that this court lacks, and the district court before it  lacked, authority to enforce the subpoena because the grand  jury that issued the subpoena had expired before the district  court issued its order on September 24, 1999 granting the  motion to compel compliance.  The RNC relies primarily on  the First Circuit's opinion in In re Grand Jury Proceedings  (Caucus Distributors, Inc.), 871 F.2d 156, 161 (1st Cir. 1989),  in which the court held that the running of civil contempt  fines must stop at the expiration of the grand jury under  whose aegis the contempt citation was issued, even though a  second grand jury pursuing the same matter had been convened.

11
But whereas in Caucus Distributors the shift in grand  juries occurred during the contempt enforcement process,  here it occurred before that even started.  The analogic force  that the Caucus Distributors court drew from the statutory  rule that recalcitrant witnesses may not be confined beyond  "the term of the grand jury, including extensions, before  which such refusal to comply with the court order occurred,"  28 U.S.C. § 1826(a)(2);  871 F.2d at 160-61, is plainly absent. Indeed, the First Circuit was explicit that a "subpoena issued  by one grand jury may be used to obtain evidence for a  second grand jury."  Id. at 160.  While the court saw the  continuous running of fines after expiration of the contempt  grand jury as posing difficult questions as to when "an  investigation has ceased," id. at 161, such questions, if pertinent at all in this context, impose no comparable risk of ever accumulating penalties for an offense that may have become  moot.  Finally, the court relied heavily on language in Shillitani v. United States, 384 U.S. 364 (1966);  although there the  initial grand jury investigation had evidently ceased altogether, with no successor grand jury, the Court had written  broadly, seeming to require termination of contempt remedies  after any such expiration, regardless of successorship.  See  id. at 372, cited at 871 F.2d at 161-62.

12
Appellant has identified no prejudice arising from enforcement of a subpoena where the originally issuing grand jury  has expired and another has indisputably carried the investigation forward.  A parallel situation was presented in United  States v. Kleen Laundry & Cleaners, Inc., 381 F. Supp. 519,  521 (E.D.N.Y. 1974), where the district court upheld enforcement of a subpoena issued by a federal prosecutor in the  name of a grand jury that was not sitting at the time but  would be sitting on the return date.  The court saw no  prejudice to the witness and noted that it is "the prosecutor  who has the initiative and power by subpoena to bring proof  to the courthouse."  See id. at 522;  see also In re Immunity  Order Dated April 21, 1982, 543 F. Supp. 1075, 1078  (S.D.N.Y. 1982).  Thus we reject the claims of a lack of power  in the district court to enforce the subpoena.

13
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14
On the merits, there are slightly different--and here immaterial--differences in the formulation of the test for the  crime-fraud exception as applied to the two privileges in  question, attorney-client and work-product.  To establish the  exception to the attorney-client privilege, the court must  consider whether the client "made or received the otherwise  privileged communication with the intent to further an unlawful or fraudulent act," and establish that the client actually  "carried out the crime or fraud."  In re Sealed Case, 107 F.3d  46, 49 (D.C. Cir. 1997).  To establish the exception to the  work-product privilege, courts ask a slightly different question, focusing on the client's general purpose in consulting the  lawyer rather than on his intent regarding the particular  communication:  "Did the client consult the lawyer or use the  material for the purpose of committing a crime or fraud? "Id. at 51.  Here the application of the crime-fraud exception  turns on a pure question of law, which we resolve de novo. United States v. Kim, 23 F.3d 513, 517 (D.C. Cir. 1994).

15
This case does not fall within the crime-fraud exception  because what RNC and its officials are accused of is not  criminal.  The government alleges that RNC "conspire[d] either to commit an[ ] offense against the United States or to  defraud the United States" in violation of 18 U.S.C. § 371.Contrary to the government's assertion that impossibility as a  matter of law is not a defense to conspiracy, it clearly is in  this context.  Because the transaction described by the government does not violate FECA, there can be no finding of  conspiracy.  "Pure legal impossibility is always a defense. For example, a hunter cannot be convicted of attempting to  shoot a deer if the law does not prohibit shooting deer in the  first place."  United States v. Hsu, 155 F.3d 189, 199 n.16  (3rd Cir. 1998).  Obviously a charge of conspiracy to shoot a  deer would be equally untenable.

