In Re SEALED CASE

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 25, 2000 Decided July 14, 2000

No. 99-3125

In re: Sealed Case

Appeal from the United States District Court
for the District of Columbia
(No. 98ms00003)

---------

Before: Williams, Ginsburg and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Williams, Circuit Judge: A lawyer resisted compliance
with a federal grand jury subpoena on grounds of privilege,
and the government filed a motion to compel compliance.
Finding the documents privileged, the district court reviewed
them in camera and found them subject to the crime-fraud
exception. Accordingly it ordered them produced. We re-
verse: the understanding of the federal elections laws sup-
porting application of the crime-fraud exception is erroneous.

* * *

Because this case is under seal we endeavor to provide no
more information than is necessary to our disposition. Prin-
ciples governing the relationships of courts and agencies,

however, compel us to address--and, indeed, ultimately defer
to--a civil enforcement recommendation issued by the Feder-
al Elections Commission ("FEC") when the matter was be-
fore it. See In re RNC, Alec Pointevint, and Haley Barbour,
Matter Under Review ("MUR") 4250. We thus divulge facts
of the case to the extent they appear in the Statement of
Reasons associated with the MUR, Statement of Reasons of
Commissioners Wold, Elliott and Mason, MUR 4250 (Feb. 11,
2000), a document that 11 CFR s 4.4(a)(3) requires be made
public. Of course, the subject of this case might theoretically
be different from that of the Commission proceeding, but the
factual similarity is so obvious that it would be pointless to
suppress the actual names.

In May 1993 three officials of the Republican National
Committee ("RNC"), including the Chairman Haley Barbour,
founded the National Policy Forum ("NPF"), a separately
incorporated, not-for-profit think tank. Through September
1994 NPF received loans totaling $2,345,000 from the Repub-
lican National State Elections Committee ("RNSEC").
RNSEC is a "nonfederal" account of RNC and thus is not a
"political committee" for purposes of certain disclosure re-
quirements and contribution rules of the Federal Election
Campaign Act of 1971 ("FECA"), 2 U.S.C. s 431 et seq. See,
e.g., id. s 433 (registration requirements of political commit-
tees), s 434(a)-(b) (reporting requirements of political com-
mittees), s 441a(1)-(2) (limitations on contributions to and by
political committees).

In September 1994, when NPF still owed RNSEC
$2,145,000, Barbour and other NPF and RNC officials arrived
at an agreement with Ambrous Young, a foreign national.
Young's corporation, Young Brothers Development, Ltd.-
Hong Kong ("YBD-Hong Kong"), would provide $2,100,000 in
collateral through its U.S. subsidiary to secure a loan of that
amount from Signet Bank to NPF. On October 17, 1994
Signet disbursed the loan to NPF, and on October 20 NPF
used $1,600,000 of the proceeds to repay a portion of the
original loan from RNSEC.

 The FEC's General Counsel recommended that the Com-
mission find probable cause to believe that RNC and its
officials had violated 2 U.S.C. s 441e(a)--a prohibition on
receipt of contributions from foreign nationals. The Commis-
sion split 3-3, and because a majority of commissioners is
required to find probable cause, 2 U.S.C. s 437g(a)(4)(A)(i),
the vote precluded Commission enforcement action. In re
RNC, Alec Pointevint, and Haley Barbour, MUR 4250. The
three commissioners who voted for no-action provided a
Statement of Reasons, details of which will follow.

NPF's loan repayment also drew the attention of the
Department of Justice, which here rests its crime-fraud ex-
ception claim on the theory that the repayment transaction
amounted to solicitation and receipt of foreign contributions
by the RNC in violation of s 441e(a), and conspiracy by
various RNC officials to defraud the United States for failing
to disclose the transaction, 18 U.S.C. ss 371, 1001.

