JOHNSON, Circuit Judge:
This case concerns an appeal from an order by the district court compelling testimony pursuant to a grand jury subpoena. We affirm.
Glen Schroeder is the target of a grand jury investigation into charges of tax evasion. Todd Kliston, an accountant and an attorney, prepared Schroeder's income tax returns for several of the years under investigation. Consequently, the grand jury subpoenaed Kliston to testify and produce documents relating to the preparation of Schroeder's income tax returns for those years. Schroeder intervened and moved for a protective order on the grounds of attorney-client privilege and the attorney work product doctrine. Kliston moved for a protective order on the same grounds or, in the alternative, for a motion to compel testimony. The government opposed both motions on the grounds of the crime-fraud exception to both the attorney-client privilege and the attorney work product doctrine. The court, after hearing argument, ordered that Kliston:
Schroeder now appeals that order.
We observe initially that Schroeder does not challenge the district court's order insofar as it compels Kliston to answer questions regarding the preparation of his tax returns. Nor can he. The attorney-client privilege attaches only to communications made in confidence to an attorney by that attorney's client for the purposes of securing legal advice or assistance. United States v. White, 617 F.2d 1131, 1135 (5th Cir.1980); United States v. Kelly, 569 F.2d 928, 938 (5th Cir.), cert. denied, 439 U.S. 829, 99 S.Ct. 105, 58 L.Ed.2d 123 (1978). Courts generally have held that the preparation of tax returns does not constitute legal advice within the scope of that privilege. United States v. Lawless,
However, Schroeder does challenge the district court's order insofar as it compels Kliston to testify as to any source of income disclosed by Schroeder in the course of his providing legal advice to Schroeder. He contends that those disclosures are protected by the attorney-client privilege.
The government argues that Schroeder failed to prove the existence of such a relationship by failing to put on any evidence that he consulted with Kliston for any purpose other than the preparation of his income tax returns. The person invoking the privilege does bear the burden of proving its existence. In re Grand Jury Subpoena, 788 F.2d 1511, 1511-12 (11th Cir.1986); In re Grand Jury Proceedings in Matter of Freeman, 708 F.2d 1571, 1575 (11th Cir.1983). However, during the hearing on Schroeder's and Kliston's motions, the government conceded the existence of an attorney-client relationship between Schroeder and Kliston.
The government also suggests that Schroeder waived any privilege that attached to his disclosures. In support of its position, the government argues that the disclosure of information in a tax return waives the privilege not only to the disclosed data but also as to the details underlying
Nevertheless, any such disclosures may not be privileged because Schroeder possibly used Kliston's legal advice to effectuate tax evasion. The attorney-client privilege does not protect communications made in furtherance of a crime or fraud. See, e.g., In re Sealed Case, 754 F.2d 395, 399 (D.C.Cir.1985) (Sealed Case II); United States v. Dyer, 722 F.2d 174, 177 (5th Cir.1983); In re Grand Jury Proceedings (Pavlick), 680 F.2d 1026, 1028 (5th Cir. Unit A 1982) (en banc); United States v. Hodge and Zweig, 548 F.2d 1347, 1354 (9th Cir.1977). In deciding whether the crime-fraud exception applies to a communication between a lawyer and his client, courts apply a two part test. First, there must be a prima facie showing that the client was engaged in criminal or fraudulent conduct when he sought the advice of counsel, that he was planning such conduct when he sought the advice of counsel, or that he committed a crime or fraud subsequent to receiving the benefit of counsel's advice. Second, there must be a showing that the attorney's assistance was obtained in furtherance of the criminal or fraudulent activity or was closely related to it. See, e.g., In re International Systems and Controls Corporation Securities Litigation, 693 F.2d 1235, 1242 (5th Cir.1982); In re Sealed Case, 676 F.2d 793, 814-15 (D.C.Cir.1982) (Sealed Case I); In re Murphy, 560 F.2d 326, 338 (8th Cir.1977).
The first prong is satisfied by a showing of evidence that, if believed by a trier of fact, would establish the elements of some violation that was ongoing or about to be committed.
The second prong is satisfied by a showing that the communication is related to the criminal or fraudulent activity established under the first prong. Courts have enunciated slightly different formulations for the degree of relatedness necessary to meet that standard. See, e.g., In re International Systems, 693 F.2d at 1243 ("reasonably relate"); In re Murphy, 560 F.2d at 338 ("close relationship"); In re September 1975 Grand Jury Term, 532 F.2d 734, 738 (10th Cir.1976) ("potential relationship"). Nonetheless, the different formulations share a common purpose — identifying communications that should not be privileged because they were used to further a crime or a fraud. Furthermore, the determination whether the requested material is sufficiently related to the investigation must take into account that the government does not know precisely what the material will reveal or how useful it will be. See Sealed Case I, 676 F.2d at 814 n. 83.
