## Facts

- Goldman, Sachs & Co. proposed a tax-advantaged transaction to Paramount Communications, Inc. intended to generate capital losses to offset capital gains.
- David A. Ackert, a Goldman Sachs investment banker, participated in pitching the proposal to Paramount.
- Paramount’s in-house tax counsel, Eugene I. Meyers, researched the proposal’s tax consequences and held follow-up meetings with Ackert to discuss aspects of the proposal.
- Paramount later implemented a version of the transaction through another firm and paid Goldman Sachs a fee.
- During an IRS audit of Paramount’s 1989–1992 tax years, the IRS issued a summons seeking Ackert’s testimony about the proposal and his communications with Meyers.
- Paramount and Ackert asserted attorney–client privilege to prevent IRS questioning about the Meyers–Ackert communications.
- The magistrate judge and district court enforced the summons generally but barred questioning that would elicit the Meyers–Ackert communications as privileged.

## Issues

1. Whether attorney–client privilege protects communications between a corporation’s counsel and a third-party investment banker consulted to evaluate the tax consequences of a proposed transaction.
2. Whether the privilege extension recognized in *United States v. Kovel* applies when the third party is not translating or clarifying client communications but instead provides independent, non-privileged information.

## Decision

- The Second Circuit reversed the district court’s ruling that attorney–client privilege barred the IRS from questioning Ackert about his conversations with Paramount’s counsel.
- The court held the communications were not privileged because Ackert was a third party who supplied external information about the transaction rather than serving as a necessary intermediary for client–lawyer communications.
- The court otherwise affirmed enforcement of the IRS summons, requiring Ackert to appear and testify subject to valid privilege limits.

## Legal Principles

- Attorney–client privilege protects confidential communications between attorney and client made for the purpose of obtaining or providing legal advice.
- Communications involving third parties are privileged only when the third party’s participation is necessary (or highly useful) to enable effective attorney–client consultation by translating or clarifying client communications (the *Kovel* principle).
- A lawyer’s fact-gathering from non-client third parties is not privileged merely because the information is later used to render legal advice.
- Privilege is construed narrowly because it withholds relevant information from disclosure.

## Conclusion

The Second Circuit held that communications between corporate tax counsel and an investment banker about a proposed tax-driven transaction were not protected by attorney–client privilege because the banker was an independent source of information, not a *Kovel*-type intermediary facilitating confidential client–attorney communications.


United States v. Ackert, 169 F.3d 136 (2d Cir. 1999)