In late March (2015), the Illinois Supreme Court rendered its long awaited decision on the accountant’s privilege under the Illinois Public Accounting Act. Prior to the decision in Brunton v. Kruger, et al., it was unclear whether the privilege belongs to the accountant or the client.
Complex facts make for interesting cases; and so it is with Brunton v. Kruger. Helen and Gordon Kruger (“Krugers”) consulted the Bloomington (Illinois) based accounting firm of Stiegel, Knobloch & Co (“Stiegel”) regarding their estate plans; and provided the firm with a variety of confidential documents. After the Krugers died, June Brunton, the Krugers’ disenfranchised daughter (“Brunton”), contested the will and brought suit against her brother, Robert Kruger, as trustee of the trusts established by the Krugers and as the personal representatives of their estates (“Estates”). Both the Estates and Brunton issued subpoenas to obtain the confidential information given to Stiegel by the Krugers. Stiegel, for reasons unknown, gave the documents to the Estates, but not to Brunton, who filed a motion to compel compliance with her subpoena.
In refusing to turn the documents over to Brunton, Stiegel relied on Section 27 of the Illinois Public Accounting Act, which states, “A licensed or registered [CPA] shall not be required by any court to divulge information or evidence which has been obtained by him in his confidential capacity as a licensed or registered [CPA].” The Supreme Court applied a strict reading of the statute recently reaffirmed by the Illinois legislature; and determined that its language was plain and unambiguous. It created a privilege for the accountant and not the client. Accordingly, even if the client consents to (or requests) disclosure of the confidential information by the accountant, “the statue still protects the accountant from being required by a court to divulge the information.”
The Court in Brunton also ruled on a number of collateral matters. First, the definition of public accounting services includes estate planning services, even though these services are not specifically listed as public accounting in the statute. Next, the principle behind the so called “testamentary exception” does not apply to accountants. The testamentary exception is a carve-out to the attorney-client privilege when the attorney prepares and witnesses the will of a client – the rationale being that the decedent would likely forego the privilege so that their testamentary intent would be given effect. Finally, and not surprisingly, the Court held that Stiegel waived the privilege when it disclosed the confidential information to the Estates – notwithstanding its argument that the Estates and Brunton were adverse, and that Stiegel and the Estates had a “common interest;” namely, the testamentary intent of the Krugers.
The decision in Brunton may actually create more questions than it answers. Does an accountant’s ethical duty to maintain the confidences of the client trump the statutory accountant’s privilege? If disclosure of information to a client (including their estate) undercuts the accountant privilege, should accountants be generally more guarded about what they give to clients; potentially eroding the relationship? If the accountant is also an attorney, which privilege applies – the attorney-client privilege where the client holds the privilege, or the accountant privilege?