Auditor’s Communications with AICPA Unprotected

In the securities class action In re Winstar Commc’ns Secs. Litig., 2007 U.S. Dist. LEXIS 85134 (S.D.N.Y. Nov. 15, 2007), the shareholders sued Grant Thornton for its alleged participation in an accounting fraud that allegedly led to Winstar’s demise. Grant Thornton withheld post-litigation communications with the Quality Control Inquiry Committee (“QCIC”) of the American Institute of Certified Public Accountants ("AICPA") -- documents that, it contended, were generated pursuant to AICPA requirements that accounting firms provide information about litigation filed against them. District Judge George B. Daniels ordered disclosure over claims of “self-critical analysis” privilege and Grant Thornton requested a certification pursuant to 28 U.S.C. § 1292(b) permitting interlocutory review in the Second Circuit. Grant Thornton did not claim either attorney-client privilege or work product protection, both of which the District Court held were effectively precluded by § 7000.16 of the AICPA SEC Practice Section Reference Manual (2001), which provides that an accounting "firm is not required to provide the QCIC, or its representatives with information that would invade the attorney-client privilege, or with the litigation work product of the firm or any of its partners or employees." The Court held that interlocutory review, which is generally inapt for non-dispositive discovery orders, “is especially inappropriate here because the self-critical analysis privilege is not a traditionally recognized privilege. Neither the United States Supreme Court nor the Second Circuit Court of Appeals has ruled that such a privilege exists as a matter of federal law.” Certification denied.

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