Why is a Kovel Letter Important?

An attorney should always issue a Kovel Letter to a forensic accountant after being hired by a client to represent them in a civil or criminal tax matter. 

What is a Kovel letter?  It is a letter based on a landmark federal case, United States v. Kovel, 296 F.2d 918 (2d Cir. 1961). This is based upon the refusal of Louis Kovel to testify before a grand jury that was investigating a client of his law firm.  When the accountant was held in contempt of court for refusing to answer questions in front of a grand jury, the Second Circuit reversed the contempt citation, reasoning that the accountant was akin to a “translator,” helping the attorney provide legal advice that depended upon an unfamiliar “language” (i.e., accounting).  As a result, communications among the accountant, the attorney, and the ultimate client were protected from disclosure through an extension of the attorney-client privilege.   

As a result of this case, an attorney retained by a client in a tax matter should wait until after he is hired to have his firm hire a forensic accountant.  Therefore, anything the accountant finds or produces by way of analysis will be “made in confidence for the purpose of obtaining legal advice for the lawyer” United States v. Adlman, 68 F.3d 1495, 1499-1500 (2d Cir. 1995).  The information will be protected under the attorney client privilege and work product rule.  All correspondence from the forensic accountant should be addressed to the attorney. 

The client may want to have his financial auditor hired in the matter, because of his knowledge of the business and tax matters.  It is highly recommended that an attorney not hire an accountant that has represented the client in the past, because that accountant could be called as a fact witness to testify for the government.

If you or your client needs a knowledgeable retired IRS Special Agent and forensic accountant for help on civil or criminal tax matters that require a Kovel Letter call Edmond J. Martin Chief Investigator, at Sage Investigations, LLC call 512-659-3179 or email edmartin@sageinvestigations.com and visit our website at www.sageinvestigations.com.