The U.S. District Court for the District of Columbia hasdeclined to compel Deloitte & Touche USA to produce two categories ofdocuments in connection with a civil tax refund case.
The case was brought by Chemtech Royalty Associates, L.P.and Chemtech II, L.P., subsidiaries of Dow Chemical Company.At certain points, Deloitte USAperformed auditing services for Dow and Deloitte Switzerland performed auditingservices for Chemtech.
The court found the first category of documents protectedfrom discovery as attorney work product because they were created in anticipationof future litigation over the tax treatment of Chemtech.Although the government argued that Dowhad waived its privilege claims when it disclosed the documents to DeloitteUSA, the court said the disclosure was not inconsistent with the maintenance ofsecrecy because Deloitte USA, as Dow's independent auditor, was not a potentialadversary.
The second category of documents was maintained atDeloitte Switzerland. The government argued that Deloitte USA has sufficientcontrol over the documents to enable their production.While the court found that bothDeloitte USA and Deloitte Switzerland are members of a Swiss verein, (themembership organization Deloitte Touche Tohmatsu) the government had notestablished that Deloitte USA has the legal right, authority or ability toobtain documents upon demand from its Swiss counterpart.
"Close cooperation on a specific project does not,per se, establish an ability, let alone a legal right or authority, on DeloitteUSA's part to acquire documents maintained solely by a legally distinctentity," the court stated."In fact, upon Deloitte USA's request for the documents, DeloitteSwitzerland refused to produce them absent an order from a Swiss court."
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