United States v. GMB Capital Management, LLC
1:12-mc-91187
| D. Mass. | Mar 11, 2013Background
- This matter concerns a government motion to compel production of documents from GMB Management and GMB Partners during a grand jury investigation.
- The government seeks to pierce attorney-client privilege under the crime-fraud exception and a third-party disclosure exception for communications related to SEC examinations.
- GMB and the Bitrans allegedly misrepresented pre-inception data and trading records to the SEC and investors.
- GMB had previously settled with the SEC; the SEC found misrepresentations and imposed sanctions.
- The court conducted in-camera review of privileged materials and limited the scope to three SEC requests (8, 10, 15) related to the SEC examination responses.
- The magistrate judge recommended granting the motion to compel as to documents related to those three requests, with limited action on witness testimony.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether crime-fraud exception applies to GMB documents | GMB argues no crime-fraud connection; privilege remains intact | Government shows reasonable basis GMB used counsel to commit fraud | Yes, crime-fraud exception applies to the three SEC requests |
| Whether third-party disclosure exception governs communications | GMB contends communications remained confidential | Disclosures to SEC negate confidentiality | Not dispositive; court focused on crime-fraud exception scope and documentation for three requests |
| Scope of compelled production | Privilege should protect all communications | Only documents pertaining to SEC Requests 8, 10, 15 are subject to exception | Allowed to compel documents related to the three SEC requests; broader production reserved for further motions |
Key Cases Cited
- Upjohn Co. v. United States, 449 U.S. 383 (U.S. 1981) (confidentiality of attorney-client communications; purpose of privilege)
- In re Grand Jury Proceedings, 417 F.3d 18 (1st Cir. 2005) (crime-fraud exception requires reasonable basis to pierce privilege)
- In re Grand Jury Proceedings (Violette), 183 F.3d 71 (1st Cir. 1999) (client’s intent governs crime-fraud; privilege forfeiture when used to facilitate fraud)
- United States v. Albertelli, 687 F.3d 439 (1st Cir.) (crime-fraud standard; client’s intent controls)