Tax accrual workpapers: IRS efforts to obtain them, corporate strategies to protect them.

Introduction

There is an ancient Chinese proverb to the effect that even the longest journey is one that begins with a single step. What the proverb does not reveal is that the longest journeys can become longer if the traveler does not have a roadmap.

Corporate tax executives know all too well that Internal Revenue Service examinations often resemble excruciatingly long journeys, as IRS revenue agents probe, prod, and examine corporate financial and accounting records for potential issues. Understandably, IRS agents would like nothing more than to obtain a roadmap of the transactions and issues (plus the underlying analysis) that really matter.

Unfortunately for corporate tax executives, the IRS has identified just such a roadmap in the corporation's tax accrual workpapers, which may show the corporation's annual transactions, analyze so-called soft spots on the tax return, and maybe even reveal the corporation's tax contingency reserve for specific issues. (The tax accrual workpapers and underlying legal analysis will sometimes be referred to in this article as the "Roadmap").

A little more than a year ago, the IRS issued Announcement 2002-63, (1) which signaled a more aggressive approach by the government to requesting and summoning tax accrual workpapers. A corporation's response to Announcement 2002-63, which is part of the IRS's effort to identify and crack down on abusive tax shelters, requires--(1) a thorough understanding of the contours of the attorney-client privilege, the federally authorized tax practitioner privilege, and the work product doctrine;

(2) an awareness of the implications of disclosing tax accrual workpapers to the corporation's independent auditors; and

(3) the development of internal policies to best protect the analysis underlying the corporation's tax contingency reserve.

A lack of preparedness in this area will result in the IRS securing the Roadmap, and following it directly to a multitude of undesirable destinations. In the long run, there can be little doubt that this is one journey that corporate tax executives and their companies would rather not take.

The Arthur Young Case

The IRS's authority to summon tax accrual workpapers was strengthened by the Supreme Court of the United States' 1984 decision in United States v. Arthur Young & Co. (2) In Arthur Young, the Supreme Court unanimously held that a public corporation's tax accrual workpapers, which were prepared by an independent auditing firm during the course of its review of the corporation's financial statements, were not protected from the reach of an IRS summons by the claim of either an accountant-client privilege or an accountant work product privilege. In concluding that no accountant-client privilege or accountant work-product immunity existed to shield the auditor-created tax accrual workpapers, the Supreme Court emphasized the independent auditor's role as "public watchdog." (3) According to the Court, the independent auditor's "public watchdog" role, which required "total independence from the client" and "complete fidelity to the public trust," distinguished it from the attorney's role as a client's confidential adviser and advocate. (4)

Announcement 2002-63

To its credit, the IRS did not attemt to use the Arthur Young decision as a mandate to indiscriminately seek tax accrual workpapers. Rather, the IRS chose to adhere to its pre-Arthur Young policy of requesting tax accrual workpapers only in "unusual circumstances." (5) On June 17, 2002, however, in connection with its increased efforts to crack down on abusive tax shelter transactions, the IRS updated its procedures for seeking tax accrual workpapers. (6)

Under the new procedures, for tax returns filed on or after July 1, 2002, if a taxpayer discloses a "Listed Transaction," (7) the IRS will routinely request tax accrual workpapers--but only for that Listed Transaction. More important, the IRS will routinely request all tax accrual workpapers when any of the following circumstances exists:

* The taxpayer does not disclose the Listed Transaction on the return.

* The taxpayer claims tax benefits on the return from two or more investments in Listed Transactions, regardless of disclosure.

* There are reported financial irregularities (e.g., restatement of earnings) in connection with the examination of a return claiming tax benefits from a disclosed Listed Transaction.

For returns filed before July 1, 2002, the IRS will--in appropriate circumstances (8)--request tax accrual workpapers pertaining only to a Listed Transaction in situations where the taxpayer failed to comply with an obligation to disclose the Listed Transaction. (9)

THOMAS J. CALLAHAN, JEFFRY J. ERNEY, and GREGORY J. GAWLIK are all members of the Tax Controversy Practice Group of the law firm of Thompson Hine LLP in Cleveland, Ohio. Mr. Callahan is Chair of Thompson Hine's Tax Practice Group. Mr. Erney formerly served as IRS Utility Industry Specialization Coordinator. Copyright 2003 by Thompson Hine LLP and Tax Executives Institute, Inc.

For corporate tax executives, Announcement 2002-63 should be a catalyst for developing new strategies to protect the corporation's most sensitive tax contingency material. Remember, the IRS is seeking the Roadmap, and the IRS is using the existence of Listed Transactions as the first step in obtaining it. The risks associated with losing control over the corporation's Roadmap are fully detailed in the Disclosure Matrix at the conclusion of this article. The bottom line is that the corporation potentially risks disclosure of the descriptions and analyses behind all of its transactions if the IRS identifies undisclosed or multiple Listed Transactions. Of course, this would make Revenue Agents' job much easier, enabling them to use the Roadmap to raise issues beyond just the Listed Transactions.

Faced with this type of exposure, tax executives have three courses of action. First, corporation management can take appropriate steps to ensure that the corporation does not engage in Listed Transactions (including transactions that are substantially similar to Listed Transactions). Second, if the corporation has engaged in only one Listed Transaction, then the company can seriously consider disclosing that transaction to the IRS; such a disclosure will limit the request for tax accrual workpapers to only that Listed Transaction, and also permit the corporation to rely on advice of its tax advisers to avoid accuracy-related penalties. (10) Finally, tax executives can develop policies and procedures to enable the corporation to be in the best position possible to assert the attorney-client privilege, the federally authorized tax practitioner privilege, or the work product doctrine with respect to its most sensitive tax contingency material, including legal analyses and memoranda.

For all circumstances falling outside the scope of Announcement 2002-63, the IRS asserts that it will exercise restraint in requesting tax accrual workpapers--meaning that it will request them only in "unusual circumstances." Tax executives, however, should keep in mind that there is nothing to prevent the IRS from broadening this policy over time, seeking all tax accrual workpapers in every case. This possibility magnifies the importance of developing internal policies to ensure that the critical analysis behind the tax contingency reserve is protected to the fullest extent possible.