On September 8, 1997 a grand jury subpoenaed the lawyer
who had served as general counsel of RNC in the period
surrounding the loan repayment. He declined to produce a
number of documents that he claimed were subject to the
attorney-client and work-product privileges. The government
filed a motion to compel compliance, and the RNC intervened
to oppose the motion. Finding that the privileges did not
attach, the district court ordered the general counsel to
produce some of the withheld documents; on appeal by the
RNC, this court reversed. In re Sealed Case, 146 F.3d 881,
888 (D.C. Cir. 1998). On remand the district court ordered
the documents produced, holding that those privileges,
though applicable in the first instance, were subject on the
facts here to the crime-fraud exception. Not discussing the
alleged "crimes" in detail, the district court said simply that
"the evidence shows that the RNC sought the advice of [the
general counsel] in an effort to construct the loan guarantee
transaction in a manner designed to conceal from the FEC
the source of the funds used to acquire the loan," and "to
evade federal election campaign laws." Concluding that the
government has failed to allege any conduct that is criminal
under FECA, we reverse.

 * * *

Appellant RNC first argues that the case is moot. The
theory is that this court lacks, and the district court before it
lacked, authority to enforce the subpoena because the grand
jury that issued the subpoena had expired before the district
court issued its order on September 24, 1999 granting the
motion to compel compliance. The RNC relies primarily on
the First Circuit's opinion in In re Grand Jury Proceedings
(Caucus Distributors, Inc.), 871 F.2d 156, 161 (1st Cir. 1989),
in which the court held that the running of civil contempt
fines must stop at the expiration of the grand jury under
whose aegis the contempt citation was issued, even though a
second grand jury pursuing the same matter had been con-
vened.

But whereas in Caucus Distributors the shift in grand
juries occurred during the contempt enforcement process,
here it occurred before that even started. The analogic force
that the Caucus Distributors court drew from the statutory
rule that recalcitrant witnesses may not be confined beyond
"the term of the grand jury, including extensions, before
which such refusal to comply with the court order occurred,"
28 U.S.C. s 1826(a)(2); 871 F.2d at 160-61, is plainly absent.
Indeed, the First Circuit was explicit that a "subpoena issued
by one grand jury may be used to obtain evidence for a
second grand jury." Id. at 160. While the court saw the
continuous running of fines after expiration of the contempt
grand jury as posing difficult questions as to when "an
investigation has ceased," id. at 161, such questions, if perti-
nent at all in this context, impose no comparable risk of ever-
accumulating penalties for an offense that may have become
moot. Finally, the court relied heavily on language in Shilli-
tani v. United States, 384 U.S. 364 (1966); although there the
initial grand jury investigation had evidently ceased altogeth-
er, with no successor grand jury, the Court had written
broadly, seeming to require termination of contempt remedies
after any such expiration, regardless of successorship. See
id. at 372, cited at 871 F.2d at 161-62.

 Appellant has identified no prejudice arising from enforce-
ment of a subpoena where the originally issuing grand jury
has expired and another has indisputably carried the investi-
gation forward. A parallel situation was presented in United
States v. Kleen Laundry & Cleaners, Inc., 381 F. Supp. 519,
521 (E.D.N.Y. 1974), where the district court upheld enforce-
ment of a subpoena issued by a federal prosecutor in the
name of a grand jury that was not sitting at the time but
would be sitting on the return date. The court saw no
prejudice to the witness and noted that it is "the prosecutor
who has the initiative and power by subpoena to bring proof
to the courthouse." See id. at 522; see also In re Immunity
Order Dated April 21, 1982, 543 F. Supp. 1075, 1078
(S.D.N.Y. 1982). Thus we reject the claims of a lack of power
in the district court to enforce the subpoena.

* * *

On the merits, there are slightly different--and here imma-
terial--differences in the formulation of the test for the
crime-fraud exception as applied to the two privileges in
question, attorney-client and work-product. To establish the
exception to the attorney-client privilege, the court must
consider whether the client "made or received the otherwise
privileged communication with the intent to further an unlaw-
ful or fraudulent act," and establish that the client actually
"carried out the crime or fraud." In re Sealed Case, 107 F.3d
46, 49 (D.C. Cir. 1997). To establish the exception to the
work-product privilege, courts ask a slightly different ques-
tion, focusing on the client's general purpose in consulting the
lawyer rather than on his intent regarding the particular
communication: "Did the client consult the lawyer or use the
material for the purpose of committing a crime or fraud?"
Id. at 51. Here the application of the crime-fraud exception
turns on a pure question of law, which we resolve de novo.
United States v. Kim, 23 F.3d 513, 517 (D.C. Cir. 1994).

