February 18th, 2026

In a criminal proceeding before the United States District Court for the Southern District of New York, United States of America v. Bradley Heppner, 25 CR. 503 (JSR), Judge Jed S. Rakoff, issued a pre-trial order on February 10, 2026, holding in favor of the Government that certain written exchanges that the defendant Heppner had with a generative artificial intelligence ("AI") platform were not protected from production to the United States by either the attorney-client privilege or work product doctrine. Judge Rakoff issued a Memorandum in support of his conclusions and further noted this question was one of first impression nationwide. In particular, the question before the Court was "when a user communicates with a publicly available AI platform in connection with a pending criminal investigation, are the AI user's communications protected by attorney-client privilege or the work product doctrine?" Judge Rakoff answered both questions "no" and directed that the AI platform documents must be produced for discovery to the United States and are admissible at trial.

Indictment on Securities Fraud and Related Offenses. On October 28, 2025, a grand jury returned an indictment against the defendant for securities fraud, wire fraud, conspiracy to commit securities fraud and wire fraud, making false statements to auditors, and falsifying corporation records. Heppner was arrested in Texas on November 5, 2025. He entered a non-guilty plea before the Federal District Court for the Southern District of New York and was released on bond. Trial is set for April 6, 2026. In a press release issued by the Government, Heppner, while serving as Chairman of a publicly traded company, GWG, allegedly misappropriated over $150M. In furtherance of his scheme, he allegedly falsified documents, made misleading statements to investors and auditors and obstructed investigation of alleged impropriety by regulators. GWG would then file for bankruptcy resulting in over $1B in losses to retail investors. The FBI also announced that the investigation is not over.

Search Warrant of Defendant's Residence: Seizure of AI Documents. In execution of a search warrant by the FBI at the defendant's home, agents seized numerous documents and electronic devices. Among the materials seized were 31 documents containing summaries of communications that Heppner had with the AI platform "Claude" operated by Anthropic, a privately owned company. Defendant's legal counsel represented that the documents reflected communications between the defendant with Claude that took place after he received a grand jury subpoena and after it was clear to lawyers and Heppner that he was the target of the criminal investigation. Without any suggestion by legal counsel, Heppner proceeded to "prepare reports that outlined defense strategy, that outlined what he might argue with respect to the facts and the law that we anticipated that the government might be charging." These reports were therefore prepared "in anticipation of potential indictment" which is a legal standard used in resolving whether documents are entitled to protection under the work product doctrine. Heppner claimed privilege over the AI Documents based on: (i) he inputted into Claude information learned from his counsel; (ii) he prepared the documents produced by Claude for obtaining further legal advice from counsel; and (iii) he subsequently shared the contents of the AI Documents with his legal counsel. On February 6, 2026, the United States filed a written motion asking that the Court rule that the AI Documents are not protected from discovery. After oral argument, Judge Rakoff ruled in favor of the Government.

Court's Rulings:

AI Documents Were Not Protected Under the Attorney-Client Privilege. Generally, the attorney-client privilege protects against the disclosure by the client or the attorney of confidential communications made by the client in the course of a professional attorney-client relationship, unless the privilege is later waived. See U.S. v. Bisanti 414, F3d 168, 171 (1st Cir. 2005)(testimony of accountant/attorney who represented the defendant in a tax audit was not privileged); (see also Wigmore, Evidence § 2290 (McNaughton rev 1961) for a much cited definition of the rule “(1) Where legal advice of any kind is sought; (2) from a professional legal advisor in his capacity as such; (3) the communications relating to that purpose; (4) made in confidence; (5) by the client; (6) are at his instance permanently protected; (7) from disclosure by himself or by his legal advisor; (8) except the protection may be waived.”); U.S. v. Mejia, 655 F3d 126, 132 (2d Cir. 2011). Based on principles well recognized under case law under FREV 501, the courts narrowly apply the scope of the attorney-client privilege so that it can not be used as a "sword" in preventing the fact-finder from reviewing all relevant evidence for a complete record in order to reach a decision and further in the interest of the fair administration of our laws.

Judge Rakoff observed that the AI Documents lacked at least two, if not three, elements of the attorney-client privilege. First, the AI documents are not communications of the client which his legal counsel. Heppner could not retain "Claude" as his lawyer. Legally impossible. Citing In re OpenAI, Inc. v. Copyright Infringement Litigation, 802 F. Supp. 3d 688, 689 (S.D.N.Y. 2025). Judge Rakoff noted, however, that "some commentators have argued that whether Claude is an attorney is irrelevant because a user's AI inputs, rather than being communications, are more akin to the use of other cloud-based word processing applications". But Judge Rakoff stated that the use of such applications is not intrinsically privileged. Instead in order to find a recognized privileged relation there must be, inter alia, " a trusting human relationship" such as in the attorney-client context between a licensed professional who owes fiduciary duties and is subject to discipline. An AI platform's relationship with a user is not a "trusting human relationship".

Second, the communications set forth in the AI Documents were not confidential. The private company owning Claude collects and uses data on both users' "inputs" and "outputs" in order to train Claude. The company involved here, Anthropic, notices its internal use policy to its users that even in the absence of a subpoena compelling it to do so, it may disclose personal data to third parties in connection with claims, disputes, or litigation. AI users do not have substantial privacy interests involved in conversations with publicly accessible AI platforms. The AI Documents are not confidential notes that a client may prepare with the intent of sharing them with an attorney because the client, i.e., Heppner, first shares the equivalent of his notes with a third-party (without a sufficient privacy interest).