IRS Procedures for Obtaining Tax Accrual Workpapers

Once a Revenue Agent determines that a corporation has engaged in one or more Listed Transactions--through disclosure by the corporation, the issuance of the Mandatory Tax Shelter Information Document Request (IDR) developed by the IRS's LMSB Division in January 2002, or contact with LMSB's Office of Tax Shelter Analysis (OTSA)--the Revenue Agent will be expected to work with the IRS local counsel's office to develop appropriate language to be contained in the request for tax accrual workpapers. Additionally, the Revenue Agent must obtain approval from senior IRS management (specifically, the appropriate LMSB Director of Field Operations) to request the tax accrual workpapers.

Tax executives should expect the corporation to receive advance notice from the Revenue Agent of the request for tax accrual workpapers. Likewise, tax executives should expect that the request will be addressed to both the corporation's independent auditor and the corporation itself. The scope of the request ultimately will be determined by the number of Listed Transactions discovered and the procedures set forth in Announcement 2002-63.

Any initial disputes concerning the corporation's and independent auditor's responses to the request for tax accrual workpapers, including any claims of privilege and the timing of the response, likely will be addressed by the Revenue Agent, working with the local counsel's office. Continued noncompliance by the corporation or independent auditor will prompt the Revenue Agent to seek approval for the issuance of a summons. Should a summons be issued, a corporation must carefully weigh its options in deciding how to respond, especially when considering the manner in which to assert privilege over sensitive materials. Corporate strategies in responding to an IRS summons are beyond the scope of this article, but it should be understood that noncompliance with the summons could lead to the IRS's initiation of a summons enforcement action in a U.S. District Court. (11)

The Attorney-Client Privilege

Myriad treatises and cases alike have set forth extensive definitions of the attorney-client privilege. (12) For purposes of understanding how the privilege applies to tax accrual workpapers, it is most important to keep in mind the following elements:

* Communications must be made by the client to an attorney for the purpose of seeking "legal advice."

* The client must intend for the communications to be "confidential," and the communications must, in fact, be kept confidential.

* "Blanket assertions" of the privilege are not permitted. The client must assert the privilege on a document-by-document basis.

* "Voluntary disclosures" of the communications will "waive" the privilege, in whole or in part.

Legal Advice

Generally speaking, the preparation of tax returns, and the rendition of business or accounting advice (even by a lawyer), will not constitute "legal advice" and will not be protected by the attorney-client privilege. (13) A client cannot shield otherwise non-legal services from discovery simply by filtering them through an attorney's office or copying an attorney on correspondence.

A lawyer can hire agents, such as accountants, to help render legal advice, (14) but some courts will only extend the attorney-client privilege to communications with an accountant if the accountant has been hired to "translate" complicated accounting concepts for the lawyer, rather than to give his own independent tax advice. (15) Additionally, when directing an accounting firm to aid in-house lawyers in giving legal advice, corporate executives prudently must require the use of specific contractual arrangements that are separate from other contractual arrangements covering the accounting firm's consulting or accounting services. (16) Not having separate engagements for legal services will make it easier for a court to conclude that services were rendered not in aid of giving legal advice, but rather in the normal course of ongoing auditing, accounting, and advisory services, which are not covered by the attorney-client privilege. (17)

Although the Supreme Court's decision in Arthur Young seemed to provide support for the IRS's authority to obtain tax accrual workpapers, it did not consider whether tax accrual workpapers could be considered "legal advice" protected by the attorney-client privilege. (Remember, the Supreme Court held only that no "accountant-client" or "accountant work product" privilege existed under federal law in effect at the time to protect the tax accrual workpapers from disclosure). This is significant because, while Arthur Young was still a victory of sorts for the IRS, the IRS cannot use the case to simply quash all privilege claims related to the Roadmap.

As might be expected, the federal courts were eventually called upon to review the application of the attorney-client privilege and the work product doctrine to the disclosure of tax accrual workpapers. Two key cases are United States v. El Paso Co., and United States v. Rockwell International, in which the courts discussed the concept of legal advice in the context of tax accrual workpapers.

The Fifth Circuit Court of Appeals, in United States v. El Paso Co. (18) did not directly address whether tax accrual workpapers constituted legal advice, but it described tax accrual workpapers as being prepared solely for financial reporting purposes, and commented that their preparation could be considered an accounting service. Such a classification, of course, would exclude tax accrual workpapers from the ambit of the attorney-client privilege. More important, the Fifth Circuit considered the lawyer's role in the preparation of the tax contingency reserve and stated that, "we would be reluctant to hold that a lawyer's analysis of the soft spots in a tax return and his judgments on the outcome of litigation on it are not legal advice." (19)

In United States v. Rockwell International, (20) the Third Circuit Court of Appeals considered a situation in which the tax accrual file was prepared and maintained by a lawyer, with the assistance of other lawyers and accountants under his supervision. The file contained not only workpapers, but also the attorney's mental impressions about settlement positions and litigation strategy. Again, while not deciding the issue whether the tax accrual file constituted legal advice, the Third Circuit picked up on the decision in El Paso, remanding the case to the trial court with instructions to address specifically what material in the file constituted legal advice.

Thus, although it seems likely that the tax accrual workpapers themselves constitute only business or accounting documents not protected by the attorney-client privilege, back up legal memoranda prepared by an attorney may be protected by the attorney-client privilege. The recent California District Court decision in Segerstrom v. United States (21) supports the notion that memoranda providing legal advice about a corporation's business affairs or legal documents incorporating and expounding upon otherwise non-privileged business details can be protected by the attorney-client privilege. The court in Segerstrom held, in part, that documents incorporating information on equity contributions made, documents concerning charts showing ownership interests in various business entities, and documents containing calculations concerning those interests were privileged because "the contributions appear(ed) in draft legal documents prepared by an attorney, the charts (were) the subject of an attorney's legal comments, and the revised calculations accompanied a request for legal advice. "(22) In reaching its conclusion, the court acknowledged that, "(a) client is entitled to hire a lawyer, and have his secrets kept, for legal advice regarding the client's business affairs."(23)

Therefore, El Paso and Rockwell, combined with the Segerstrom rationale, suggest that certain material prepared by an attorney concerning the analysis underlying the tax contingency reserve (i.e., back-up legal memoranda) may be protected by the attorney-client privilege. To be in the best position to assert that portions of the Roadmap constitute legal advice, tax executives should strive to prepare their own tax accrual analysis completely separate from lawyer-created memoranda. In fact, legal memoranda should not be kept in the tax accrual file at all, and optimally extended discussion of business issues and strategies should be excluded from legal memoranda. Finally, tax executives should not use legal memoranda as the basis for tax return preparation.