This case does not fall within the crime-fraud exception
because what RNC and its officials are accused of is not
criminal. The government alleges that RNC "conspire[d]

either to commit an[ ] offense against the United States or to
defraud the United States" in violation of 18 U.S.C. s 371.
Contrary to the government's assertion that impossibility as a
matter of law is not a defense to conspiracy, it clearly is in
this context. Because the transaction described by the gov-
ernment does not violate FECA, there can be no finding of
conspiracy. "Pure legal impossibility is always a defense.
For example, a hunter cannot be convicted of attempting to
shoot a deer if the law does not prohibit shooting deer in the
first place." United States v. Hsu, 155 F.3d 189, 199 n.16
(3rd Cir. 1998). Obviously a charge of conspiracy to shoot a
deer would be equally untenable.

As we understand the government's position, the RNC's
guilt turns on two alternative theories, both of which assume
that the prohibition of 2 U.S.C. s 441e(a) on contributions by
foreign nationals applies not only to contributions to a "feder-
al account" such as RNC's but also to contributions to a non-
federal account, here RNSEC. Besides that each theory has
what may be viewed as a substantive element (characterizing
a specific element of the transaction as the illicit "contribu-
tion") and an element collapsing legally distinct entities. In
the first theory, (1) NPF's repayment of the loan to RNSEC
is classified as a "contribution"; and (2) YBD-Hong Kong is
seen as the contributor, by an elision of the entities. In the
second, (1) YBD-Hong Kong's provision of the loan guarantee
to NPF is the relevant "contribution"; and (2) RNSEC is
viewed as the recipient. In light of the Commission's statuto-
ry interpretation, both theories flunk; the collapsing of enti-
ties is unjustified, and the substantive element of the first
theory (treating a loan repayment as a "contribution") is
false.

Because the Commission has in effect spoken to both
theories, we start by considering whether we should defer to
Commission interpretations in the context presented here--
where the Department of Justice in a criminal case relies on
an interpretation of the relevant statutes that has been
rejected by the Commission in a 3-3 decision that, under the
statutory voting mechanism, 2 U.S.C. s 437g(a)(4)(A)(i) (re-
quiring affirmative vote of four commissioners), controls
Commission enforcement.

 We have already held that we owe deference to a legal
interpretation supporting a negative probable cause determi-
nation that prevails on a 3-3 deadlock. See FEC v. National
Republican Senatorial Committee, 966 F.2d 1471, 1476 (D.C.
Cir. 1992). There the issue involved interpretation of an
FEC regulation rather than of FECA (a distinction we return
to later), and we relied on an earlier decision of this court
insisting that, to enable judicial review, a no-action decision
by three commissioners must be backed by their statement of
reasons. Id. (citing Democratic Congressional Campaign
Committee v. FEC, 831 F.2d 1131, 1134-35 (D.C. Cir. 1987)).

It is irrelevant that the prevailing interpretation was estab-
lished in the context of agency enforcement, whereas this is a
criminal prosecution. Deference is due as much in a criminal
context as in any other for interpretations made outside that
context, such as those found in published regulations. See
United States v. Kanchanalak, 192 F.3d 1037, 1047 n.17 (D.C.
Cir. 1999) ("That criminal liability is at issue does not alter
the fact that reasonable interpretations of the act are entitled
to deference."); see also Babbitt v. Sweet Home Chapter of
Communities for a Great Oregon, 515 U.S. 687, 703-05
(1995).

Here, unlike in National Republican Senatorial Commit-
tee, agency interpretation of a statute rather than a regula-
tion is at issue. The Supreme Court has recently elaborated
its view of the conditions for deference, both as to regulations,
see Auer v. Robbins, 519 U.S. 452 (1997), and statutes, see
Christensen v. Harris County, 120 S. Ct. 1655 (2000). As to
statutes, the focus of our interest here, the Court drew the
line between interpretations that are controlling on us if
"reasonable," under Chevron U.S.A., Inc. v. Natural Re-
sources Defense Council, Inc., 467 U.S. 837, 844 (1984), or
merely "entitled to respect" to the extent that they have
"power to persuade," under Skidmore v. Swift & Co., 323 U.S.
134, 139 (1944). The Court appeared to make the interpreta-
tion's legal effect the touchstone: "Interpretations such as
those in opinion letters--like interpretations contained in
policy statements, agency manuals, and enforcement guide-
lines, all of which lack the force of law--do not warrant

