Kovel Accountant: Definition, Purpose, and Legal Implications

A Kovel accountant is a specialized accountant retained by a lawyer to assist in providing legal advice to a client, with the goal of extending attorney-client privilege to communications involving the accountant. The term comes from the landmark 1961 case United States v. Kovel.

Background of the Kovel Doctrine

The Kovel doctrine emerged from the Second Circuit Court of Appeals decision in United States v. Kovel. The court held that when an attorney hires an accountant to help interpret complex financial information necessary for legal advice, communications with the accountant may be protected under attorney-client privilege, provided certain conditions are met.

Role and Responsibilities of a Kovel Accountant

What is a Kovel accountant?

A Kovel accountant is not simply an accountant working for a client, but one specifically engaged by legal counsel to assist in rendering legal services. Their primary role is to clarify financial matters so that the attorney can provide informed legal advice. This may include analyzing tax returns, preparing financial statements, or assisting in forensic investigations.

Purpose and Scope of a Kovel Agreement

What is the purpose of a Kovel agreement?

A Kovel agreement is a formal arrangement between a client, their attorney, and an accountant, designed to extend attorney-client privilege to the accountant’s work. The purpose is to ensure that sensitive financial information shared with the accountant for the purpose of legal advice remains confidential and protected from disclosure in legal proceedings.

For the privilege to apply, the accountant must be retained by the attorney (not directly by the client), and their work must be necessary for the attorney to provide legal advice. The agreement should clearly outline the scope of the accountant’s engagement and the necessity of their involvement in the legal matter.

Limitations and Legal Considerations

While the Kovel doctrine can extend privilege, it is not absolute. Courts may scrutinize the arrangement to ensure it is not being used to shield otherwise discoverable information. If the accountant’s work is deemed to be for non-legal purposes, such as routine tax preparation, privilege may not apply.

Conclusion

Kovel accountants play a critical role in complex legal matters involving financial issues. By working under a Kovel agreement, they help attorneys provide informed legal advice while maintaining the confidentiality of sensitive information.