Confidentiality

In order for the attorney-client privilege to apply, communications made for the purpose of seeking legal advice must be intended to be, and must be kept, "confidential." This means, at the very least, that the communications cannot be made in the presence of third parties, unless they are accountants who have been specifically hired to assist the attorney in rendering legal advice. It also means that the communications must not be made for the ultimate purpose of winding up in the public sphere. For example, the attorney-client privilege generally does not apply to information compiled for the purpose of being put into a public document, such as a prospectus. (24) Even if the document never actually becomes public, the attorney-client privilege may not apply; it is the absence of intent to keep a communication confidential that is the key. (25)

The Fifth Circuit used this reasoning to dispose of the El Paso case without directly passing on the issue of "legal advice." Specifically, the court held that because the corporation knew that it would have to turn over the tax accrual workpapers (and possibly some supporting memoranda) to its independent auditors for purposes of verifying its financial statements, it created the tax accrual workpapers without the intention of keeping them confidential:

  The evidence showed that in the course of the
  audit, the accountants determine whether the
  company has set aside an adequate reserve for
  contingent taxes. This task carries auditors into
  the tax pool analysis and into at least some of
  the supporting memoranda. Confidentiality as to
  these documents is neither expected nor preserved,
  for they are created with the knowledge that independent
  accountants may need access to them
  to complete the audit. (26)

Assertion of the Privilege

Often, clients fail to realize the necessity of asserting the attorney-client privilege on a document-by-document, or even a line-by-line, basis. "Blanket assertions" of the privilege will be fatal to efforts to shield documents from discovery, leading courts to conclude that the privilege simply does not apply. Courts have held that blanket assertions of the privilege are insufficient to overcome a prima facie showing by the IRS that summoned documents should be produced, (27) and have refused to allow parties to present evidence of privilege in summons enforcement hearings where the complaint has failed to allege specific facts concerning the applicability of the privilege. (28)

What this means is that all of the precautionary internal corporate policies in the world will not protect documents related to the corporation's Roadmap if the corporation fails to properly assert privilege over those documents. For example, in addition to its conclusion that the tax accrual workpapers (and some related memoranda) were not confidential, the court in El Paso determined that the attorney-client privilege did not apply because the corporation failed to assert the privilege with respect to any specific document:

  El Paso's tax department employs eighty accountants
  and ten attorneys. The tax department as a whole
  has responsibility for preparing the various memoranda
  that underpin the tax pool analysis. Both the
  head of the tax department and the general counsel
  testified at the enforcement hearing, but neither
  witness had reviewed the backup memoranda prior
  to testifying. As a result, neither was able to state
  how many or which memoranda were prepared by
  attorneys rather than by accountants. (29)

Likewise, the court in Rockwell found the corporation's blanket assertion of the attorney-client privilege to be wholly inadequate, and warned that it would have to make a document-by-document assertion if the privilege was put at issue upon remand. (30)

Consequently, because legal, business, and accounting issues frequently overlap, corporate executives serving in both a managerial and a legal capacity--as well as tax departments employing both attorneys and accountants--must take care to delineate and designate their legal projects from their non-legal projects. As stated previously, all legal memoranda related to the tax contingency reserve should be segregated from the accounting files, should be prepared and maintained by an attorney (possibly outside counsel), (31) and each such document should be stamped with "Attorney-Client Privileged Material" or like words. (32) A failure to accurately identify the source and purpose of these specific legal documents, and a commingling of these legal documents with other business and accounting documents created within the tax department, may result in a court's concluding that the attorney-client privilege either was never properly asserted, or that all of the documents are business related, and, therefore, not covered by the privilege at all.

Waiver

Assuming that the corporation can establish that certain material constitutes "legal advice," that it intended and maintained "confidentiality" over such material, and that it asserted the attorney-client privilege in a specific manner (i.e., document-by-document or line-by-line), the corporation can still "waive" the privilege and thus be forced to produce the information that it initially sought to protect.

Waiver is often confused with confidentiality. In fact, the courts in El Paso and Rockwell mixed their analyses of confidentiality with that of waiver when discussing the extent to which the corporations disclosed materials to their independent auditors during the review of the corporations' financial statements. From a practical standpoint, the technical terms "confidentiality" and "waiver" make little difference, because the end result is the same: Both voluntary disclosures and lack of intent to maintain confidentiality will prevent a client from being able to claim the attorney-client privilege. Technically, only "voluntary" disclosures result in waiver. In general, "voluntary" means anything short of "court-compelled" disclosure. (33) For instance, it has been held that a corporation's voluntary disclosure of unredacted minutes of board of directors' meetings to an accounting firm for purposes of conducting annual audits of the corporation's financial statements resulted in a waiver of the attorney-client privilege in respect of any confidential legal advice contained in those minutes. (34) Furthermore, at least one court has held that a contractual obligation to turn over attorney billing statements and board minutes to the auditing arm of a government agency is still a "voluntary" disclosure that waives the privilege. (35)

The critical component to waiver is its scope. For example, consider Scenario I: If a corporation voluntarily discloses Document 1 to Opponent A, can it still claim attorney-client privilege in respect of Document 1 against Opponent B? Likewise, consider Scenario II: If a corporation voluntarily discloses Summary 1 to Opponent A, can it still claim attorney-client privilege in respect of Back-up Documents to Summary 1 against Opponent A? These scenarios were not specifically addressed in the tax accrual workpapers cases of El Paso and Rockwell, but the rationales of other courts in related areas are applicable to the analysis.

Scenario I describes a concept known as "selective waiver." Most federal appellate courts have rejected the idea of selective waiver, and have held that once a client waives the privilege to Document 1 as to Opponent A, he or she also waives the privilege to Document 1 as to Opponent B. For example, the First, Second, Third, Fourth, Sixth, D.C. and Federal Circuits have all held, in one form or another, that voluntary disclosure of internally generated reports, and other legal documents, to government agencies waives the privilege for those reports and documents in subsequent litigation against private parties. (36) Conversely, the Eighth Circuit has gone a slightly different direction, holding that a corporation's voluntary disclosure to the SEC of materials produced pursuant to a law-firm directed internal investigation did not waive the privilege to thosc materials as against a later litigant. (37)

The Scenario I analog to tax accrual workpapers, of course, is whether the corporation's disclosure of those workpapers to the independent auditors prevents the corporation from claiming the attorney-client privilege in response to an IRS summons. Even if the workpapers themselves (excluding any back-up legal memoranda) are found to be privileged, El Paso and Rockwell make clear that disclosure of those documents to the independent auditors will waive the privilege. Additionally, the weight of authority suggests that the IRS will be successful in its attempts to defeat a claim of privilege in a subsequent summons enforcement action. The essence, then, of the corporation's strategy becomes Scenario II: limiting the extent of the waiver.

