Court Opinion

ID: 203465
Source: CourtListenerOpinion
Date Created: 2011-02-07 06:17:23+00
Date Added: 2024-06-11T17:27:37.162635
License: Public Domain

Not for Publication in West's Federal Reporter

           United States Court of Appeals
                        For the First Circuit

No.   07-2095

                      UNITED STATES OF AMERICA,

                                 Appellee,

                                      v.

                            GEORGE SCHUSSEL,

                         Defendant, Appellant.

            APPEAL FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. Reginald C. Lindsay, U.S. District Judge]

                                   Before

                    Lipez, Merritt,* and Howard,
                           Circuit Judges.

     Scott A. Srebnick with whom Martin G. Weinberg and Francis
DiMento were on brief for appellant.
     Michael J. Sullivan with whom Jack W. Pirozzolo and Carmen M.
Ortiz were on brief for appellee.

                             August 29, 2008

      *
       Of the Sixth Circuit, sitting by designation.
     MERRITT, Senior Circuit Judge.       Defendant George Schussel was

convicted   after   a   thirteen-day   jury    trial   of   one   count   of

conspiracy to defraud the United States in violation of 18 U.S.C.

§ 371 and two counts of tax evasion in violation of 26 U.S.C. §

7201.   He was sentenced to 60 months’ imprisonment on each count,

to run concurrently.    He now appeals his conviction, raising three

issues:   (1) whether documents turned over to the government from

his attorney’s files violate the attorney-client privilege; (2)

whether the refusal of the trial court to give certain requested

jury instructions violated Schussel’s right to a fair trial; and

(3) whether sufficient evidence supports Schussel’s conviction for

conspiracy.    Schussel does not appeal his sentence.              For the

following reasons, we affirm the judgment of the district court.

                                I.   Facts

     Defendant George Schussel is the founder of and was, at all

times relevant to the charges herein, the principal shareholder of

Digital   Consulting,   Inc.   (“DCI”),   a   Massachusetts   corporation

engaged in the business of planning and conducting trade shows and

conferences for businesses in the computer industry. DCI’s primary

source of revenue came from participants at DCI-organized events

and from vendors at those events that bought booth space to display

software or other products.      Schussel was first the president and

then the CEO of DCI and he owned 95% of the stock.          Ronald Gomes,

who owned the other 5% of DCI stock,             succeeded Schussel as

                                  - 2 -
president of DCI.         Diane Reed was hired in 1985 as DCI’s accountant

and   she   later    became      controller.       She    reported    primarily    to

Schussel.

      Schussel      also     was     the   owner   and    President     of    Digital

Consulting International Limited (“DCIL”), a company established in

1988 and operating in Hamilton, Bermuda, ostensibly to help DCI

expand its international business.                 DCIL, however, was a shell

company that existed in name only; it did not exist as an actual

company with employees or a building.               According to testimony of

Diane Reed, DCI’s controller, from the late 1980s through 1995,

Schussel directed her to divert money generated by DCI                         into a

Bermuda bank account held in the name of DCIL in order to avoid

paying    taxes     on    DCI    income.     Schussel,     Schussel’s     wife,   and

Schussel’s daughter, Stacy Griffin, were the authorized signatories

of the Bermuda account.             The types of checks deposited into the

Bermuda account varied.            Sometimes customer checks were deposited

directly into the Bermuda account, but, over time, Reed began

sending     funds    to    the     Bermuda   account     from   various      operating

accounts of DCI known as “user group” accounts.                    DCI used these

accounts to handle incoming and outgoing funds associated with

particular events run by DCI. The separate accounts allowed DCI to

keep client and vendor funds separated from DCI funds.

      Between 1988 and 1995, Schussel diverted over $12 million of

DCI’s income to the Bermuda account, much of it from the “user

                                           - 3 -
group” accounts.    This was taxable income to DCI that was not

reported to the IRS.    After being deposited in the DCIL Bermuda

account, most of the money was transferred by wire to accounts in

the United States at Fidelity Investments that were maintained and

controlled by Schussel.   The rest of the money deposited in the

Bermuda account, about 5%, was transferred to Schussel’s business

partner, Gomes.    By depositing money in the Bermuda account and

then transferring it to the Fidelity account, Schussel also avoided

paying personal income tax.   Reed kept track of the funds diverted

to the Bermuda account by noting the amount of each deposit made

and the subsequent distribution to Schussel and Gomes.

     In late 1991 and early 1992, the IRS conducted an audit of DCI

covering tax years 1986 to 1990.   When the IRS agent in charge of

the audit asked about two payments from DCI to DCIL, he was told

that the payments were commissions DCI owed to DCIL for foreign

events.   The agent was also given fabricated documents signed by

Schussel and Gomes that referenced each payment as being made for

services DCIL purportedly performed for DCI.

     Although tax adjustments were made for DCI for the years 1986

to 1990, the agent took no further action.   In 1995, the IRS again

audited DCI, this time for tax year 1993.       A different agent

handled the audit, and the existence of the Bermuda account was not

raised by the agent or anyone at DCI.

                               - 4 -
     In the mid-1990s, discussions arose about selling DCI.                  A

concern arose that DCI would not be able to show its true value and

profitability to potential buyers because income actually earned by

DCI was being diverted to the DCIL Bermuda account.               Two sets of

numbers existed in DCI’s books – one set reflected DCI’s true

income and the other set reflected the income reported by DCI to

the Internal Revenue Service.     In early 1996, it was decided that

money would no longer be diverted to the Bermuda account so that

the company could be sold for its “true” value.             Tax year 1995,

therefore, was the last year that the corporate return omitted

income DCI had diverted to Bermuda.        The Bermuda account was not

closed until 1997, but Schussel reported on his 1996 personal

return that he did not control any foreign bank accounts.

