In Uncategorized on 04/04/2012 at 18:33

Just a tax protester case from Tax Court today, with nothing really new about it, just a banking warehouse scheme, where the participants deposited all their income in a single pooled account in the name of a dummy, to hide it from IRS. A few subpoenas, and game over for taxpayer, who gets the 75% fraud penalty.

But the case I noted in passing two days ago, F. Lee Bailey, 2012 T.C. Mem. 96, filed 4/2/12 (see my blogpost “Service Trumps Sickness”, 4/2/12), has gotten a bit of buzz. Peter Reilly picked up the case and my blogpost, and commented on his blog. His post got some activity from the groundlings, so I thought I’d throw in my take.

I met Mr. Bailey forty years ago in my youthful days in our State’s Attorney General’s office, when we put a client of his out of business. He already possessed a formidable reputation, which only grew over the years. I best remember him as a member of the O.J. Simpson Dream Team in 1995, at the same time the witches’ brew of facts later described in his Tax Court case was percolating.

Mr. Reilly thinks Mr. Bailey had a fool for a client, as he tried the case himself, with apparently no idea of burdens of proof or recordkeeping requirements. Mr. Bailey seems to have thought it was a criminal trial.

But maybe it’s not that simple.

I was surprised at the DOJ lawyers, who entrusted Mr. Bailey with $5.9 million worth of publicly-traded stock belonging to his incarcerated client, and allowed Mr. Bailey to deal with the stock in an account he controlled in a Swiss bank, with no requirement to account periodically (only at the end), pay at stated intervals, and with no written agreement embodying this extraordinary deal.

But the AUSA (who later became a US Attorney) who made this deal stated: “…Mr. Bailey’s work on the repatriation of Mr. …’s assets was very good; and the Court of Federal Claims found that his work was ‘far more than usual for a defense attorney’.” 2012 T.C. Mem. 96, at p. 15.

Moreover, the AUSA also said he “…he has never heard of any other case in which a criminal defense attorney agreed with the Government to manage assets, to postpone for years any payment of his fees, and to risk complete nonpayment of fees if the assets’ value declined.” 2012 T.C. Mem. 96, at p. 72, footnote 35.

Obviously the AUSA was star-struck by the extraordinary undertakings of this famous lawyer. The AUSA never thought to question the great man, much less dare to require him to put in writing these incredible terms. The AUSA was not alone; many were spellbound. And remarkably, the great man delivered.

Once a tyrant asked one of his minions, “What is the most deadly poison gas?” The minion replied, “Incense is invariably fatal, Excellency.”

Mr. Bailey obviously believed himself to be everything his reputation said he was. A Tax Court trial should be a stroll on the boardwalk for him. It wasn’t.

Takeaway–Never believe your own press releases. Never fool yourself.



  1. […] Taishoff in A Victim of His Own Success comments on the extraordinary deal that Bailey had made with the US Attorney, that was the source […]


  2. […] Taishoff in A Victim of His Own Success comments on the extraordinary deal that Bailey had made with the US Attorney, that was the source […]


  3. […] to Stockholm Syndrome.  He picked up on Joe Kristan’s story about the yacht. Lew Taishoff in A Victim of His Own Success comments on the extraordinary deal that Bailey had made with the US Attorney, that was the source […]


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