Scenario II is commonly referred to as "limited waiver" or "subject matter waiver." Some courts have declined to engage in the process of discerning varying degrees of waiver, opting instead for the certainty that comes with the bright-line rule of complete waiver. (38) Conversely, other courts have been willing to define the scope of "subject matter" that is common to the waived material, and have limited additional waivers to only that "subject matter." (39) For example, it has been held that the public disclosure of the "findings" and "conclusions" contained in a report did not waive the attorney-client privilege as to the contents of the underlying report. (40) Suffice it to say that cases involving "subject matter waiver" are extremely fact-specific, and a thorough examination of these cases is well beyond the scope of this article. For background purposes, however, a brief description of two cases on subject matter waiver is appropriate.

In re Pioneer Hi-Bred International, Inc. (41) concerned (among other things) a patent infringement action in which the plaintiff sought information relating to the tax consequences and intellectual property implications of a merger involving the defendant corporation. The defendant's in-house counsel asserted attorney-client privilege with respect to some of the information. The plaintiff, however, asserted in part that the defendant waived the attorney-client privilege for all of the withheld material via certain disclosures that it had made in an SEC proxy statement. Specifically, the proxy statement revealed that the discussion concerning the federal income tax consequences of the merger were the opinions of two specific law firms hired by the defendant. Ultimately, the Federal Circuit held that the defendant had waived the privilege, not only with respect to the advice in the opinions, but also for "all documents which formed the basis for the advice, all documents considered by counsel in rendering that advice, and all reasonably contemporaneous documents reflecting discussions by counsel or others concerning that advice." (42) The court also held, however, that the disclosure and reliance on the tax advice did not waive the privilege in respect of other subject matters, such as the effects of the merger on intellectual property rights. (43)

In re Grand Jury Proceedings (44) involved a government investigation into possible Medicare fraud. During the course of its investigation, government agents interviewed the owner of a laboratory, who disclosed advice given by an attorney concerning certain aspects of the laboratory's marketing plan (specifically, advice concerning billing procedures and the provision of free supplies to nursing homes). When asked to testify in court about the attorney's advice on other aspects of the marketing plan, the owner of the laboratory asserted the attorney-client privilege. Addressing the waiver issue, the Sixth Circuit adopted a narrow view of the term "subject matter," holding that the laboratory owner had not waived the privilege with respect to other aspects of the marketing plan that had not been discussed with investigators, and remanding for further findings:

  (S)ubject matter can be defined narrowly or broadly.
  Here subject matter could include the entire
  marketing plan, or it could include only plans
  about providing (free supplies).... (W)e do not
  believe that the owner's ... waiver of the privilege
  by divulging the attorney's advice on several
  specific items of the marketing plan necessarily
  constitutes waiver as to the attorney's advice on
  the entire plane. (45)

In a sense, subject matter waiver is the last line of defense in protecting the Roadmap--specifically, back-up legal memoranda containing analysis relevant to the tax contingency reserve. Consequently, this is the major reason for: (1) labeling legal documents with "Attorney-Client Privilege"; (2) segregating legal documents from accounting and business documents; (3) clearly defining the bounds of legal engagements; and (4) negotiating with the corporation's independent auditors to limit the amount of material that must be turned over. As a corollary to the fourth point, the Pioneer Hi-Bred case suggests that no mention should be made to the corporation's independent auditors that the corporation relied on the opinions of legal counsel in establishing the tax contingency reserve. (46)

The Federally Authorized Tax Practitioner Privilege

The federally authorized tax practitioner privilege (FATP) is contained in section 7525 of the Internal Revenue Code and is intended to protect communications between a client and a "federally authorized tax practitioner," (47) as long as those communications constitute "tax advice." (48) Some practitioners view section 7525 of the Code as a codification of the "accountant-client privilege," which not all states recognize, and which is not otherwise recognized in federal common law.

The FATP, however, does not afford protection above and beyond that offered by the attorney-client privilege. In other words, section 7525 of the Code is drafted so that its application mirrors that of the attorney-client privilege: "(Section 7525 applies) to a communication ... to the extent the communication would be considered a privileged communication if it were between a taxpayer and an attorney."(49) Or, as the Seventh Circuit put it in United States v. Frederick: (50) "Nothing in (section 7525) suggests that ... nonlawyer practitioners are entitled to privilege when they are doing other than lawyer's work."

In fact, the FATP is even narrower than the attorney-client privilege because it does not apply to tax shelters:

  The privilege ... shall not apply to any written
  communication between a federally authorized tax
  practitioner and a director, shareholder, officer, or
  employee, agent, or representative of a corporation
  in connection with the promotion of the direct or indirect
  participation of such corporation in any tax
  shelter (as defined in section 6662(d)(2)(C)(iii)). (51)

For practical purposes, this means that many tax opinions and related documents issued by accountants will not be privileged, whereas those same tax opinions and related documents may be privileged if issued by attorneys.

Finally, the FATP does not encompass the work-product doctrine, and it does not apply to criminal proceedings.

Work Product Doctrine

The work product doctrine is intended to protect an attorney's notes, mental impressions, and other materials produced by or on behalf of an attorney. (52) Thus, the work product doctrine is somewhat broader than the attorney-client privilege because it encompasses more than just confidential communications.