     In early 1997, Gomes and Schussel met with attorney Kenneth

Glusman regarding the sale of DCI.        At an evidentiary hearing to

consider   admission   into   evidence    of   various      attorney-client

communications,   attorney    Glusman    testified   that    at    his   first

meeting with Schussel and Gomes, the men told him about the shell

company DCIL and the Bermuda account to which money had been

diverted, including the fact that DCI had not been reporting all of

its taxable income to the IRS for a number of years.           Glusman, who

did not have experience with criminal tax matters, testified that

his main concern at that point was not Schussel’s and Gomes’

liability for not paying taxes, but the fact that anyone who

                                 - 5 -
purchased DCI would be buying a company with a potentially large

liability for unpaid taxes.

     Also occurring in 1997 was the decision among Schussel, Gomes,

Diane Reed (the controller of DCI), Schussel’s daughter, Stacey

Griffin, and her husband, Michael, both DCI employees, to destroy

certain DCI records.   Specifically, Michael Griffin recommended a

plan to delete and alter DCI’s computerized accounting records so

that if an audit were to occur, revenue information in the computer

would match the revenue information in the 1995 corporate tax

return.   The discussion stemmed from concern that potential buyers

might discover the discrepancies in DCI’s records due to the

deposits of money into the Bermuda account.       Records in DCI’s

computer database showed that DCI’s income receipts did not match

DCI’s corporate bank account due to the monies that had been

transferred to the Bermuda account.       Gomes testified that the

record destruction plan was referred to as “Project Phoenix” and

the project’s goal was to alter DCI’s electronic database to ensure

that the information in the database matched income reported in

DCI’s corporate tax returns.1   In July 1997, at Gomes’ direction,

Reed prepared a list of documents to “Keep or Lose” in case of an

IRS audit or a sale.   An “All Staff Memo” dated July 29, 1997, from

the “Archiving Committee” directed the destruction of records as

     1
     Information and records relating to the Bermuda account of
DCIL were not maintained in the DCI database and were not
destroyed.

                                - 6 -
part of a “routine” clean up.              Reed questioned Gomes about this

memo and he told her he wanted to make sure all the documents were

“purged.”

         DCI learned in September 1997 that it would undergo an IRS

audit of its 1995 tax return.          On October 27, 1997, Reed, Schussel

and Paul Law, DCI’s accountant, met with Kelly McGovern, an IRS

agent.2        Prior to the October meeting, Reed had collected all of

the documentation requested by McGovern, other than documents

pertaining to DCIL and the Bermuda account.               The over $4 million

diverted to the Bermuda account in 1995 was therefore not disclosed

to the IRS agent.         Concern arose at DCI, however, when, during the

investigation, McGovern found a refund check issued to a vendor

written from a “user group” account, the separate accounts DCI used

to handle the funds for certain specific events.             The refund check

had come from the general DCI account because that particular “user

group” account had been closed. This led McGovern to inquire about

the separate accounts of “user groups.”            DCI became concerned that

if   a       thorough   examination   of   each   “user   group”   account   was

conducted, it would be discovered that money from these accounts

had been transferred to the Bermuda account.

         McGovern’s discovery of the “user group” accounts led to

another meeting in November 1998 with Schussel, Schussel’s wife,

         2
     IRS Agent McGovern is referred to in various places in the
record and briefs as Kelly Jordan, her married name.

                                      - 7 -
Gomes and his wife, Stacey and Michael Griffin, Reed and Glusman,

the attorney. Reed testified that Glusman was told at that meeting

that monies from the user group accounts had been transferred to

the Bermuda account.           Glusman then left the meeting and further

discussion took place regarding whether information in the DCI

database     could    be    destroyed     or   at   least   made    confusing    and

difficult for the IRS to understand.

       Upon learning about the audit, attorney Glusman recommended to

Schussel that he hire an attorney with experience in criminal tax

matters.      On     Glusman’s    recommendation,      Schussel      hired    Edward

DeFranceschi to represent both Schussel and DCI in the 1997 audit.

Gomes and Schussel first met with DeFranceschi in November 1997 and

told him that income had been diverted from DCI to the Bermuda

account and had not been reported to the IRS.                     Glusman was also

present at the meeting.          Reed met with DeFranceschi and showed him

the user group documentation and checks that had been sent to the

Bermuda account.           She also showed him documentation that showed

money being sent from DCI user groups to the Bermuda account and

back    to   Schussel’s       Fidelity    account     in    the    United    States.

DeFranceschi took over communicating with IRS agent McGovern and

recommended that no one from DCI communicate directly with the IRS.

DeFranceschi relied mainly on Schussel for information disclosed to

the IRS. Reed was instructed by Schussel to provide information to

DeFranceschi and Schussel as needed by DeFranceschi.

                                         - 8 -
     In February 1998, McGovern discovered more “user group” checks

and inquired about the relationship between DCI, DCIL and Schussel.

DeFranceschi provided her with a copy of a contract between DCI and

DCIL dated September 1993, given to him by Schussel.                    The contract

was signed by “J. Cardullo” on behalf of DCIL and provided that DCI

would compensate DCIL for “services rendered.”                          DeFranceschi

represented to McGovern that the contract had been in effect in

various forms since 1988.       Gomes and Reed testified that they did

not see the contract at the time it was executed in 1993.                      Gomes

said he first saw the contract in 1997 during the IRS audit.                   Reed,

who was responsible for maintaining all of DCI’s contracts in her

position as controller, testified that she did not see the contract

until 2003, when it was shown to her by the government.                           John

Cardullo,   who   was   hired   by    DCI    in    1988    to    be     Director    of

International     Operations,   testified         that    he    never    signed    the

contract, nor did he authorize anyone else to sign on his behalf.

He also testified that he had never conducted any business with

DCIL or any other company in Bermuda while at DCI.                      In addition,

Cardullo left DCI before September 1993, the date he purportedly

signed the contract.