16
As we understand the government's position, the RNC's  guilt turns on two alternative theories, both of which assume  that the prohibition of 2 U.S.C. § 441e(a) on contributions by  foreign nationals applies not only to contributions to a "federal account" such as RNC's but also to contributions to a non federal account, here RNSEC.  Besides that each theory has  what may be viewed as a substantive element (characterizing  a specific element of the transaction as the illicit "contribution") and an element collapsing legally distinct entities.  In  the first theory, (1) NPF's repayment of the loan to RNSEC  is classified as a "contribution";  and (2) YBD-Hong Kong is  seen as the contributor, by an elision of the entities.  In the  second, (1) YBD-Hong Kong's provision of the loan guarantee  to NPF is the relevant "contribution";  and (2) RNSEC is  viewed as the recipient.  In light of the Commission's statutory interpretation, both theories flunk;  the collapsing of entities is unjustified, and the substantive element of the first  theory (treating a loan repayment as a "contribution") is  false.

17
Because the Commission has in effect spoken to both  theories, we start by considering whether we should defer to  Commission interpretations in the context presented here-where the Department of Justice in a criminal case relies on  an interpretation of the relevant statutes that has been  rejected by the Commission in a 3-3 decision that, under the  statutory voting mechanism, 2 U.S.C. § 437g(a)(4)(A)(i) (requiring affirmative vote of four commissioners), controls  Commission enforcement.

18
We have already held that we owe deference to a legal  interpretation supporting a negative probable cause determination that prevails on a 3-3 deadlock.  See FEC v. National  Republican Senatorial Committee, 966 F.2d 1471, 1476 (D.C.  Cir. 1992).  There the issue involved interpretation of an  FEC regulation rather than of FECA (a distinction we return  to later), and we relied on an earlier decision of this court  insisting that, to enable judicial review, a no-action decision  by three commissioners must be backed by their statement of  reasons.  Id. (citing Democratic Congressional Campaign  Committee v. FEC, 831 F.2d 1131, 1134-35 (D.C. Cir. 1987)).

19
It is irrelevant that the prevailing interpretation was established in the context of agency enforcement, whereas this is a  criminal prosecution.  Deference is due as much in a criminal  context as in any other for interpretations made outside that  context, such as those found in published regulations.  See  United States v. Kanchanalak, 192 F.3d 1037, 1047 n.17 (D.C.  Cir. 1999) ("That criminal liability is at issue does not alter  the fact that reasonable interpretations of the act are entitled  to deference.");  see also Babbitt v. Sweet Home Chapter of  Communities for a Great Oregon, 515 U.S. 687, 703-05  (1995).

20
Here, unlike in National Republican Senatorial Committee, agency interpretation of a statute rather than a regulation is at issue.  The Supreme Court has recently elaborated  its view of the conditions for deference, both as to regulations,  see Auer v. Robbins, 519 U.S. 452 (1997), and statutes, see  Christensen v. Harris County, 120 S. Ct. 1655 (2000).  As to  statutes, the focus of our interest here, the Court drew the  line between interpretations that are controlling on us if  "reasonable," under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984), or  merely "entitled to respect" to the extent that they have  "power to persuade," under Skidmore v. Swift & Co., 323 U.S.  134, 139 (1944).  The Court appeared to make the interpretation's legal effect the touchstone:  "Interpretations such as  those in opinion letters--like interpretations contained in  policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law--do not warrant Chevron-style deference."  Christensen, 120 S. Ct. at 1657  (emphasis added).  (As examples of agency documents that  merit Chevron deference the Court listed formal adjudications and notice-and-comment rulemakings.  See id.)  In  support, the Court cited Martin v. OSHRC, 499 U.S. 144  (1991), where it had made Chevron-style deference turn on  whether the interpretation "derive[d] from the exercise of the  [agency's] delegated lawmaking powers."  Id. at 157.  Although Martin involved a regulatory interpretation, its use  by the Christensen Court supports its application to statutory  interpretation as well.  Regardless of possible differences of  nuance between these views, we find the Commission's probable cause determination here entitled to deference under  both.