For the work product doctrine to apply, the materials prepared by or on behalf of an attorney must be prepared "in anticipation of litigation." The phrase "in anticipation of litigation" has been interpreted a number of different ways by courts. Some courts have concluded that documents can be protected even if they are created before specific events give rise to litigation. (53) Other courts have taken a slightly more restrictive view, requiring that specific claims be identified before work product protection can be extended. (54) Still other courts have considered whether the prospect of litigation was the primary motivating purpose behind the creation of the document. (55)

Interestingly, the IRS Chief Counsel has recently taken a broad view of the work product doctrine. In Chief Counsel Notice CC-2003-22 (July 1, 2003), the IRS Chief Counsel concluded that some Chief Counsel Advice (CCA) could be completely withheld from public disclosure under section 6110 of the Code (i.e., fully redacted) if, for example, it consisted entirely of attorney work product. (56) According to the IRS Chief Counsel, a CCA must have a "litigation predicate" in order for the work product doctrine to apply. Circumstances determinative of a "litigation predicate" include the taxpayer's litigious reputation and the fact that the taxpayer's representative previously litigated the same issue for three or more clients. Additionally, Chief Counsel employees can articulate other bases on which they believe the work product doctrine applies. Arguably, the IRS Chief Counsel's view of the applicability of the work product doctrine expands the "in anticipation of litigation" standard.

Regardless of the standard used to interpret the phrase "in anticipation of litigation" courts have been reluctant to extend work product protection to business, accounting, or return preparation materials, concluding that such documents are not created "in anticipation of litigation." (57) In part, this is owing to the advisory committee notes to Rule 26(b)(3) of the Federal Rules of Civil Procedure (58)--the Rule that currently embodies the work product doctrine--which excludes from work product protection "materials assembled in the ordinary course of business, or pursuant to public requirements unrelated to litigation." Arguably, as the Fifth Circuit in El Paso pointed out, this includes tax accrual workpapers:

  We recognize that the tax pool analysis involves
  weighing legal arguments, predicting the stance of
  the IRS, and forecasting the ultimate likelihood of
  sustaining El Paso's position in court. Nevertheless,
  this analysis (assuming it is legal rather than
  accounting work) is only a means to a business
  end. The legal analysis is not an end in itself: The
  memoranda underlying the tax pool analysis do not
  map out El Paso's actual litigating strategy, should
  litigation occur. In fact, no single item in the tax
  pool analysis is specifically under scrutiny by the
  IRS when the memoranda are drafted. Business
  imperatives, not the press of litigation, call these
  documents into being. (59)

The court's conclusion in El Paso, however, is not the final word. True, the court is probably correct in its determination that the preparation of the workpapers themselves are driven by the business needs of satisfying the independent auditors and complying with the securities laws, and, therefore, are not prepared in "anticipation of litigation." The court did not state, however, that all underlying memoranda could not be prepared in connection with litigation concerns, only that none of El Paso's memoranda appeared to be created as such. Other courts have extended work product protection to legal memoranda underlying business documents and business decisions where those legal memoranda analyzed the possibility of future litigation.

For example, the Eighth Circuit in Simon v. G.D. Searle (60) considered a situation in which a corporation refused to produce certain "risk management" documents relating to the corporation's product liability litigation reserve. Apparently, the corporation's legal department created reserve files containing figures for individual cases based on factors such as anticipated expenses and settlement value. These individual case figures were then used by the corporation's nonlegal executives to create an aggregate reserve, which was used for business planning purposes--including budget, profit, and insurance analysis. In response to the corporation's assertion of the work product doctrine over these risk management documents, the court held that the documents revealing the aggregate reserve, and not identified with individual cases, were not protected because they were prepared for business reasons and not in anticipation of litigation. The court also held that the individual case reserve files were protected, stating, "The individual case reserve figures reveal the mental impressions, thoughts, and conclusions of an attorney in evaluating a legal claim. By their very nature they are prepared in anticipation of litigation and, consequently, they are protected from discovery as opinion work product." (61)

This line of thinking suggests that if a corporation were to have legal memoranda prepared that independently analyzed the reserve for specific corporate transactions, that such legal memoranda could be segregated from the aggregate tax contingency reserve documentation and could be protected by the work product doctrine. Of course, as with attorney-client privilege, waiver is a possibilitly, (62) and a court could conclude that disclosure of information to auditors constitutes such a waiver. As a general matter, however, legal opinions are afforded special protection, and some courts will be willing to protect the legal opinions of attorneys prepared in anticipation of litigation, even though a corporation has turned over other documents to its independent auditors. (63)

Conclusion

The IRS's aggressive posture towards shutting down abusive tax shelter transactions, coupled with its new approach to seeking tax accrual workpapers, demands a thoughtful, active response by corporate tax executives. The Roadmap is the prize, and the stakes are high.

Although the boundaries of the attorney-client privilege, the FATPP, and the work product doctrine are currently being tested in the tax shelter arena (and seemingly shrinking at the same time), corporate tax executives must realize that they can still take measures to put the corporation in the best position possible to assert these legal protections over the Roadmap. Now is the time to educate corporate staff--accountants, executives, and attorneys alike--concerning such topics as the labeling of documents, the segregation of files, and disclosures to independent auditors.

Remember: Even the longest journeys begin with a single step. But the IRS knows that the journeys are much easier when the traveller has a Roadmap.

Disclosure of Tax Accrual Workpapers Disclosure Matrix

Announcement 2002-63

Triggering Event            Scope of Request

1: One Listed Transaction*  Tax Accrual Workpapers
Disclosed                   (TAWP) For
                            Listed Transaction

2: One Listed Transaction*  All (TAWP)
Not Disclosed

3: More Than One Listed     All (TAWP)
Transaction*

4: One Listed Transaction*  All (TAWP)
Disclosed Plus Accounting
Irregularity

Triggering Event            Impact on Taxpayer

1: One Listed Transaction*  * Roadmap: IRS Already Aware of Issue
Disclosed
                            * Exposure: In TAWP-Only Single
                              Listed Transaction

                            * Analysis: Could Be In TAWP

                            * Admission:>50% Could Lead to
                              Assertion of Penalty Issue

2: One Listed Transaction*  * Roadmap: IRS Will Become Aware of
Not Disclosed                 All Transactions identified in TAWP

                            * Exposure: Includes All Transactions
                              Identified in TAWP

                            * Analysis: Could Be In TAWP

                            * Admission:>50% Could Lead to
                              Assertion of Penalty Issue

3: More Than One Listed     * Roadmap: IRS Will Become Aware of
Transaction*                  All Transactions identified in TAWP

                            * Exposure: Includes All Transactions
                              Identified in TAWP

                            * Analysis: Could Be In TAWP

                            * Admission:>50% Could Lead to
                              Assertion of Penalty Issue

4: One Listed Transaction*  * Roadmap: IRS Will Become Aware of
Disclosed Plus Accounting     All Transactions identified in TAWP
Irregularity
                            * Exposure: Includes All Transactions
                              Identified in TAWP

                            * Analysis: Could Be In TAWP

                            * Admission:>50% Could Lead to
                              Assertion of Penalty Issue

Arthur Young Case (What's Next?)