     After receiving the contract between DCIL and DCI, IRS agent

McGovern requested certain documents from DeFranceschi concerning

DCIL,   Schussel’s   relationship      with   DCIL       and    the     relationship

between DCI and DCIL.     On March 4, 1998, Schussel faxed responses

                                     - 9 -
to some of the questions to DeFranceschi and provided a description

of what had occurred concerning DCIL in the earlier audit in 1991

and 1995.     Schussel asserted that he “had provided [the IRS] with

the complete file which I had in my possession at that time” and

indicated that on both occasions the IRS had not                  found a problem

with    the   DCI-DCIL      connection.          Schussel    also    supplied       two

“exhibits” to DeFranceschi that purported to document international

events for which DCI compensated DCIL.

       DeFranceschi,       using    the   information       supplied   to     him    by

Schussel, drafted a response to the IRS document request.                   He sent

the draft response to Schussel, who made notations on the draft

that indicate that he discussed the response with DeFranceschi. On

March 12, 1998, DeFranceschi sent the letter to IRS agent McGovern.

Based on the representations in this letter, IRS agent McGovern

concluded     that   DCI    and    DCIL   were    not   related     entities,   that

Schussel had no control over DCIL, and that the business conducted

by DCIL was outside the scope of her audit of DCI.                     Glusman and

Reed testified that McGovern never asked to see the actual records

of DCIL.      Pursuant to a letter dated May 6, 1998, the audit was

concluded     with   the    IRS    making    certain     adjustments     to     DCI’s

corporate return for 1995. None of these adjustments reflected the

DCI income that Schussel had diverted to the Bermuda account.

       After the 1997 audit concluded, Gomes and Schussel discussed

amending their personal tax returns for 1995 to reflect income that

                                      - 10 -
had not been disclosed at the time.                        At Schussel’s request,

controller Reed provided to attorney DeFranceschi documentation

regarding the Bermuda account, as well as documentation concerning

Schussel’s Fidelity account, so that DeFranceschi could prepare an

amended return for Schussel.                  Although an amended return was

prepared by DeFranceschi, it was never filed based on advice from

DeFranceschi.

      In October 2001, Darlene Flint, who had worked as Gomes’

secretary for 18 years, walked into the IRS office in Stoneham,

Massachusetts, with a box of DCI records that included the Bermuda

account    records.             This       disclosure       triggered     a     criminal

investigation of DCI and its employees.                   Reed and Gomes cooperated

in the investigation and provided information implicating Schussel

in both the diversion of taxable income and obstruction of IRS

audits.    In addition to the DCI employees, attorney DeFranceschi’s

conduct was also questioned by the federal prosecutor.                                 Upon

learning   that     he    was    a    subject       and   potential    target     of   the

investigation, DeFranceschi hired his own attorney, Elliot Lobel,

who   contacted     the    federal         prosecutor     and   offered    to     provide

evidence    that    DeFranceschi            did     not   knowingly     provide    false

information    to    the    IRS       or    obstruct      the   1998   audit.      Lobel

determined that the Massachusetts Rules of Professional Conduct

allowed    DeFranceschi          to        reveal     attorney-client         privileged

information to the extent necessary to defend himself from criminal

                                           - 11 -
charges.      Lobel allowed DeFranceschi to make a statement pursuant

to   a    proffer   letter   with    the    government.      In   the   proffer,

DeFranceschi stated that Schussel had provided him with all the

information and material provided to the IRS.             The prosecutor told

Lobel that the government would require documentary evidence to

prove      that   DeFranceschi      had    not   knowingly   participated     in

Schussel’s illegal scheme.           Lobel produced a limited number of

documents deemed necessary to prove DeFranceschi’s innocence, along

with an affidavit by DeFranceschi.           DeFranceschi did not turn over

his entire Schussel file to the government. The government decided

not to indict DeFranceschi.

         On February 26, 2004, a federal grand jury returned a three-

count indictment against Schussel, charging him with conspiring

with unnamed others, known and unknown, to defraud the United

States in the collection of income taxes in violation of 18 U.S.C.

§ 371 (Count I), and two counts of tax evasion in violation of 26

U.S.C. § 7201.       Specifically, the tax evasion counts allege that

Schussel made false statements to a revenue agent of the Internal

Revenue Service and filed a false and fraudulent corporate income

tax return (Count II) and individual tax return (Count III).                The

indictment charged that the offense conduct in the conspiracy in

Count I began in or about January 1988 and extended through May

1998.      The offense conduct in Counts II and III occurred in March

                                      - 12 -
1998 during an audit of Schussel’s individual and corporate tax

returns for 1995.

     The indictment charged that Schussel and others “intentionally

and willfully caused the filing of false and fraudulent Corporate

U.S. Income Tax Returns to be filed with the IRS for the purpose of

evading and defeating income tax due and owing for several years.”

Indictment at ¶ 32.   The indictment also specifically stated that

Schussel and others had failed to disclose DCI income which had

been diverted to DCIL’s bank account in Bermuda in the amount of

$8.5 million from 1993 through 1995.        The indictment also charged

that Schussel and others “for purposes of preventing discovery of

DCI’s unreported income, endeavored to impede and obstruct an audit

conducted by the IRS of DCI’s 1995 Corporate U.S. Income Tax

Return.”    Indictment   at   ¶   34.      The   overt   acts   charged   in

furtherance of the conspiracy included Schussel’s hiring of a tax

attorney in 1997 to represent him during the audit and his use of

the attorney “to impede and obstruct the audit.”          Indictment at ¶

40 (ee).   At issue on appeal are the following overt acts charged

in the indictment:

     gg. On or about March 11, 1998, Schussel caused the tax
     attorney who was acting on his behalf, to send a letter
     to the revenue agent, which letter falsely stated, among
     other things, that Schussel was not an officer of DCIL
     and falsely represented that payments made by DCI to DCIL
     were pursuant to the contract purportedly executed
     between DCI and DCIL in September 1993.

     hh. On or about May 6, 1998, Schussel signed IRS Form
     CG-4549, acknowledging and agreeing to income tax

                                  - 13 -
     examination changes that the revenue agent had made to
     DCI’s 1995 Corporate U.S. Income tax Return which showed
     that $18,859.00 was additional income tax due for DCI’s
     1995 calendar year. As Schussel well knew, this amount
     was, in fact, substantially less than the true amount due
     to the IRS because Schussel had concealed DCI’s true
     income from 1995 from the revenue agent during the course
     of the audit.