21
Under §§ 437g(a)(4)(A)(i), (5)(C), and (6)(A) the probable  cause determination is part of a detailed statutory framework  for civil enforcement and is analogous to a formal adjudication, which itself falls on the Chevron side of the line.  Like  the citation to which the Court deferred in Martin, the  probable cause determination "assumes a form expressly  provided for by Congress."  Martin, 499 U.S. at 157.  The  General Counsel advocates and the respondent opposes a  finding of probable cause;  through this statutorily mandated  adversarial process, see 2 U.S.C. § 437g(a)(1), (3), the agency  "gives ambiguous statutory terms concrete meaning through  a process of case-by-case adjudication."  INS v. AguirreAguirre, 526 U.S. 415, 425 (1999) (citation and internal quotation marks omitted).  Unlike a judicially unreviewable SEC  no-action letter, which this court has said would not merit  Chevron deference, Roosevelt v. E.I. Du Pont de Nemours &  Co., 958 F.2d 416, 427 n.19 (D.C. Cir. 1992) ("[T]he principle  of deference described in [Chevron] is not applicable here, for  neither the staff's no-action letter nor the Commission's brief  ranks as an agency adjudication or rulemaking."), the no action decision here was made by the Commission itself, not  the staff, and precludes further enforcement.  Compare  Board of Trade of Chicago v. SEC, 883 F.2d 525, 529 (7th Cir.  1989) ("[The SEC staff] could change [its] mind tomorrow, or  the Commissioners might elect to proceed no matter what the [staff] recommends.  The SEC has not, in other words, issued  a 'final' decision....").  Congress vested enforcement power  in the FEC, carefully establishing rules that tend to preclude  coercive Commission action in a partisan situation, where the  Commission, itself statutorily balanced between the major  parties, 2 U.S.C. § 437c(a)(1) ("No more than 3 members of  the Commission appointed under this paragraph may be  affiliated with the same political party."), is evenly split.  If  courts do not accord Chevron deference to a prevailing decision that specific conduct is not a violation, parties may be  subject to criminal penalties where Congress could not have  intended that result.

22
This reasoning is consistent with FEC v. Democratic Senatorial Campaign Comm., 454 U.S. 27, 37 (1981), where the  Court, in deciding whether the Commission's decision to  dismiss a complaint was "contrary to law," 2 U.S.C.  § 437g(a)(8)(C), deferred to the Commission's interpretation. Although the Court cited Skidmore (Chevron after all had not  yet been decided), it spoke in terms more consonant with  Chevron.  The interpretation need only be "sufficiently reasonable," FEC v. Democratic Senatorial Campaign Comm.,  454 U.S. at 39 (citation omitted), and "[t]o satisfy this standard it is not necessary for a court to find that the agency's  construction was the only reasonable one or even the reading  the court would have reached if the question initially had  arisen in a judicial proceeding."  Id.  Similarly, as this court  has said (again not explicitly in Chevron terms), a 3-3 deadlock would be subject to great deference:  "In the absence of  prior Commission precedent ..., judicial deference to the  agency's initial decision or indecision would be at its zenith."Democratic Congressional Campaign Committee v. FEC, 831  F.2d 1131, 1135 n.5 (D.C. Cir. 1987).

