Securities and Exchange Commission v. W Financial Group LLC et al, No. 3:2008cv00499 - Document 173 (N.D. Tex. 2009)
Court Description: Memorandum Opinion and Order Denying 165 Motion to Quash Subpoena & Objection filed by Russell E Mackert, Denying as Moot 167 Motion to Expedite Hearing filed by Russell E Mackert. (see order) (Ordered by Magistrate Judge Jeff Kaplan on 03/09/09) (lmp)
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IN THE I.INITEDSTATESDISTRICTCOURT NORTHERNDISTRICTOF TEXAS DALLAS DIVISION SECUzuTIES EXCHANGE AND COMMISSION Plaintiff, VS. LLC, W FINANCIAL GROUP, ET AL. Defendants. $ $ $ I $ $ $ $ $ $ $ MEMORANDUM NO.3-08-CV-0499-N ORDER severaldefendantssued RussellE. Mackert, an attorneywho at varioustimes hasrepresented by the SEC in this securitiesfraud action, has filed a motion to quasha Rule 45 subpoenaservedon At Subpoena"). issuearebankrecords Bank,N.A. ("theJPMorganChase his bank,JPMorganChase relating to the transfer of funds into and out of his IOLTA account for the benefit of certain named "Account Holders," including Adley Abdulwahab,Michael K. Wallens, Sr., Michael K. Wallens, requires Jr., Brent Onacle,and ICI Vehicle Holdings,Inc. Accordingto Mackert: (1) the subpoena by the productionof privilegedor confidentialclient information;(2) the bank recordsareprotected is the Right to FinancialPrivacyAct ("RFPA"),12 U.S.C. $ 3401,et seq.;and (3) the subpoena positionsin a joint overly broad,vague,and ambiguous.' The partieshave briefedtheir respective statusreport filed on March 5,2009, and the motion is ripe for determination. I Mackert urges the court to appoint a special master "to carefully review all the records forming the basis of the subject subpoenaand make a decision as to relevance,materiality and discoverability." (Jt. Stat. Rep., Exh.2 at7). Becausethe court is able to determinetheseissueswithout reviewing any documents,the appointmentof a specialmaster SeeFeo.R.Crv.P.53(aXlXA) isunnecessary. Norwouldthecourtbeinclinedtoappointaspecialmasterinanyevent. & (C) (authorizing the appointment of a special master only, inter alia,to perform duties consentedto by the parties or by to addresspretrial matters that cannot be effectively and timely addressed an available district judge or magistrate judge). The court rejectsMackert'sprivilege argument. Although the Fifth Circuit hasnot addressed this precise issue,other courts have held that bank recordsrelating to the transfer of funds into and out of a lawyer's trust account are not privileged communications. See,e.g. SEC v. First Security Bank of Utah,N.A.,447 F.2d 166,167(lOth Cir. l97l), cert.denied,g2S.Ct.710 (1972);Harris (9thCir. 1969);O'Donnellv. Sullivan,364F.2d43,44(lst v. UnitedStates,4l3F.2d316,319-20 privilege extendsonly the Cir.), cert. denied,87 S.Ct. 501 (1966). That is because attorney-client "to the substanceof matters communicatedto an attomey in professional confidence," and "[t]he deposit and disbursement of money in a commercial checking account are not confidential communications."First SecurityBank,447 F.2d at 167(citationsomitted). In a strikingly similar case, a federal district court in Indiana rejected a claim that bank records relating to a lawyer's IOLTA accountcontainedprivileged or confidentialclient information: Generally,thereis no legitimateexpectationofprivacy in the contents in of checks,deposit slips or bank statements a bank's possession. Checks are negotiable instrumentsused in commercial transactions, to voluntarily conveyedto banks,and exposed the banks'employees that [the lawyer's] bank in the ordinary course. Caselaw establishes recordsarenot protectedby the attorney-clientprivilege. Further,the professional rules are not violated because [the lawyer] is not requests ofher clients. The summons or revealinga confidence secret that Bank One, not [the lawyer], producethe information requested. The fiawyer's] arguments ignore the basic nature of such banking transactions. They are not confidential communications among attorneyand client. They arecommercialtransactionswhich disclose the identity and other identifiers ofthe partiesto the transactionto the third party banking institution. Even if the transactions could be viewed by a large stretchof the imagination to be communicative, in no way could they be consideredconfidential. If the flawyer] and [her] clients sought confidentiality regarding the monetary transactions, theyblew anycoverof secrecybyutilizinga commercial banking enterprise. 2003 WL21254772 at*2 (S.D. Ind. Apr. I 1, Najjar v. UnitedStater,No. 1:02-cv-18O7-JDT-WTL, 2003) (internal citations omitted). Mackert cites no contrary authority to support his claim of privilege. Consequently, this objectionis ovemrled. The court also rejects Mackert's argumentthat his bank recordsare protectedby the RFPA. Under this statute, "no Government authority may have accessto or obtain information contained in the financial records of any customer from a financial institution" unless certain conditions are met. See l2 U.S.C. $ 3402. The statutedefines"Governmentauthority" to mean "any agencyor departmentof the United States,or any officer, employee,or agent thereofl.]" /d. $ 3401(3). Mackert's bank records is not an officer, Becausethe court-appointed receiver who subpoenaed employee, or agent of a government agencyor department,the RFPA does not apply. Nor is the subpoenaoverly broad, vague, and ambiguous. To the contrary, the subpoena requests only documents pertaining to Account Holders who have some relationship to the receivership. Three of the Account Holders--AdleyAbdulwahab,Michael K. Wallens, Sr., and Michael K. Wallens, Jr.--are named defendantsin this case. Abdulwahab and Brent Onacle are former businesspartnersin A&O Life Funds,L.P., an entity that received$2 million in investor fundsfrom W FinancialGroup,LLC--the subjectof the receivership.(SeeJt. Stat.Rep.App. at2l7, 117& Exh. A). ICI Vehicle Holdings, Inc. ("ICI") was an entity set up by Mackert to facilitatethe purchaseof two Ferrari automobiles--onefor use by Abdulwahab and one for use by Onacle. (See into or transferred of Mackert's out id. a134,47 ,78). Bank recordspertainingto funds deposited ,57 IOLTA account for the benefit of Abdulwahab, the Wallenses,Onacle,and ICI are clearly relevant assets. and recoverreceivership and necessary enablethe receiverto traceinvestorproceeds to Mackert'smotion to quashthe JPMorgan ChaseSubpoena For thesereasons, [Doc. #165] is denied. His requestfor an expeditedhearing[Doc. #167] is deniedas moot. SO ORDERED. DATED: March9.2009. JUDGE S]'ATESMAGISTR.ATE
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