Indictment at ¶ 40 (gg, hh).

     Count II of the indictment charged that on March 11, 1998,

Schussel did “willfully attempt to evade and defeat” part of the

federal income tax owed by DCI by “making and causing to be made”

false statements to an IRS agent in order to mislead and impede an

audit examination of DCI’s 1995 corporate income tax return, and by

“filing    and   causing    to   be   filed”   with   the   IRS   a   false   and

fraudulent income tax return underreporting DCI’s taxable income

for 1995.      Indictment at ¶ 91.     Count III charged that on or about

March 11, 1998, Schussel willfully attempted to evade and defeat

part of the personal income tax owed by him by “making and causing

to be made false statements” to the revenue agent in order to

mislead and impede the audit of DCI’s 1995 corporate income tax

return, and by “filing and causing to be filed” with the IRS a

false and fraudulent individual income tax return by underreporting

his taxable income for 1995.          Indictment at ¶ 93.

     Before trial, Schussel moved to suppress documents on the

basis     of   various     privileges,    including    the    attorney-client

privilege, the corporate attorney-client privilege and the joint

defense/common interest privilege.             An evidentiary hearing was

                                      - 14 -
held in May 2005 before Magistrate Judge Alexander.                 Reed, Gomes,

Schussel’s attorneys Glusman and DeFranceschi and others testified.

The magistrate judge found that of the thirteen documents at issue

three were privileged and the government was prevented from using

them at trial.      The other ten were either not privileged or the

privilege was vitiated under an exception, such as the crime-fraud

exception or third-party disclosure rule.            Of the six documents at

issue in this appeal, the Magistrate Judge held that two (Exs. 65

and 73) were not privileged under the third-party disclosure rule

and   one   (Ex.   67)   was   not   privileged      because   it    was   not   a

confidential communication.          Three documents (Exs. 66, 68 and 71)

lost their privilege under the crime-fraud exception. See Findings

and Recommendation on Motion to Suppress Government’s Use and

Acquisition of Privileged Materials and for Other Appropriate

Relief, August 25, 2005.       Over Schussel’s objection, the district

court adopted the Magistrate Judge’s Findings and Recommendation.

                               II.     Analysis

      Schussel     raises   three    main   issues    on   appeal:      (1)    the

attorney-client     relationship      was   violated   when    documents      sent

between Schussel and his lawyer were introduced into evidence at

trial; (2) the district court erred in refusing to give certain

jury instructions requested by Schussel pertaining to the tax

evasion counts; and (3) the evidence was insufficient to support

the conspiracy conviction.

                                     - 15 -
A.   Attorney-Client Privilege

     The purpose of the attorney-client privilege is “to encourage

full and frank communication between attorneys and their clients .

. . .”   Upjohn Co. v. United States, 449 U.S. 383, 389 (1981).     The

privilege is not absolute, however, and does not extend to all

communications between an attorney and client.           The privilege

protects “only those communications that are confidential and are

made for the purpose of seeking or receiving legal advice.”        In re

Keeper of Records (Grand Jury Subpoena Addressed to XYZ Corp.), 348

F.3d 16, 22 (1st Cir. 2003).       The First Circuit has adopted the

following definition of the attorney client privilege:

     (1) Where legal advice of any kind is sought (2) from a
     professional legal adviser in his capacity as such, (3)
     the communications relating to that purpose, (4) made in
     confidence (5) by the client, (6) are at his instance
     permanently protected (7) from disclosure by himself or
     by the legal adviser, (8) except the protection be
     waived.

United States v. Mass. Inst. of Tech.. 129 F.3d 681, 684 (1st Cir.

1997) (quoting 8 J. Wigmore, Evidence § 2292, at 554 (McNaughton

rev. 1961)).   The burden of proving an applicable privilege lies

with the party claiming the privilege.      The party must demonstrate

by a preponderance of the evidence not only that the privilege

applies, but that it has not been waived or that exceptions do not

apply.   FDIC v. Ogden Corp., 202 F.3d 454, 460 (1st Cir. 2000).

     Following his indictment, Schussel filed a motion to suppress

thirteen    documents   supplied    by    his   tax   attorney,   Edward

                                 - 16 -
DeFranceschi, to the government, claiming they were privileged and

confidential        pursuant    to   attorney-client   privilege.3    Of   the

thirteen documents, the district court found three to be protected

by the attorney-client privilege.           Of the remaining ten documents

at issue, the district court found most of them not to be protected

under the attorney-client privilege either because they were not

confidential due to their content or due to the fact that they were

intended to be disclosed to a third-party.             Three documents that

were found to be confidential had the attorney-client privilege

vitiated      due    to   the   “crime-fraud    exception,”   which   exempts

privileged documents from protection if the client seeks advice

from a lawyer that will serve him in the commission of a crime or

fraud.      Only six of the documents are at issue on appeal; all six

documents came from the files of Ed DeFranceschi, Schussel’s

attorney at the time of an IRS audit in 1998.

       The six documents at issue on appeal are:

Exhibit 65:         A fax dated 2/16/98 from Schussel to DeFranceschi

telling DeFranceschi that the information in a 2/13/98 letter sent

to the IRS by DeFranceschi is incorrect and should be corrected to

say:       “I am advised that the transactions for 1988 through 1991

were reviewed in 1993 as part of the IRS audit for the years 1987-

1991.”      As the district court ruled, this document was properly

       3
     Schussel also moved to suppress documents provided to the
government by Gomes and Flint.     The court’s rulings on those
documents are not at issue in this appeal.

                                       - 17 -
admitted under the third-party disclosure rule because Schussel

intended, and indeed directed, that DeFranceschi disclose the

information to a third-party – the IRS.

Exhibit 66:   A fax dated 3/4/98 from Schussel to DeFranceschi with

draft responses to questions 1-3 of a document request from the

IRS.   This document was admitted under the “crime-fraud exception”

to the attorney-client privilege.