23
We now turn to the Commission's (i.e., the prevailing)  interpretation of the applicable statutes in the Statement of  Reasons for MUR 4250.  The Department's first theory here  strikes out on the failure of its basic claim that a loan  repayment is a contribution.  On its face this is improbable.It would be unusual to characterize a loan repayment--which  could include, for example, simple payment on a purchase money mortgage on a property sold by a political committee--as a "contribution."  The Commission here rejected the  idea that the final loan repayment from NPF to RNSEC fell  within the definition of "contribution." The statute defines  "contribution" as "any gift, subscription, loan, advance, or  deposit of money or anything of value made by any person for  the purpose of influencing any election for Federal office."  2  U.S.C. § 431(8)(A)(i).  No reason appears why repayment of  a lawful debt could qualify.  It is true that strictly speaking  the definition applies only to hard money contributions ("any  election for Federal office"), and thus not directly to a contribution to RNSEC, which because of its non-federal character  is not a "political committee."  But in the absence of a  separate definition for soft money contributions, we have no  reason to think that Congress would intend a broader definition of "contribution" in the soft money context than in the  hard money context.  Cf. Kanchanalak, 192 F.3d at 1046-47  & n.19.

24
In rejecting the inclusion of a loan repayment in the idea of  "contributions," the Commission observed that its regulation  did not purport to expand the statutory definition.  MUR  4250 at 3 & n.3.  Indeed, the regulation's formal definition  contains no reference to "loan repayments," and goes on to  say that "[r]epayment of the principal amount of [a loan by a  political committee] to such political committee shall not be a  contribution by the debtor to the lender committee."  11 CFR  § 100.7(a)(1)(i)(E).

25
The FEC's General Counsel before the Commission sought,  and the government here seeks, to turn this regulation into a  sword.  It points to the clause of 11 CFR § 100.7(a)(1)(i)(E)  saying that repayment to a political committee of the principal of a loan "shall be made with funds which are subject to  the prohibitions of" various regulations, including a regulatory equivalent of the ban on foreign contributions.  But as the  Commission responded, the regulation is specifically limited  to repayments to political committees, and thus is not applicable here.  MUR 4250 at 5.  The government says the Commission and appellant cannot rely on § 100.7(a)(1)(i)(E) selectively, that they must take the bitter with the sweet.  But citation of a regulation purporting only to govern loans by  political committees as support for the obvious reading of the  statutory term does notseem to us logically to require  accepting its caveat on source of funds, where the caveat has  no visible statutory support and the regulation does not even  purport to cover non-political committees.

26
We thus turn to the government's theory that RNC officials violated 2 U.S.C. § 441e(a)'s ban on foreign contributions by bringing about, or helping to bring about, YBDHong Kong's guarantee of the loan to NPF.  That a loan  guarantee is a contribution is an easy step.  It is clearly a  valuable economic contribution, and the Commission's regulations (again for political committees), having defined contribution to include a loan, go on to define loan to include a  "guarantee."  11 CFR § 100.7(a)(1)(i).  And the government's  contention that 2 U.S.C. § 441e(a) covers contributions for  non-federal elections (e.g., to RNSEC) is here supported by  the Commission, MUR 4250 at 6, and meets the test of  reasonableness.  The ban speaks to contributions in connection with an election "for any political office," 2 U.S.C.  § 441e(a);  although as we have seen, the statutory definition  of contribution addresses only elections "for Federal office," 2  U.S.C. § 431(8)(A)(i), we have already upheld the FEC's  resolution of that contradiction in favor of a broad reading of  the ban.  Kanchanalak, 192 F.3d at 1046-50.

27
But unless NPF can somehow be telescoped together with  either RNSEC or RNC, YBD-Hong Kong's contribution to  NPF is no violation.  One possible device would be a notion  that NPF was really part of RNC, but the government has  not seriously voiced such a claim.  Although its brief contains  occasional language such as the assertion that "NPF was  operated as a de facto division or subsidiary of the RNC,"  nowhere does it coherently argue that NPF is not, legally  distinct from RNC, that the rules applicable to political  committees apply to NPF, or that the relevant "contribution"  was the loan guarantee directly from YBD-Hong Kong to  NPF.  Instead it considers NPF an intermediary:  "[YBDHong Kong's domestic subsidiary's] apparently innocuous  guarantee of a $2.1 million bank loan to the NPF suspiciously begins to resemble a prohibited foreign campaign contribution that was simply passed through the NPF."

