A Kovel agreement is a legal arrangement that extends the attorney-client privilege to any professional that is employed under an attorney. The Kovel agreement gets its name from the landmark United States v. Kovel case, and ensures that any sensitive information that a client or their attorney shares with third-party professionals remains protected from disclosure during legal proceedings. They are especially beneficial in tax-related legal cases, where complex financial matters often require specialized expertise. Kovel agreements enable attorneys to work with experts and maintain confidentiality, a critical reason why clients hire attorneys to begin with. This blog will explore what a Kovel agreement entails, its uses, and its critical role in safeguarding clients’ interests.

Since TWG clients are sometimes derived from referring CPAs and accountants, and the referring CPA or accountant is already familiar with the client’s business affairs, accounting, and transactional matters, we rely heavily upon the Kovel arrangement to efficiently represent our clients.

What is a Kovel Agreement?

As briefly mentioned above, a Kovel agreement is a legal tool that extends the attorney-client privilege to communications involving third-party professionals, such as accountants, when they are assisting an attorney in providing legal advice. The concept originated with the 1961 case United States v. Kovel. Essentially, the court in this case recognized for the first time that attorneys often needed to collaborate with other professionals to deliver effective counsel. Thanks to Kovel agreements, third party professionals operate as an agent of the attorney, which ensures that any communications or work performed in support of a legal case remains confidential.

Kovel agreements are designed to keep client information confidential throughout the legal process. Attorneys need clients to be 100% truthful, even when communicating with third-party professionals, and clients need to know that when they work with a third-party professional, like an accountant, that their interests are just as protected with them as they are with their attorney. Most court cases rely on third-party professionals to some degree, but Kovel agreements are particularly critical in cases that involve financial or tax matters, which can be intricate and complex.

If Kovel agreements didn’t exist, then any communications with professionals like accountants, could have to be disclosed in court, jeopardizing their right to comprehensive representation. As such, this type of agreement is most necessary in tax cases where financial complexities require the input of accountants or auditors. It allows attorneys to gather critical information and advice while maintaining the confidentiality necessary for an effective legal strategy.

When should a Kovel Agreement be used?

To protect a client’s sensitive information and communications at all times, even when they work with third-party professionals, attorneys should have a Kovel agreement in place. They should specifically consider using a Kovel agreement for the following situations:

• Complex Tax Cases: Tax issues that involve audits, fraud allegations, or IRS disputes, attorneys usually have to call on accountants or tax specialists to provide insights into complex financial data.
• Financial Investigations: In cases involving forensic accounting or the evaluation of financial records for evidence, a Kovel agreement protects the work done by these experts from being disclosed in court.
• Business Litigation: When legal disputes arise involving company finances, such as shareholder disagreements or breaches of fiduciary duty, attorneys may need to call in third-party financial experts to analyze records while maintaining confidentiality.
• Criminal Defense Cases: White-collar crimes, such as embezzlement and money laundering, often require the protection of Kovel agreements when clients and their attorneys have to collaborate with financial experts to build a strong defense.
• Pre-Litigation Planning: Attorneys frequently use accountants and consultants in the early stages of a case and a Kovel agreement ensures that this work remains privileged.

By protecting sensitive information, Kovel agreements allow clients to benefit from specialized expertise without jeopardizing their legal confidentiality.

How does a Kovel Agreement benefit the client?

A Kovel agreement provides significant advantages for clients involved in legal cases that require expert assistance beyond the attorney’s capabilities. Extending attorney-client privilege to third-party professionals ensures that sensitive information remains protected while enabling the attorney to deliver well-rounded, effective representation. Here’s how a Kovel agreement benefits clients:

• Preservation of Confidentiality: Not having a Kovel agreement in place would mean that communications with third-party experts may not be confidential. A Kovel agreement ensures these interactions are kept secure under the attorney-client privilege.
• Access to Specialized Expertise: An attorney is not an expert in every single part of a case. A wise attorney gets input from field experts such as accountants, engineers, and finance professionals. A Kovel agreement allows attorneys to collaborate with these specialists without risking privilege.
• More potent Legal Strategy: Since a Kovel agreement covers all aspects of the case and any third-party professionals, an attorney can develop a more potent legal strategy, knowing that all parties can communicate without fear of incrimination.
• Protection in Tax Cases: Kovel agreements also prevent disclosure of professional financial analyses or interpretations. As such, clients facing tax disputes are less likely to self-incriminate or provide evidence that could damage their case.
• Peace of Mind for Clients: When clients know about their communications with their attorney collaborators, they are more likely to share critical information, which creates trust among all parties working for the client and enhances the quality of their legal representation.

A Kovel agreement offers invaluable protection and support to clients navigating complex legal challenges.

TWG navigates complex tax matters with ease.

Not all legal firms have the skills and resources it takes to successfully handle complex tax matters. At Tax Workout Group, our excellence lies in our ability to resolve complicated tax issues such as audits, bankruptcy, collections, litigation, and criminal tax cases. We have former DOJ attorneys, IRS auditors, certified public accountants, and other experienced professionals on our team, and we use advanced technology to effectively and efficiently collaborate and communicate with our partners and clients. If you’re facing a challenging tax issue, contact us today to schedule a free consultation. Let our team resolve your tax problems with expertise and dedication.