Exhibit 67:      A fax dated 3/6/98 from Schussel to DeFranceschi

requesting that DeFranceschi ask the IRS agent when Schussel can

“take down” the data room at Schussel’s offices that was set up for

the IRS examination. The district court found this document not to

be a confidential communication and therefore not privileged.

Exhibit 68:   Draft of letter dated 3/11/98 to be sent to IRS agent

concerning Document request #4.    This document was admitted under

the “crime-fraud exception” to the attorney-client privilege.

Exhibit    71:    Fax from Schussel to DeFranceschi dated 3/12/98

reminding DeFranceschi that the auditor who performed the 1993

audit had some questions about a cash transaction involving one of

DCI’s user groups and the questions were answered to the agent’s

satisfaction at that time.     This document was admitted under the

“crime-fraud exception” to the attorney-client privilege.

Exhibit 73:      Fax from Schussel to DeFranceschi dated 4/24/98

alerting DeFranceschi to a package of tax forms, schedules and

other material    DeFranceschi will be receiving from Schussel under

                                - 18 -
separate cover.      This document was admitted under the third-party

disclosure    rule    because   Schussel   intended   that   DeFranceschi

disclose the information to a third-party – the IRS.

1.   Waiver

     The government first argues that Schussel waived the privilege

as to all six documents     because in the trial court Schussel made

selective use of the documents as part of an advice-of-counsel

defense – sometimes wanting to use them in his defense and other

times wanting to withhold them on the ground of attorney-client

privilege.    The government argues that once Schussel put any

communications with DeFranceschi in evidence pursuant to an advice-

of-counsel defense, he waived the attorney-client privilege as to

all communications with DeFranceschi.       However, the district court

did not admit the documents on the basis of waiver and, because a

determination of waiver often requires a detailed factual analysis,

we decline to make such a finding in this appeal.

2.   Contents Not Privileged

     Exhibit 67 is a fax dated March 6, 1998, from Schussel to

DeFranceschi requesting that DeFranceschi ask the IRS agent when

Schussel can dismantle a data and records room at Schussel’s offices

that was set up for the IRS examination.      Because the communication

did not seek or give legal advice, the district court found this

document not to be a confidential communication and therefore not

privileged.   This finding was not clearly erroneous.

                                  - 19 -
3.   The Crime-Fraud Exception to the Attorney-Client Privilege

     Under   the   “crime-fraud     exception,”    the    attorney-client

privilege does not apply when a client seeks advice from a lawyer

that will serve him in the commission of a crime or fraud.          Clark

v. United States, 289 U.S. 1, 15 (1933); accord In re Grand Jury

Proceedings, 417 F.3d 18,22 (1st Cir. 2005);             United States v.

Reeder, 170 F.3d 93, 106 (1st Cir. 1999).         The exception applies

where there is a “reasonable basis to believe that the lawyer’s

services were used by the client to foster a crime or fraud.”          In

re Grand Jury Proceedings, 417 F.3d at 23.        The exception applies

based on the client’s intent, not the lawyer’s.          In re Grand Jury

Proceedings (Violette), 183 F.3d 71, 79 (1st Cir. 1999).              The

exception applies, therefore, regardless of whether the attorney was

an innocent or willing accomplice.         To “successfully invoke the

crime-fraud exception, the government must make a prima facie

showing that the attorney’s assistance was sought in furtherance of

a crime or fraud.”   Reeder, 170 F.3d at 106.       The government must

show: (1) that the client was engaged in (or was planning) criminal

or fraudulent activity when the attorney-client communications took

place; and (2) that the communications were intended by the client

to facilitate or conceal the criminal or fraudulent activity.          In

re Grand Jury Proceeding, 183 F.3d at 75.         The district co urt

found that the exception applied to Exhibits 66, 68 and 71, all

three of which were faxes or drafts sent to DeFranceschi by Schussel

                                  - 20 -
in March 1998 when DeFranceschi was trying to gather information

from Schussel and DCI to respond to IRS inquiries or document

requests.       The district court correctly applied the exception

because in each of the three documents Schussel was providing

incorrect information to DeFranceschi to be used in responses to

document requests and other exchanges with the IRS in an effort to

deceive the IRS about the true nature of Schussel’s relationship

with DCIL.

     Schussel’s attempts to characterize these communications as

simply soliciting legal advice from DeFranceschi belies their

content   and    Schussel’s   intent   in   relaying   the   information   to

DeFranceschi. The three documents were clearly sent to DeFranceschi

by Schussel so that Schussel and DCI could continue to evade the

taxes they owed.       In Exhibit 66, the March 4, 1998, fax from

Schussel to DeFranceschi, Schussel provided false information to

DeFranceschi about the business relationship between DCI and DCIL

by stating that DCIL had performed services for DCI and received

compensation.     In Exhibit 68, the March 12, 1998, draft letter to

the IRS from DeFranceschi on behalf of Schussel and DCI, Schussel

provided false information about the contract between DCI and DCIL.

As to Exhibit 71, the March 12, 1998, fax to DeFranceschi from

Schussel, Schussel reported to DeFranceschi that in the earlier 1995

audit, the IRS had questioned a cash payment to a user group

account. Schussel intended for DeFranceschi to use this information

                                  - 21 -
to mislead the IRS into believing that the user group accounts had

already been examined by the IRS during an earlier audit.

     Schussel argues that the exception cannot apply because he had

not yet been found guilty of any wrongdoing.          The crime-fraud

exception may apply, however, even if the client is ultimately found

not to be guilty.   By necessity, the assessment of documents during

a legal proceeding is generally preliminary and does not reflect a

finding that a client acted wrongfully. The required level of proof

to pierce the privilege under the crime-fraud exception is limited

to the issue of whether reasonable cause adequate to pierce the

privilege exists.    In re Grand Jury Proceedings, 417 F.3d at 22.