28
Thus the heart of the government's case is the argument  that the transactions should be considered end-to-end, beginning with the loan guarantee made by YBD-Hong Kong and  ending with the repayment from NPF to RNSEC.  Here the  Commission is flatly to the contrary, and its view that there is  no basis for treating the several legally distinct transactions  as one is reasonable.  The Commission considered each of the  various elements--the "loan from the RNSEC to NPF, the  collateral from [YBD-Hong Kong] to Signet, the loan from  Signet to NPF, and the repayment from NPF to the  RNSEC," MUR 4250 at 10--and found none of them to be  without valid business purpose.  Id. at 10-11.  The government has weakly claimed that the initial loan was sham, the  creation of a debt for which the RNC never expected full  repayment.  The Commission found the charge rebutted "by  the documentation of the loans with a promissory note and  RNC's reporting of the loans;  by the fact that NPF did repay  $200,000 of the loans prior to receiving the loan from Signet  Bank;  and by the efforts of the RNC's officers to find sources  of funds for NPF that would enable NPF to repay the loans."MUR 4250, at 9.  The government points to nothing contradictory.

29
Second, the government relies heavily on the idea that  RNC's purpose in bringing about the YBD-Hong Kong guarantee, and perhaps Young's in giving it, was to enable NPF to  repay its loan to RNSEC.  But the Commission rejected the  principle that the parties' purposes can tie together a set of  lawful transactions, each with a legitimate business purpose,  to create an unlawful one.  MUR 4250 at 9-14.

30
In so doing, the Commission relied on precedent.  In In re  Fisher, MUR 4000 (1994), a candidate for Senate invited  potential contributors to donate $1000 to the current campaign, and an additional $1000 to each of three previous  campaigns (assuming they had not already contributed to  them), to help those committees retire their debts.  The  candidate promised that he would match, with contributions to the current campaign, any funds contributed for retirement  of the old debts.  Because the only debts of the prior campaigns were to the candidate himself, the overall effect was to  generate funds--in excess of the $1000 per-individual limit-for the current campaign.  The Commission nonetheless  found unanimously that these contributions would not be  deemed to have exceeded the $1000 maximum.  Here the  FEC General Counsel sought to distinguish Fisher on the  theory that the donors did not know that their donations  would eventually reach Fisher's current campaign.  The claim  is highly improbable, as the campaign solicitations set a  target for each "couple" of "$5000 for Richard's campaign."MUR 4000 at 3.  In any event, the Commission then did not  consider the contributors' knowledge to be relevant.  This  seems reasonable:  where the recipient is fully informed,  there appears no reason why varying degrees of knowledge  on the part of donors should be pivotal in determining the  recipient's guilt.

31
The government's theory of a reporting violation is even  weaker.  11 CFR § 104.8(e) requires that "National party  committees [e.g., RNC] shall disclose ... information about  each ... entity that donates an aggregate amount in excess  of $200 in a calendar year to the committee's non-federal  account(s) [e.g., RNSEC].  This information shall include the  donating individual's or entity's name...."  We need not  consider whether a loan guarantee such as that made by  YBD-Hong Kong falls within the donations covered by  § 104.8, or whether a guarantor such as YBD-Hong Kong is  properly considered a "donating individual."  Our rejection of  the government's effort to treat the two transactions as one  moots both issues.  To the extent that YBD-Hong Kong  "donated" a loan guarantee it did so to NPF and not to the  RNSEC, and thus the RNC was not required to report the  identity of the guarantor.

32
The government has noted that in making its case to the  district court for the crime-fraud exception it has included  evidence not before the Commission in MUR 4250.  (The  appellant notes, in parallel, that it has never seen the evidence before the district court.)  But this does not alter or even bear on the gaps in the legal theories marshaled by the  government to support the exception.  There may somewhere  be evidence such that, under valid legal theories, the government can justify applying the exception.  But until the government tries to assemble its evidence around valid theories,  the character of the evidence is largely irrelevant.

33
*  *  *

34
Because we find that the legal theories invoked to support  application of the crime-fraud exception are without exception  faulty, we reverse.

35
So ordered.