Trigerring Event            Scope of Request
None                        All TAWP

Trigerring Event            Impact on Taxpayer
None
                            * Roadmap: IRS Will Become Aware
                              of All Transactions identified in
                              TAWP

                            * Exposure: Includes All Transactions
                              Identified in TAWP

                            * Analysis: Could Be In TAWP

                            * Admission:>50% Could Lead to
                              Assertion of Penalty Issue

* Includes "substantially similar" transactions (and possibly "other
reportable" transactions in future)

(1) Announcement 2002-63, 2002-27 I.R.B. 72.

(2) 465 U.S. 805 (1984).

(3) Id. at 818. The Supreme Court clarified that no accountant-client privilege existed under federal law, and that no state-created privilege had been recognized in federal cases.

(4) Id.at 817-18.

(5) I.R.M. 4024.4 (May 14, 1981). This policy was announced in May 1981 by Commissioner Roscoe L. Egger, Jr. at a Joint Meeting of the San Francisco Chapter of the California CPA Society and the Tax Section of the San Francisco Bar Association. His comments are embodied in IRS News Release IR-81-49 (May 5, 1981). As contained in the Internal Revenue Manual, "unusual circumstances" exist when: (a) a specific issue(s) has been identified by the examiner for which there exists a need for additional facts; and (b) the examiner has sought from the taxpayer all facts known to the taxpayer relating to the identified issue(s); and (c) the examiner has sought from the taxpayer's accountant supplementary analysis (not necessarily contained in the workpapers) of facts relating to the identified issue(s). I.R.M. 4024.4 (2) (May 14, 1981).

(6) "Tax accrual workpapers," which can be created internally or by an outside auditor, are defined by the IRS, as follows: "(W)orkpapers that reflect the estimate of a company's tax contingency liability. Tax accrual workpapers are sometimes referred to as the tax pool analysis, tax liability contingency analysis, tax cushion or tax contingency reserve. These workpapers are generally prepared and maintained by the taxpayer but, in some cases, all or portions of them may be maintained by the independent accountant. The specific objective of the tax accrual process is to obtain a figure representing a reasonable estimate of the income tax properly attributable to all items of income and expense for a given year and an accrued balance to cover the estimated tax liabilities as of the balance sheet date. Tax accrual workpapers may include the following: (a) A summary of the transactions recorded in the taxpayer's general ledger with respect to income tax accounts; (b) A computation of the tax provision for the current year, whether or not the tax is payable in that year; and (c) A memorandum discussing items reflected in the financial statements as income or expense where the ultimate tax treatment is unclear." I.R.M. 4024.2(3) (May 14, 1981). See also Appendix I to Memorandum issued by Commissioners Langdon and Kehoe to IRS's Large and Mid-Size Business Division and Small Business/Self-Employed Executives, Managers, and Examiners entitled, "Obtaining Tax Accrual Workpapers Related to Abusive Tax Avoidance Transactions."

(7) "Listed Transaction" means those transactions classified pursuant to Treas. Reg. [section] 1.6011-4(b)(2). These include transactions "substantially similar" to Listed Transactions. The term "substantially similar" is intended to be construed broadly in favor of disclosure, and it generally includes any transaction that is expected to obtain the same or similar types of tax benefits as a Listed Transaction, and which is either factually similar to, or based on the same or similar tax strategy as, a Listed Transaction. See Q&A 23 of the "Frequently Asked Questions" publication issued on August 28, 2002, by the IRS's Office of Tax Shelter Analysis in conjunction with Announcement 2002-63 (hereinafter referred to as "Frequently Asked Questions").

(8) In Q&A 6 of Frequently Asked Questions, the IRS indicated that "appropriate circumstances" refers to situations in which requests for workpapers are justified, and that cases in which there was a lack of justification would be rare. For example, the IRS stated that a case in which a taxpayer fully conceded the issue might not warrant pursuing tax accrual workpapers.

(9) Specifically, under the notice, the IRS would have to determine that the taxpayer failed to comply with an obligation to disclose the Listed Transaction either (a) on the return, (b) under Rev. Proc. 94-69, 1994 C.B. 804 (if applicable), or (c) pursuant to Announcement 2002-2, 2002-2 I.R.B. 304. Announcement 2002-63, 2002-27 I.R.B. 72.

(10) Prop. Reg. [section] 1.6664-4(c)(2) provides that taxpayers may not reasonably rely on an opinion or advice of a tax adviser for purposes of establishing a "good faith/reasonable cause" defense to the accuracy-related penalty where a Listed Transaction was not properly disclosed to the IRS.

(11) The general procedures outlined above are more fully described in Chief Counsel Notice CC-2003-12 (April 9, 2003), Q&A 22-24 of Frequently Asked Questions, and the Memorandum issued by Commissioners Langdon and Kehoe to LMSB and SB/SE Executives, Managers, and Examiners entitled, "Obtaining Tax Accrual Workpapers Related to Abusive Tax Avoidance Transactions."

(12) "The privilege applies only if (1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client." In re Sealed Case, 737 F.2d 94, 98-99 (D.C. Cir. 1984) (citation omitted).

(13) See, e.g., United States v. Lawless, 709 F.2d 485 (7th Cir. 1983) (holding that an attorney could be compelled to testify and produce documents with respect to his preparation of an estate tax return because he was not acting in his capacity as a legal adviser); Olender v. United States, 210 F.2d 795 (9th Cir. 1954) (holding that an attorney-accountant's preparation of a net worth statement was not protected by the attorney-client privilege); United States v. Frederick, 182 F.3d 496 (7th Cir. 1999) (holding that documents created by an accountant-attorney primarily for preparation of the tax return, but which may have had use in litigation, were not protected by the attorney-client privilege). Furthermore, fee information and attorney billing statements are not privileged unless they reveal litigation strategy or the specific nature of the legal advice sought, such as specific laws researched. See Chaudhry v. Gallerizzo, 174 F.3d 394 (4th Cir. 1999) (holding that the attorney-client privilege applied to certain legal bills because the bills identified the federal statutes that were researched).