Both the district court and the magistrate judge held hearings where

findings were made that a sufficient factual predicate existed to

pierce the privilege as to these documents.      The district court’s

admission of Exhibits 66, 68 and 71 under the crime-fraud exception

was not clearly erroneous.

     Schussel also argues that even if the crime-fraud exception

applied, the documents should be suppressed and his conviction

reversed as a sanction against the government for violating his due

process rights when it “induced” DeFranceschi to turn over certain

documents without notifying Schussel first.      This argument is also

without   merit.    Attorneys   may   disclose   confidential   client

information to the extent the attorney reasonably believes such

disclosure is necessary to defend himself against a charge of

                                - 22 -
criminal wrongdoing.        See Mass. Rules of Prof’l Conduct 1.6(b)(2)

(a lawyer may reveal confidential information “to the extent the

lawyer reasonably believes necessary           . . . to establish a defense

to a criminal charge . . . against the lawyer based on conduct in

which the client was involved”).          Moreover, an attorney need not

wait to be indicted before making such disclosures.                 Id. cmt. 18

(“Paragraph (b)(2) does not require the lawyer to await commencement

of an action or proceeding that charges such complicity [with the

client], so that the defense may be established by responding

directly to a third party who has made such an assertion.”); United

States v. Weger, 709 F.2d 1151, 1156-57 (7th Cir. 1983) (permitting

a law firm to disclose privileged information before formal charges

filed to avoid stigma of indictment).

     Under    the     Massachusetts    Rules    of     Professional     Conduct,

therefore, and general legal principles aimed at preserving client

confidentiality to the fullest extent possible, DeFranceschi was

permitted to make a limited disclosure of information to the

government to defend himself from indictment.                 Once the United

States notified DeFranceschi’s attorney that DeFranceschi was a

potential    target    of   the   investigation      into   DCI   and   Schussel,

DeFranceschi became entitled immediately to disclose information

showing that he should not be charged.

     Citing to United States v. Zolin, 491 U.S. 554 (1989), Schussel

claims he had a due process right to be notified by either the

                                     - 23 -
government or DeFranceschi before DeFranceschi made the disclosure

to the government.        Schussel’s reliance on Zolin is misplaced.

Zolin held only that a court may receive contested documents for in

camera inspection to assess whether the crime-fraud exception

applies.      It makes no requirement that an attorney give advance

notice   to    the   client   about    his   intention    to     disclose   client

documents to a third party in order to defend himself from criminal

charges.      While we are mindful of Schussel’s argument that notice

is required due to the potential manipulation of an attorney by an

overzealous     or   unethical   prosecutor         accusing   the   attorney   of

criminal wrongdoing in order to get access to documents that might

be helpful in building a case against the client, Schussel has cited

no evidence that such was the case here.

     Finally, to the extent there was any error in admitting the

three documents under the crime-fraud exception, the error was

harmless.       Other   evidence      at   trial,    including    non-privileged

documents and testimony by witnesses, including employees of DCI,

was sufficient to show Schussel’s guilt. Such evidence included the

false contract given by Schussel to DeFranceschi, knowing it would

be turned over to the IRS.            Evidence was also introduced showing

that after each of the audits, Schussel had signed off on the

adjustments to his and DCI’s taxes recommended by the IRS knowing

that the income diverted to the Bermuda account was not included in

the adjustments.        This evidence and the testimony by numerous

                                      - 24 -
witnesses was sufficient for the jury to conclude that Schussel had

the necessary intent to mislead and deceive the IRS to support the

conspiracy and tax evasion counts.

4.   Third-Party Disclosure

     The third-party disclosure exception supports the principle

that the attorney-client privilege does not attach to communications

between attorney and client when they have been disclosed to a third

party or were created with the intention of being disclosed to a

third party.   “When information is transmitted to an attorney with

the intent that the information will be transmitted to a third-party

. . ., such information is not confidential.”      United States v.

Lawless, 709 F.2d 485, 487 (7th Cir. 1983) (finding waiver of

attorney-client privilege where information used to prepare tax

return would be disclosed on the tax return itself).

     Both Exhibits 65 and 73 contained information that Schussel

sent to DeFranceschi with the intent that the information be turned

over to the IRS.   Therefore, the documents are not privileged and

no attorney-client confidentiality attaches to them.   Exhibit 65 is

a fax sent by Schussel to DeFranceschi in which Schussel provides

information for DeFranceschi to give to IRS agent McGovern. Exhibit

73 consists of drafts of amended tax returns for Schussel and Gomes.

As the information provided in both these documents was intended to

be disclosed to the IRS, it is not confidential.    Schussel argues

that Exhibit 73 is a working draft between attorney and client that

                               - 25 -
is therefore privileged. If a client transmits information “so that

it might be used on a tax return, such transmission destroys any

expectation of confidentiality that might have otherwise existed.”

     Lawless, 709 F.2d at 487.   The court below correctly ruled that

the documents are not privileged.

B.    Jury Instructions

       Schussel claims error as to several of the jury instructions.

Schussel filed requests for specific jury instructions concerning

willfulness and the attorney-client relationship that were rejected

by the district court as incorrect statements of the law.        Another

requested    instruction    sought   to   “supplement”   the   conspiracy

instruction to specifically inform the jury that DeFranceschi,

Schussel’s tax attorney, was not part of the conspiracy.

