United States v. Chen

Tei Fu Chen and his wife (defendants) owned the Sunrider Corporation (Sunrider), an importer of health food and skin care products from Taiwan, Hong Kong, Japan, and other countries. Sunrider paid tariffs to the U.S. Customs Service (Customs) on the actual costs of the goods, but then had its comptroller, Jau Hwa, prepare fictional invoices from its Hong Kong affiliate showing that the company paid much more for the imported goods than it actually did. Generally, an importer who pays higher import tariffs based on the higher cost of the goods will pay less in income tax to the Internal Revenue Service (IRS). The Chens provided the IRS with the fictional Customs tariff invoices showing the inflated costs of the goods imported and paid less in income tax. The attorneys representing Sunrider and the Chens had no knowledge of their tax evasion scheme. Jau Hwa left Sunrider and provided a number of incriminating Sunrider documents to Customs Agent Diciurcio. The government indicted the Chens and Sunrider for conspiracy, tax evasion, and other crimes. Agent Diciurcio provided a sworn affidavit of what Hwa had told him and information about the documents provided to Customs. The government subpoenaed two Sunrider attorneys to provide information to a Grand Jury. The attorneys filed a motion to quash the subpoena on the ground that any information would be protected by the attorney-client privilege. Despite a finding that the attorneys were not aware of the Chens’ criminal scheme, the district court denied the motion based on the crime-fraud exception to the attorney-client privilege. The attorneys appealed.