(14) See United States v. Kovel, 296 F.2d 918 (2d Cir. 1961) (holding that communications made by a client to an accountant were privileged because the accountant had been hired by the law firm to help in rendering legal advice to the client).

(15) See In re: G-I Holdings Inc., et al., 2003 U.S. Dist. Lexis 13901 No. 02-3082 (D.C.N.J. 2003) (holding that attorney-client privilege did not apply to in-house attorney's communications with accountant because the accountant had been hired for his tax advice alone). See discussion in the text that follows with respect to the recently enacted "Federally Authorized Tax Practitioner Privilege."

(16) To ensure that work done by an accounting firm (on behalf of a lawyer who is rendering legal advice/is covered by the attorney-client privilege, one commentator has suggested that the attorney hire the accounting firm directly, and that the engagement letter should be drafted to include the following: (1) a recital that the attorney is hiring the accountant-agent to assist the lawyer in rendering legal advice; (2)the nature and scope of the accountant-agent's engagement; (3)acknowledgment that payment will come from the law firm (and that the ultimate client is not to be billed); (4) acknowledgement that all records, schedules, documents, etc., of the accountant-agent will be the sole property of the attorney; and (5) a recital that once the assignment is completed, all of the accountant-agent's files will be delivered to the lawyer and copies will not be retained. See Jerald David August, The Attorney-Client Privilege and Work-Product Doctrine in Federal Tax Controversies, 83 J. TAX'N 197, 199-200 (1995).

(17) See United States v. Adlman, 134 F.3d 1194 (2d Cir. 1998) (holding that, despite the assertions of a corporation's vice president and in-house tax attorney that he hired an accounting firm to write a legal memorandum concerning the likelihood that the IRS would challenge a proposed merger, the attorney-client privilege did not protect the memorandum because the weight of the evidence showed that the accounting firm had given its opinion not in the course of helping the attorney render legal advice, but in the course of its regular and ongoing auditing, accounting, and advisory services to the corporation).

(18) 682 F.2d 530, 534-35 (5th Cir. 1982).

(19) Id. at 539.

(20) 897 F.2d 1255 (3d Cir. 1990).

(21) 2001 U.S. Dist. LEXIS 2949 (N.D. CA. 2001).

(22) Id. at *14.

(23) Id. at *7 (citing United States v. Chen, 99 F.3d 1495, 1501 (9th Cir. 1996)).

(24) See In re Grand Jury Proceedings, 727 F.2d 1352 (4th Cir. 1984) (holding that the attorney-client privilege did not apply to communications made to an attorney for the purpose of creating a prospectus--even though no such prospectus was ever created and published).

(25) Id. at 1358.

(26) United States v. El Paso Co., 682 F.2d 530, 540 (5th Cir. 1982).

(27) See Wheaton v. United States, 1992 U.S. Dist. LEXIS 15734 (D.N.J. 1992) (holding that blanket assertion in complaint to quash summons was insufficient to establish privilege). See also United States v. Chevron, 1996 U.S. Dist. LEXIS 4154 (N.D. Cal. 1996) (holding that the party asserting the privilege has the burden of showing that the privilege applies as to specific materials, and remanding for factual findings).

(28) United State v. First State Bank, 691 F.2d 332 (7th Cir. 1982).

(29) United States v. El Paso Co., 682 F.2d at 541.

(30) United States v. Rockwell Int'l, 897 F.2d 1255, 1265 (3d Cir. 1990).

(31) Again, while we stress the necessity of creating and asserting the attorney-client privilege on a document-by-document basis, we do note that some courts have applied a presumption that all privileged communications to outside legal counsel are primarily related to legal advice, assuming that outside counsel would not ordinarily be involved in the business decisions of the corporation. See, e.g., Chevron, 1996 U.S. Dist. LEXIS 4154 (citing Diversified Indus. Inc. v. Meredith, 572 F.2d 596, 610 (8th Cir. 1977)). The attorney-client privilege applies with no less force to in-house counsel, but a corporation must take even more stringent steps to show that in-house counsel's advice was given strictly in his legal capacity. See, e.g., In re Sealed Case, 737 F.2d 94, 99 (D.C. Cir. 1984) (stating that, "The Company can shelter (in-house counsel's) advice only upon a clear showing that (in-house counsel) gave it in a professional legal capacity.").

(32) Documents could be stamped to read: "Attorney-Client and Work Product Privileged" or "Federally Authorized Tax Practitioner Privilege."

(33) Court-compelled disclosure generally means that a party has to turn over document subject to a court order.

(34) First Fed. Savings Bank of Hegewisch v. United States, 55 Fed. C1. 263 (2003).

(35) United States v. MIT, 129 F.3d 681, (1st Cir. 1997).

(36) See, e.g. United States v. MIT, 129 F.3d 681, 687 (1st Cir. 1997) (holding that voluntary disclosure of board minutes to Department of Defense waived the privilege for those minutes in a subsequent litigation against another party); In re Steinhardt Partners, L.P., 9 F.3d 230 (2d Cir. 1993) (holding that a company's voluntary disclosure of a memorandum to the SEC, during the course of its investigation of the company, waived work product protection for that same memorandum in a subsequent litigation with a third party); Westinghouse Electric Corp. v. The Republic of the Philippines, 951 F.2d 1414 (3d Cir. 1991) (holding that a corporation's voluntary disclosure of documents to both the SEC and the Department of Justice, in order to cooperate with their investigations, waived the attorney-client privilege and work product doctrines in respect of those documents in subsequent litigation with a third party); In re Marietta Corp. v. Pollard, 856 F.2d 619 (4th Cir. 1988) (holding that portions of documents voluntarily disclosed to the Department of Justice and the U.S. Attorney's Office waived the attorney-client privilege for purposes of subsequent litigation against another party); In re Columbia/HCA Healthcare Corp., 2002 U.S. App. LEXIS 10969 (6th Cir. 2002) (holding that a corporation's voluntary disclosure of audit reports to the DOJ waived the attorney-client privilege for those reports in a later litigation); Permian Corp. v. United States, 665 F.2d 1214 (D.C. Cir. 1981) (holding that voluntary disclosure of documents to the SEC waived the privilege as against the Department of Energy); Genentech, Inc. v. United States, 122 F.3d 1409 (Fed. Cir. 1997) (holding that inadvertent disclosure of documents was voluntary due to lack of procedures to prevent disclosure; thus, the disclosure operated as a waiver in subsequent litigation).