Chevron-style deference." Christensen, 120 S. Ct. at 1657
(emphasis added). (As examples of agency documents that
merit Chevron deference the Court listed formal adjudica-
tions and notice-and-comment rulemakings. See id.) In
support, the Court cited Martin v. OSHRC, 499 U.S. 144
(1991), where it had made Chevron-style deference turn on
whether the interpretation "derive[d] from the exercise of the
[agency's] delegated lawmaking powers." Id. at 157. Al-
though Martin involved a regulatory interpretation, its use
by the Christensen Court supports its application to statutory
interpretation as well. Regardless of possible differences of
nuance between these views, we find the Commission's proba-
ble cause determination here entitled to deference under
both.

Under ss 437g(a)(4)(A)(i), (5)(C), and (6)(A) the probable
cause determination is part of a detailed statutory framework
for civil enforcement and is analogous to a formal adjudica-
tion, which itself falls on the Chevron side of the line. Like
the citation to which the Court deferred in Martin, the
probable cause determination "assumes a form expressly
provided for by Congress." Martin, 499 U.S. at 157. The
General Counsel advocates and the respondent opposes a
finding of probable cause; through this statutorily mandated
adversarial process, see 2 U.S.C. s 437g(a)(1), (3), the agency
"gives ambiguous statutory terms concrete meaning through
a process of case-by-case adjudication." INS v. Aguirre-
Aguirre, 526 U.S. 415, 425 (1999) (citation and internal quota-
tion marks omitted). Unlike a judicially unreviewable SEC
no-action letter, which this court has said would not merit
Chevron deference, Roosevelt v. E.I. Du Pont de Nemours &
Co., 958 F.2d 416, 427 n.19 (D.C. Cir. 1992) ("[T]he principle
of deference described in [Chevron] is not applicable here, for
neither the staff's no-action letter nor the Commission's brief
ranks as an agency adjudication or rulemaking."), the no-
action decision here was made by the Commission itself, not
the staff, and precludes further enforcement. Compare
Board of Trade of Chicago v. SEC, 883 F.2d 525, 529 (7th Cir.
1989) ("[The SEC staff] could change [its] mind tomorrow, or
the Commissioners might elect to proceed no matter what the

[staff] recommends. The SEC has not, in other words, issued
a 'final' decision...."). Congress vested enforcement power
in the FEC, carefully establishing rules that tend to preclude
coercive Commission action in a partisan situation, where the
Commission, itself statutorily balanced between the major
parties, 2 U.S.C. s 437c(a)(1) ("No more than 3 members of
the Commission appointed under this paragraph may be
affiliated with the same political party."), is evenly split. If
courts do not accord Chevron deference to a prevailing deci-
sion that specific conduct is not a violation, parties may be
subject to criminal penalties where Congress could not have
intended that result.

This reasoning is consistent with FEC v. Democratic Sena-
torial Campaign Comm., 454 U.S. 27, 37 (1981), where the
Court, in deciding whether the Commission's decision to
dismiss a complaint was "contrary to law," 2 U.S.C.
s 437g(a)(8)(C), deferred to the Commission's interpretation.
Although the Court cited Skidmore (Chevron after all had not
yet been decided), it spoke in terms more consonant with
Chevron. The interpretation need only be "sufficiently rea-
sonable," FEC v. Democratic Senatorial Campaign Comm.,
454 U.S. at 39 (citation omitted), and "[t]o satisfy this stan-
dard it is not necessary for a court to find that the agency's
construction was the only reasonable one or even the reading
the court would have reached if the question initially had
arisen in a judicial proceeding." Id. Similarly, as this court
has said (again not explicitly in Chevron terms), a 3-3 dead-
lock would be subject to great deference: "In the absence of
prior Commission precedent ..., judicial deference to the
agency's initial decision or indecision would be at its zenith."
Democratic Congressional Campaign Committee v. FEC, 831
F.2d 1131, 1135 n.5 (D.C. Cir. 1987).