Here there is no doubt that the first prong of the test is satisfied. The government submitted a summary of the evidence as well as an I.R.S. Special Agent's summary of the testimony Schroeder provided in an interrogation by that agent. Those submissions reveal that Schroeder reported a moderate income from 1978 to 1984, that he possessed cash in amounts grossly disproportionate to his reported income, and that he purchased assets with values grossly exceeding his reported income. For example, during one of the years under investigation, Schroeder purchased a house with a value approximately ten times his reported income for that year. He paid the entire purchase price of the house with a cashier's check that he had purchased with cash. On the basis of those facts, the district court did not abuse its discretion in finding that the government had established a prima facie showing that Schroeder willfully made false statements on his income tax returns by failing to report all of his income.
Whether Kliston's advice was related to Schroeder's failure to report income is less certain because, although the government conceded that an attorney-client relationship existed, the record does not specify the matters on which Kliston provided Schroeder legal assistance.
Schroeder complains, however, that the disclosure of his sources of income may reveal past criminal activity unrelated to his failure to report income. That complaint
Schroeder's other objections to the application of the crime-fraud exception are equally unavailing. He argues that the government's prima facie case rests on mere allegation and not on actual evidence. However, the government did not present mere allegation. Instead, it presented a summary of the evidence before the grand jury and the Special Agent's summary of Schroeder's statements. As indicated, such submissions are an accepted means for establishing a prima facie violation under the crime-fraud exception. Therefore, the prima facie showing that Schroeder was engaged in tax evasion was based on proper grounds.
Schroeder argues also that the material requested — the source of his income — is unrelated to the matter being investigated — his failure to report income. He argues that only the amount of his income, not its source, is relevant to showing the failure to report income. To the extent Schroeder places this argument under the relatedness prong of the crime-fraud exception, he is mistaken. That prong requires only that the communication be related to the crime or fraud the client seeks to perpetrate. It has nothing to do with the communication being related to the matter being investigated. Nonetheless, in Alexander v. United States, 138 U.S. 353, 357-60, 11 S.Ct. 350, 351-52, 34 L.Ed. 954 (1891), the Supreme Court arguably held that the crime-fraud exception overcomes the attorney-client privilege only for the prosecution of the specific crime in furtherance of which the allegedly privileged communication was made. At least two courts have characterized that suggestion as dictum and explicitly have rejected it. See In re Berkley, 629 F.2d at 554-55; In re Sawyer's Petition, 229 F.2d 805, 808-09 (7th Cir.), cert. denied sub nom. Sawyer v. Barczak, 351 U.S. 966, 76 S.Ct. 1025, 100 L.Ed. 1486 (1956). Furthermore, Alexander apparently has never been used to deny application of the crime-fraud exception. See In re Berkley, 629 F.2d at 555 n. 12. However, even if Alexander did state a valid rule, it would be inapplicable here. Schroeder is being investigated for tax evasion. Thus any communications Schroeder made in connection with legal advice Kliston may have provided that was related to Schroeder's tax evasion would not remain privileged under Alexander.
Furthermore, to the extent Schroeder suggests that a grand jury investigating the willful failure to report income cannot inquire into the target's sources of income, he is mistaken as well. The grand jury possesses broad investigatory powers and, to best exercise those powers, the grand jury should extensively investigate every possible lead. United States v. Echols, 542 F.2d 948, 951-52 (5th Cir.1976), cert. denied, 431 U.S. 904, 97 S.Ct. 1695, 52 L.Ed.2d 387 (1977); United States v. Doe, 541 F.2d 490, 493 (5th Cir.1976). The sources of one's income are valuable clues in determining whether one's reported total income is correct. At any rate, in this Circuit at least, the government need not make a preliminary showing of relevance and need prior to the enforcement of a grand jury subpoena. In re Grand Jury Investigation, 769 F.2d 1485, 1487 (11th Cir.1985); In re Grand Jury Proceedings the Bank of Nova Scotia, 740 F.2d 817, 825 (11th Cir.1984), cert. denied sub nom. Nova Scotia v. United States, 469 U.S. 1106, 105 S.Ct. 778, 83 L.Ed.2d 774 (1985); In re Grand Jury Proceedings in Matter of Freeman, 708 F.2d at 1575.
Finally, Schroeder complains that the subpoena requests documents that were not used to prepare his tax returns and supposedly that remain protected by the attorney-client privilege because they do not contain disclosures as to Schroeder's sources of income. However, the district court's order permits Kliston to submit to the court for an in camera review any documents he believes remain privileged.
Given that the government failed to challenge the subsequent statement by Schroeder's counsel that the government had conceded that such a relationship existed, we view the above statement as a concession by the government that such a relationship did exist. Furthermore, we note that the government prepared the district court's order. That order assumes the existence of an attorney-client relationship between Schroeder and Kliston.