Third, Heppner did not communicate with Clause for the purpose of obtaining legal advice. The Court noted that this question may be more difficult since it is possible for legal counsel to have directed Heppner to have Claude generate responses to matters that would otherwise be privileged. The new AI Kovel. See U.S. v. Adlman, 68 F.3d 1495, 1988-99 (2d Cir. 1995); Bernardo v. Commissioner, 104 T.C. 677 (1995)(In Bernardo, the Tax Court noted that the Kovel agent can not be used to cloak the services of their accountant in the role of the attorney-client privilege).

Finally, Heppner's delivery of the AI Documents to his legal counsel did not protect the non-privileged documents to discovery. See United States v. Correia, 655 F3d 126 (2d Cir. 2011).

AI Documents Were Not Protected Under the Work Product Doctrine

The work product doctrine is broader in scope than the attorney-client privilege since it is not limited to confidential communications between an attorney and client. The work product doctrine protects documents prepared “in anticipation of litigation” by or for another party, or by or for that other party’s representative. The purpose of this privilege is to preserve a zone of privacy in which a lawyer can prepare and develop legal theories and strategy "with an eye toward litigation" free from unnecessary intrusion by his adversaries". See Hickman v. Taylor, 329 U.S. 495 (1947) (work product doctrine is to prevent litigant from taking a free ride on the research and thinking of his opponent's lawyer and to avoid the resulting deterrent to a lawyer's committing his thoughts to paper); F.R.C.P. 26(b)(3).

Although the IRS may be able to compel production of a document by establishing a substantial need for the document, an attorney’s mental impression will be entitled to substantial protection, more so than factual information also contained in documents prepared in anticipation of litigation. See, e.g., Upjohn v. United States, 449 U.S. 383 (1981) (Supreme Court noted that an attorney’s mental impressions “cannot be disclosed simply on a showing of substantial need and inability to obtain the equivalent without undue hardship)”. There is also governmental work product where the IRS can deny, with Court approval, discovery of information requested by the petitioner or plaintiff in a tax refund suit. This occurred in Ratke v. Commissioner, 129 TC 45 (2007) (IRS trial counsel’s memorandum in collection proceeding, seeking advice from IRS national office concerning arguments to be made at trial, and responsive memorandum from national office, constituted work product, supporting IRS’s invoking work product doctrine to oppose taxpayer’s disclosure request, even though request, made in connection with taxpayer’s motions for attorney fees and sanctions, came after trial was concluded in taxpayer’s favor; memoranda had been prepared for same litigation to which taxpayer’s motions related, and that litigation was not concluded since taxpayer’s motions remained pending.). The Tax Court’s view of the work product doctrine may be sourced to its decision in P,T, & L Construction Co., v. Comm’r, 63 TC 404 (1974). The Tax Court follows the rule that the privilege against disclosure is not limited to the proceeding for which the document was prepared. According to the Court, the privilege extends to other proceedings that were anticipated and involve a related matter. So, it ruled that a document prepared for criminal tax purposes was protected from disclosure in a subsequent action to collect civil penalties from the same taxpayer, because it could be anticipated that a civil suit would follow the criminal proceeding. Ames v. Comm'r., 112 TC 304 (1999). Finally, the Court in its Memorandum observe that the Second Circuit Court of Appeals has repeatedly held that the work product doctrine' purpose "is not generally promoted by shielding from discovery materials in an attorney's possess that were prepared neither by the attorney not his agents," citing Matter of Grand Jury Subpoena Dated Oct. 22, 1991 and Nov.1, 1991, 959 F.2d 1158 (2d Cir. 1992).

There are two generic types of work product, fact work product and opinion work product. Fact Work Product. Fact work product encompasses such items as correspondence, interview notes, and general fact memoranda. For example, if a legal memorandum discusses business records, the memorandum is non-discoverable work product because the IRS could still presumably summon the underlying business records. Similarly, witness statements are generally non-discoverable work product because the party seeking discovery could depose the witness itself. Documents that are not created because of or in anticipation of litigation, such as general business records, are not fact work product and are discoverable. Opinion Work Product. “At its core, the work product doctrine shelters the mental processes of the attorney, providing a privileged area within which he can analyze and prepare his client’s case.” U.S. v. Chevron Texaco Corp., 241 F.Supp. 2d 1065, 1081 (N.D. Cal. 2002).

Judge Rakoff announced that the AI Documents do not merit protection under the work product doctrine even assuming they could be construed as prepared in anticipation of litigation, they were nevertheless not "prepared by or at the behest of counsel", nor did they reflect defense counsel's strategy. Here it was admitted that the AI Documents were prepared by defendant by his own volition. Because the AI Documents were not prepared at request of legal counsel and did not disclose the lawyers' strategy, they do not merit work product protection.

In the Conclusion set forth in the Memorandum, Judge Rakoff acknowledged that despite the "new frontier" of AI and its intersection with the law, the novelty of AI still requires it is subject to long-standing legal principles.

Observation

The expanding universe of research based systems, cloud storage and software and generative AI platforms, will continue to present challenges and burdens to the proper application of our laws, including tax laws, with due regard to the attorney-client privilege, accountant-client privilege, the work product doctrine and the tax compliance rules and norms contained in the Internal Revenue Code. The increasing prompts to do legal research through AI may have good intentions and may well be supported by speed and reduction in cost, there are clear disincentives to their use whether such negatives are based on the lack of privacy, compelled production, or the ethical rules pertaining to lawyers and accountants to clients. There is also the thought that the taxing authority may use AI platforms as well. What about accounting firms AI platform usage and summonses and requests for information. There will be lot more to follow in this area.

THIS POST IS INTENDED SOLELY FOR EDUCATIONAL AND INFORMATIONAL PURPOSES AND MAY NOT BE RELIED UPON BY THE READER AS LEGAL ADVICE