We now turn to the Commission's (i.e., the prevailing)
interpretation of the applicable statutes in the Statement of
Reasons for MUR 4250. The Department's first theory here
strikes out on the failure of its basic claim that a loan
repayment is a contribution. On its face this is improbable.
It would be unusual to characterize a loan repayment--which
could include, for example, simple payment on a purchase

money mortgage on a property sold by a political commit-
tee--as a "contribution." The Commission here rejected the
idea that the final loan repayment from NPF to RNSEC fell
within the definition of "contribution." The statute defines
"contribution" as "any gift, subscription, loan, advance, or
deposit of money or anything of value made by any person for
the purpose of influencing any election for Federal office." 2
U.S.C. s 431(8)(A)(i). No reason appears why repayment of
a lawful debt could qualify. It is true that strictly speaking
the definition applies only to hard money contributions ("any
election for Federal office"), and thus not directly to a contri-
bution to RNSEC, which because of its non-federal character
is not a "political committee." But in the absence of a
separate definition for soft money contributions, we have no
reason to think that Congress would intend a broader defini-
tion of "contribution" in the soft money context than in the
hard money context. Cf. Kanchanalak, 192 F.3d at 1046-47
& n.19.

In rejecting the inclusion of a loan repayment in the idea of
"contributions," the Commission observed that its regulation
did not purport to expand the statutory definition. MUR
4250 at 3 & n.3. Indeed, the regulation's formal definition
contains no reference to "loan repayments," and goes on to
say that "[r]epayment of the principal amount of [a loan by a
political committee] to such political committee shall not be a
contribution by the debtor to the lender committee." 11 CFR
s 100.7(a)(1)(i)(E).

The FEC's General Counsel before the Commission sought,
and the government here seeks, to turn this regulation into a
sword. It points to the clause of 11 CFR s 100.7(a)(1)(i)(E)
saying that repayment to a political committee of the princi-
pal of a loan "shall be made with funds which are subject to
the prohibitions of" various regulations, including a regulato-
ry equivalent of the ban on foreign contributions. But as the
Commission responded, the regulation is specifically limited
to repayments to political committees, and thus is not applica-
ble here. MUR 4250 at 5. The government says the Com-
mission and appellant cannot rely on s 100.7(a)(1)(i)(E) selec-
tively, that they must take the bitter with the sweet. But

citation of a regulation purporting only to govern loans by
political committees as support for the obvious reading of the
statutory term does not seem to us logically to require
accepting its caveat on source of funds, where the caveat has
no visible statutory support and the regulation does not even
purport to cover non-political committees.

We thus turn to the government's theory that RNC offi-
cials violated 2 U.S.C. s 441e(a)'s ban on foreign contribu-
tions by bringing about, or helping to bring about, YBD-
Hong Kong's guarantee of the loan to NPF. That a loan
guarantee is a contribution is an easy step. It is clearly a
valuable economic contribution, and the Commission's regula-
tions (again for political committees), having defined contribu-
tion to include a loan, go on to define loan to include a
"guarantee." 11 CFR s 100.7(a)(1)(i). And the government's
contention that 2 U.S.C. s 441e(a) covers contributions for
non-federal elections (e.g., to RNSEC) is here supported by
the Commission, MUR 4250 at 6, and meets the test of
reasonableness. The ban speaks to contributions in connec-
tion with an election "for any political office," 2 U.S.C.
s 441e(a); although as we have seen, the statutory definition
of contribution addresses only elections "for Federal office," 2
U.S.C. s 431(8)(A)(i), we have already upheld the FEC's
resolution of that contradiction in favor of a broad reading of
the ban. Kanchanalak, 192 F.3d at 1046-50.

But unless NPF can somehow be telescoped together with
either RNSEC or RNC, YBD-Hong Kong's contribution to
NPF is no violation. One possible device would be a notion
that NPF was really part of RNC, but the government has
not seriously voiced such a claim. Although its brief contains
occasional language such as the assertion that "NPF was
operated as a de facto division or subsidiary of the RNC,"
nowhere does it coherently argue that NPF is not, legally
distinct from RNC, that the rules applicable to political
committees apply to NPF, or that the relevant "contribution"
was the loan guarantee directly from YBD-Hong Kong to
NPF. Instead it considers NPF an intermediary: "[YBD-
Hong Kong's domestic subsidiary's] apparently innocuous
guarantee of a $2.1 million bank loan to the NPF suspiciously

begins to resemble a prohibited foreign campaign contribu-
tion that was simply passed through the NPF."