1.    Willfulness

       Schussel claims it was error for the district court to reject

a request he made to instruct the jury on additions to the standard

willfulness instructions applicable to tax evasion charges under

Cheek v. United States, 498 U.S. 192 (1991).4      The district court’s

        4
     Schussel requested several instructions on willfulness that
were rejected by the district court. Although we do not recite
each of Schussel’s requested willfulness instructions herein, we
reproduce several examples to demonstrate the nature of the
requested instructions:

        Instruction No. 3
        Willfulness

        Defendant Schussel acted wilfully if the law imposed a
        duty on him, he knew of that duty, and he voluntarily and

                                 - 26 -
instruction explicitly focused the jury on the requirement that

Schussel have “the specific intent to disobey or disregard the law,”

which satisfies the Cheek willfulness requirement.              Schussel’s

requested instruction changed the standard tax evasion instruction

to instruct the jury that it could not find guilt unless it

concluded that Schussel knew he had a legal duty to reject his

attorney’s advice, which was based on the misinformation that

Schussel   had   supplied   to   him.     Specifically,   the    requested

     intentionally violated that duty.    Thus, if defendant
     Schussel acted in good faith, he cannot be guilty of
     filing a false and fraudulent tax return, as charged in
     Counts Two and three. This is a subjective standard; the
     question is what defendant Schussel actually believed,
     not what a reasonable person would have believed.
     negligence, even gross negligence, is not enough to meet
     the wilfulness [sic] requirement. . . .

     Instruction 3(A)

     Thus, you cannot convict defendant Schussel of the
     offenses charged in Counts Two or Three unless the
     government proves beyond a reasonable doubt that he knew
     that he had the duty to instruct his attorney Edward
     DeFranceschi to make changes in the letter to the IRS
     prepared by DeFranceschi dated march 11, 1998.

. . .

     Instruction 3(D)

     . . .

     You may not convict defendant Schussel of the offenses
     charged in Counts Two or Three based upon the signing of
     the May 6, 1998, letter unless you find beyond a
     reasonable doubt that he knew he had a duty to reject his
     attorney’s advice that he sing the may 6, 1998,
     adjustment letter.

                                 - 27 -
instruction would have required Schussel to know he had a legal duty

to tell DeFranceschi to change the March 11, 1998, letter sent to

the IRS and to reject DeFranceschi’s advice to sign the May 6, 1998,

tax adjustment letter because they were based on false or misleading

information. The requested instruction indicated, erroneously, that

once a client hires an attorney and makes certain disclosures to

that lawyer, the client cannot have acted “willfully” if the lawyer

passes on false information to the IRS. This is an improper reading

of the meaning of “willfulness” under the tax evasion statutes and

the district court properly rejected this proposed instruction.

       In addition, Schussel’s requested “willfulness” instructions

focus too much on the lawyer’s duty to the client under ethical and

professional responsibility rules instead of on the taxpayer’s

conduct.    The tax evasion statute, and its standard “willfulness”

instruction, focuses solely on the taxpayer’s duty to pay the tax

imposed and to not mislead the IRS about that amount.      They do not

look to the attorney’s conduct in representing the client.

       Requested instructions are appropriate only if they correctly

state the law.    United States v. Buttrick, 432 F.3d 373, 376 (1st

Cir.   2005).    Schussel’s   requested   instruction   concerning   the

attorney-client relationship as it        applies to the willfulness

requirement to prove a tax evasion charge was simply incorrect. The

tax evasion statute at issue, 26 U.S.C. § 7201, prohibits willfully

attempting in any manner to evade or defeat any tax imposed or

                                - 28 -
payment thereof. The relevant legal duty requires that the taxpayer

pay the required income tax and not mislead the IRS.                Schussel’s

requested instruction sought to add on a multitude of concepts from

the advice-of-counsel defense and attorney ethical rules.

2.   Literal Truth Instruction

      Schussel also claims error concerning the rejection by the

district court of Schussel’s proposed instruction telling the jury

it could not consider as “false” any statement Schussel made

responding to the IRS if that statement were “literally” true – even

if   the   statement   was   found   by   the   jury   to   be   incomplete   or

misleading.     The court below found that this instruction only

applied to perjury cases and not to actions taken with the “intent

to mislead or conceal” as stated in the tax evasion statutes.

                                     - 29 -
     Schussel’s    requested   instruction5   informed   the   jury   that

DeFranceschi had told the IRS the “literal truth” in answering its

inquiries, such as informing the IRS that Schussel “is” not an

officer or employee of DCIL and that payments made to DCIL by DCI

were pursuant to a “contract,” even though DeFranceschi knew that

DCIL was a shell company to which Schussel had diverted funds.

Specifically, Schussel argues      that DeFranceschi knew that the

answers in the March 11, 1998, letter to the IRS were misleading,

but they were in keeping with the general practice whereby attorneys

recommend that their clients narrowly answer questions without

volunteering information.

     Schussel’s request that the jury be told specifically that they

must consider whether the answers given to the IRS in the March 11,

1998, letter were “literally true” does not reflect a correct

     5
         The requested instruction reads in relevant part:

     Instruction No. 10

     False Statments

     Counts Two and Three charge defendant Schussel with
     wilfully attempting to evade and defeat a part of the
     income tax due and owing by DCI and by himself personally
     by making false statements to an IRS revenue officer or
     by causing false statements to be made to an IRS revenue
     officer. In determining whether defendant Schussel is
     guilty of the offense charged in Counts Two and Three,
     you may not consider as false statements any statements
     which were made in response to questions asked by Revenue
     Agent Kelly McGovern Jordan and which were literally
     true, even if those statements are determined by you to
     have been incomplete or even misleading.

                                 - 30 -
statement of the law.    A “literal truth” instruction does not take

into account the language of 26 U.S.C. § 7201, the tax evasion

statute, which prohibits “any conduct, the likely effect of which

would be to mislead or conceal.”       (Emphasis added.)   As the statute

prohibits conduct that misleads or conceals, the “literal truth” may

still violate the tax statute.        The plain language of the statute

covers   a   broader   range   of   conduct   than   Schussel’s   proposed

instruction would reflect.      The cases that Schussel relies on for

the correctness of his “literal truth” instruction all concern

perjury, false statements and obstruction of justice charges, not

the broader conduct prohibited by the tax evasion statute.

     In addition, the instruction the district court gave to the

jury about the March 11 letter asked the jury to consider whether

Schussel had made or caused to be made “false statements to the

revenue agent.” There is nothing in that instruction that prohibits

the jury from considering the “literal truth” of Schussel’s answers

and Schussel did in fact make that argument to the jury.