(37) Meredith, 572 F.2d at 611.

(38) See, e.g., In re Marietta, 856 F.2d at 623-24 (holding that portions of documents quoted in a report disclosed to the U.S. Attorney waived the attorney-client privilege for all information underlying those published portions); United States v. Cote, 456 F.2d 142 (8th Cir. 1972) (holding that by filing amended returns, a taxpayer communicated, in part, the information contained in the underlying accounting workpapers that had been prepared at the behest of a lawyer, thus, waiving the privilege as to those underlying workpapers).

(39) See, e.g., United States v. Upjohn Co., 600 F.2d 1223 (6th Cir. 1979), rev'd on other grounds, 449 U.S. 383 (1981) (holding that voluntary disclosure of certain reports to the SEC waived privilege only as to specific facts disclosed, not all underlying notes and questionnaires).

(40) In re Dayco Corp. Derivative Securities Litig., 99 F.R.D. 616 (S.D. Ohio 1983).

(41) 238 F.3d 1370 (Fed. Cir. 2001).

(42) Id. at 1374-75.

(43) Id. at 1375.

(44) 78 F.3d 251 (6th Cir. 1996).

(45) Id. at 255.

(46) See Long-Term Capital Holdings v. United States, 2003-1 USTC [paragraph] 50,304 (D. Conn. 2003) (holding that disclosure by company to outside accounting firm of the fact that company had obtained a "more likely than not" opinion that a loss could be claimed on a transaction waived the attorney-client privilege as to that portion of the opinion). See also In re: GI-Holdings, Inc., No. 02-3082 (D.N.J. 2003) (holding that reliance on consultation with legal counsel in a response to an interrogatory waived attorney-client privilege with respect to documents concerning the tax consequences of a transaction).

(47) "Federally authorized tax practitioner" means any individual who is authorized under federal law to practice before the Internal Revenue Service if such practice is subject to federal regulation under section 330 of title 31, United States Code. I.R.C. [section] 7525(a)(3)(A).

(48) "Tax advice" means advice given by an individual, on or after July 22, 1998, with respect to a matter which is within the scope of the individual's authority to practice described in [section 7525(a)(3)(A)]. I.R.C. [section] 7525(a)(3)(B).

(49) I.R.C. [section] 7525(a)(1).

(50) 182 F.3d 496, 502 (7th Cir. 1999).

(51) I.R.C. [section] 7525(b). "Tax shelter" means (I) a partnership or other entity, (II) any investment plan or arrangement, or (III) any other plan or arrangement, if a significant purpose of such partnership, entity, plan, or arrangement is the avoidance or evasion of Federal income tax." I.R.C. [section] 6662(d)(2)(C)(iii).

(52) See Hickman v. Taylor, 329 U.S. 495 (1947).

(53) See, e.g., United States v. Adlman, 68 F.3d 1495, 1501 (2d Cir. 1995) (stating that, "(T)here is no rule that burs application of work product protection to documents created prior to the event giving rise to litigation.... In many instances, the expected litigation is quite concrete, notwithstanding that the events giving rise to it have not yet occurred.").

(54) See, e.g., Linde Thomson Langworthy Kohn &Van Dyke P.C. v. Resolution Trust Corp., 5 F.3d 1508, 1515 (D.C. Cir. 1993) (stating that, "A litigant must demonstrate that documents were created 'with a specific claim supported by concrete facts which would likely lead to litigation in mind....'" (citation omitted)).

(55) See, e.g., United States v. Davis, 636 F.2d 1028, 1040 (5th Cir. 1981) (stating that "the primary motivating purpose behind the creation of the document [must be] to aid in possible future litigation").

(56) Generally speaking, section 6110 of the Code requires that CCAs be made available for public inspection.

(57) See, e.g., Simon v. G.D. Searle, 816 F.2d 397 (8th Cir. 1987) (holding that risk management documents showing the aggregate litigation reserve, prepared by nonlawyer corporate executives, and used for business planning purposes such as budget, profit, and insurance analysis, were not prepared in "anticipation of litigation" and, thus, were not protected by the work product doctrine); Davis, 636 F.2d at 1039-40 (holding that business records, as well as workpapers, created by an attorney in the course of preparing a tax return did not fall within the scope of the work product doctrine).

(58) See Advisory Committee's Note, 48 F.R.D. 459, 501 (1970). Rule 26(b)(3) of the Federal Rules of Civil Procedure states, in part, "a party may obtain otherwise discoverable documents or tangible things 'prepared in anticipation of litigation or for trial' only upon showing 'substantial need' and the inability to obtain the substantial equivalent without 'undue hardship."'

(59) United States v. El Paso Co., 682 F.2d 530, 543 (5th Cir. 1982). See also United States v. Gulf Oil Corp., 760 F.2d 292 (Temp. Emer. Ct. App. 1985) (holding that documents created for the purpose of aiding auditors in preparing financial reports to comply with securities laws were not protected by the work product doctrine).

(60) 816 F.2d 397 (8th Cir. 1987).

(61) Id. at 401.

(62) In Medinol, LTD v. Boston Scientific Corp., 214 F.R.D. 113 (S.D.N.Y. 2002), the court held that the disclosure by a corporation to its outside public accountants of minutes of meetings of the corporation's Special Litigation Committee of the board of directors waived work product protection. While acknowledging that the work product doctrine is not waived by disclosing information to a third party who shares a common litigating interest or objective, the court concluded that the auditing firm's "public watchdog" function prevented it from sharing any common interest with the corporation.

(63) See Black & Decker Corp. v. United States, No. WDQ-02-2070 (D. Md. 2003) (holding that disclosure of one short opinion letter did not constitute a broad sweeping waiver of work product protection with respect to all other opinion work product on the same subject matter, and noting that "while the case law recognizes that even opinion work product may be waived, it can only be waived by actions that are consistent with a 'conscious disregard' of the advantage that is otherwise protected by the work product rule."). See also In re Pfizer Inc. Securities Litig., 1993 U.S. Dist. LEXIS 18215 (S.D.N.Y. 1993) (holding that documents related to the reserves for individual heart valve product liability cases were protected by the work product doctrine, and that the protection was not waived by turning over aggregate reserve information to the independent auditors); Matthew J. Barrett, Opportunities for Obtaining and Using Litigation Reserves and Disclosures, 63 Ohio St. L.J. 1017, 1093-98 (2002).