Thus the heart of the government's case is the argument
that the transactions should be considered end-to-end, begin-
ning with the loan guarantee made by YBD-Hong Kong and
ending with the repayment from NPF to RNSEC. Here the
Commission is flatly to the contrary, and its view that there is
no basis for treating the several legally distinct transactions
as one is reasonable. The Commission considered each of the
various elements--the "loan from the RNSEC to NPF, the
collateral from [YBD-Hong Kong] to Signet, the loan from
Signet to NPF, and the repayment from NPF to the
RNSEC," MUR 4250 at 10--and found none of them to be
without valid business purpose. Id. at 10-11. The govern-
ment has weakly claimed that the initial loan was sham, the
creation of a debt for which the RNC never expected full
repayment. The Commission found the charge rebutted "by
the documentation of the loans with a promissory note and
RNC's reporting of the loans; by the fact that NPF did repay
$200,000 of the loans prior to receiving the loan from Signet
Bank; and by the efforts of the RNC's officers to find sources
of funds for NPF that would enable NPF to repay the loans."
MUR 4250, at 9. The government points to nothing contra-
dictory.

Second, the government relies heavily on the idea that
RNC's purpose in bringing about the YBD-Hong Kong guar-
antee, and perhaps Young's in giving it, was to enable NPF to
repay its loan to RNSEC. But the Commission rejected the
principle that the parties' purposes can tie together a set of
lawful transactions, each with a legitimate business purpose,
to create an unlawful one. MUR 4250 at 9-14.

In so doing, the Commission relied on precedent. In In re
Fisher, MUR 4000 (1994), a candidate for Senate invited
potential contributors to donate $1000 to the current cam-
paign, and an additional $1000 to each of three previous
campaigns (assuming they had not already contributed to
them), to help those committees retire their debts. The
candidate promised that he would match, with contributions

to the current campaign, any funds contributed for retirement
of the old debts. Because the only debts of the prior cam-
paigns were to the candidate himself, the overall effect was to
generate funds--in excess of the $1000 per-individual limit--
for the current campaign. The Commission nonetheless
found unanimously that these contributions would not be
deemed to have exceeded the $1000 maximum. Here the
FEC General Counsel sought to distinguish Fisher on the
theory that the donors did not know that their donations
would eventually reach Fisher's current campaign. The claim
is highly improbable, as the campaign solicitations set a
target for each "couple" of "$5000 for Richard's campaign."
MUR 4000 at 3. In any event, the Commission then did not
consider the contributors' knowledge to be relevant. This
seems reasonable: where the recipient is fully informed,
there appears no reason why varying degrees of knowledge
on the part of donors should be pivotal in determining the
recipient's guilt.

The government's theory of a reporting violation is even
weaker. 11 CFR s 104.8(e) requires that "National party
committees [e.g., RNC] shall disclose ... information about
each ... entity that donates an aggregate amount in excess
of $200 in a calendar year to the committee's non-federal
account(s) [e.g., RNSEC]. This information shall include the
donating individual's or entity's name...." We need not
consider whether a loan guarantee such as that made by
YBD-Hong Kong falls within the donations covered by
s 104.8, or whether a guarantor such as YBD-Hong Kong is
properly considered a "donating individual." Our rejection of
the government's effort to treat the two transactions as one
moots both issues. To the extent that YBD-Hong Kong
"donated" a loan guarantee it did so to NPF and not to the
RNSEC, and thus the RNC was not required to report the
identity of the guarantor.

The government has noted that in making its case to the
district court for the crime-fraud exception it has included
evidence not before the Commission in MUR 4250. (The
appellant notes, in parallel, that it has never seen the evi-
dence before the district court.) But this does not alter or

even bear on the gaps in the legal theories marshaled by the
government to support the exception. There may somewhere
be evidence such that, under valid legal theories, the govern-
ment can justify applying the exception. But until the gov-
ernment tries to assemble its evidence around valid theories,
the character of the evidence is largely irrelevant.

* * *

Because we find that the legal theories invoked to support
application of the crime-fraud exception are without exception
faulty, we reverse.

So ordered.