     In sum, what Schussel was trying to accomplish by his requested

instructions was to inform the jury, incorrectly, that when a

taxpayer hires professionals to perform legal services for him, the

taxpayer may rely on those services to such an extent that the

taxpayer does not act “willfully” under the tax evasion statute if

he retains counsel for an audit.       The district court was correct to

                                    - 31 -
reject the changes to the tax evasion instructions requested by

Schussel.

3.   Supplemental Instruction on DeFranceschi’s Role

     The indictment in this case, which came down on February 26,

2004, alleged that the conspiracy involved “others known and unknown

to the Grand Jury.”   This language permitted the jury to convict

Schussel based on a conspiracy with persons not named in the

indictment and, in fact, the coconspirators are all unnamed.   When

describing the overt acts in furtherance of the conspiracy, the

indictment refers to DCI controller Diane Reed as “D.R.” and

minority shareholder Ronald Gomes as R.G.       Stacey and Michael

Griffin, Schussel’s daughter and son-in-law, are also unindicted

coconspirators.   Attorney Edward DeFranceschi is not mentioned in

the conspiracy count in any way.

     The statute of limitations for the conspiracy is six years, so

the government was required to prove an ongoing conspiracy among

Schussel and his coconspirators as of February 26, 1998, during the

time frame when DeFranceschi was representing Schussel in connection

with the 1997-98 audit concerning the 1995 tax year.       Schussel

claims on appeal that the government wanted the jury to believe that

DeFranceschi was part of the conspiracy because it was easier for

the government to prove the existence of a conspiracy as of February

26, 1998, between Schussel and DeFranceschi than trying to prove

that Reed, Gomes and others were still part of the conspiracy as of

                              - 32 -
that date.     Schussel’s interaction with DeFranceschi during this

time period was very clear and Schussel maintains that the others

in the conspiracy, such as Gomes and Reed, had withdrawn from the

conspiracy,    as    argued    by   Schussel   in   his   challenge    to   the

sufficiency of the evidence for the conspiracy count, which is

addressed infra.

      In an effort to counter what Schussel calls a “change in

course” by the government to have the jury believe that DeFranceschi

was   part    of    the   conspiracy,   Schussel    requested   a     specific

instruction that “the government does not allege that DeFranceschi

was   a coconspirator.”       The district court refused to give the jury

the supplemental language and gave a standard instruction concerning

the conspiracy:

      You are not being asked whether any other person is
      guilty or not guilty of those offenses or should have
      been charged with a crime. Your verdict should be based
      solely upon the evidence or lack of evidence as to Dr.
      Schussel in accordance with my instructions.

      The instruction is not confusing, as argued by Schussel.               It

told the jury not to take into consideration the question of whether

some other person should or should not have been charged.                   The

instruction does not suggest, as Schussel argues, that DeFranceschi

should have been charged as a coconspirator.          Moreover, the United

States did not imply or suggest during the trial that DeFranceschi

was or should have been charged as a coconspirator.             Indeed, the

United States told the jury that the evidence did not support the

                                    - 33 -
inference that Schussel had acted in good faith with DeFranceschi

and instead suggested that Schussel used him as a “scapegoat.” The

government   stated   that   the    evidence     showed   that    DeFranceschi

believed that the contract between DCI and DCIL was a true and valid

contract when he turned it over to the IRS.          Therefore, contrary to

Schussel’s   allegations     that    the     government   tried    to   portray

DeFranceschi as a coconspirator, the United States made clear to the

jury that Schussel “use[d] the lawyer as a conduit to give false

information to the IRS.”

C.   Sufficiency of the Evidence

     The evidence showed that Schussel and unindicted coconspirators

Reed, Gomes, and Stacey and Michael Griffin, engaged in a conspiracy

to evade taxes and that the conspiracy lasted until at least May

1998.   Schussel claims that, if a conspiracy existed at all, his

coconspirators withdrew prior to February 26, 1998, the date on

which the conspiracy must have existed to be within the six-year

statute of limitations. The documents submitted to DeFranceschi and

the IRS after February 26, 1998, demonstrate that the conspiracy was

still active   until at least the signing of the adjustment letter

with the IRS by Schussel in May 1998.               Numerous exhibits and

documents show the ongoing nature of the conspiracy after February

26, 1998.

     Withdrawal from a conspiracy as a defense requires affirmative

evidence of an effort to defeat, disavow or confess the conspiracy.

                                    - 34 -
United States v. Potter, 463 F.3d 9, 20 (1st Cir. 2006).                              The

defense requires either a full confession to authorities or a

communication to coconspirators that the individual has abandoned

the enterprise and its goals. United States v. Pizarro-Berrios, 448

F.3d   1,   10    (1st   Cir.    2006).       Mere   cessation       of    activity    in

furtherance of a conspiracy does not constitute withdrawal.                           Id.

Contrary     to    Schussel’s       argument,        none     of     the    unindicted

coconspirators met the demanding standard for withdrawal.

       Although    Diane   Reed,     DCI’s     controller,         did    not   interact

directly with IRS agent McGovern after Schussel hired attorney

DeFranceschi in late 1997, she continued to play an active role in

the conspiracy as a conduit of information between Schussel and

DeFranceschi.       Reed provided DeFranceschi with information after

February 26, 1998, that was subsequently provided to the IRS, such

as   information     included      in   the    March    11,    1998,       letter   from

DeFranceschi to agent McGovern.

       Schussel’s contention that Gomes withdrew from the conspiracy

also fails.       Schussel contends that Gomes’ “state of mind” after

January 1996, when DCI ceased sending money to the Bermuda account,

demonstrates that he had withdrawn from the conspiracy.                         However,

Gomes’ “state of mind” is not evidence of an affirmative withdrawal

from the conspiracy.            Schussel points        to no affirmative act by

Gomes indicating that he left or intended to leave the conspiracy.

                                        - 35 -
He continued to be a minority shareholder and business partner of

Schussel in DCI.

                           CONCLUSION

     For the foregoing reasons, we affirm the judgment of the

district court.

                             - 36 -