In Uncategorized on 06/05/2012 at 17:08

Or, If You’re Not Indicted You’re Not Stayed

In the words of Paul Simon’s 1970 blockbuster hit (No. 47 on Rolling Stone’s 500 greatest hits), “when you’re down and out, when you’re on the street, when evening falls so hard”, you’ll get no comfort from Tax Court unless you’ve at least been indicted. So rules hard-hearted Judge Goeke (he who gave The Great Dissenter, Judge Holmes, the Judge who writes like a human being, a firm time-out in Petaluma FX Partners, LLC, Ronald Scott Vanderbeek, A Partner Other Than The Tax Matters Partner, 2012 T. C. Mem. 142, filed 5/17/12; see my blogpost “Judge, He Didn’t Mean It”, 5/17/12), in Ironbridge Corp. and Subsidiaries f.k.a. Pitt-Des Moines, Inc., 2012 T.C. Mem. 158, filed 6/5/12.

Ironbridge was another casualty of the Forex mix-and-match shenanigans of the late Nineties, whereby recognized major currency (Euro and Yen) puts were married to unrecognizable minor currency (Danish Kroner) calls, with offshore tax indifferents thrown in, so the economics zeroed out but not the tax benefits. A big-time accounting firm put Ironbridge into one of these, and IRS, Zeus-like, flung SNODs like thunderbolts.

Meantime, DOJ got into the act, and Haber, president and panjandrum of Ironbridge, was concerned that he might be principal soloist in a concerto for stool pigeon and Grand Jury.

While the foregoing was foregoing, Ironbridge petitions Tax Court, but IRS and Ironbridge seriatim ask for stays, saying that to try the case would prejudice DOJ (in that Ironbridge could get discovery of the criminal matters beyond that permitted by Fed. R. Crim. P.) and that Ironbridge couldn’t meet their burden of proof if Haber and certain of his unnamed minions took the Fifth at the trial.

However, DOJ finally sends Haber a “dear defendant” letter, wherein they state that they’re investigating, but not to worry, we have no present intention of indicting either you or your companies. Think IRS told DOJ to send that letter? No prize for the correct answer.

Anyway, “On March 27, 2012, petitioners filed a motion to dismiss the consolidated cases and enter decisions against them. Petitioners stated that they filed the motion as a result of their inability to present the testimony of Mr. Haber and other individuals who planned to invoke their Fifth Amendment rights. Petitioners claim that the lack of such testimony ‘would prevent the petitioners from being able to put on their case at trial’ because ‘Testimony from * * * [these] witnesses is critical to petitioners’ ability to meet their burden of proof in these cases’. Respondent objected to petitioners’ motion to dismiss on the grounds that ‘The principles of judicial economy require a final determination of these issues in this proceeding, which only a decision on the merits or an agreed stipulated decision can produce.’ Respondent is concerned that petitioners’ motion ‘is merely an attempt to unnecessarily prolong and delay this proceeding.’” 2012 T.C. Mem. 158, at pp. 4-5.

Oh yes, and in the alternative Ironbridge asked for yet another stay.

This launches Judge Goeke into a disquisition anent the stay of civil proceedings in criminal cases, which I’ll leave, as is my wont, to the law review writers and the terminally insomniac. Here’s a brief preview: “The District Courts of the Second Circuit have often used the following six-factor balancing test: (1) the extent to which the issues in the criminal case overlap with those presented in the civil case; (2) the status of the case, including whether the defendant (here, petitioners) has been indicted; (3) the private interests of the plaintiff (here, respondent) in proceeding expeditiously weighed against the prejudice to plaintiff (respondent) caused by the delay; (4) the private interests of and burden on the defendant (here, petitioners); (5) the interests of the courts; and (6) the public interest. Id. at 99-100. After considering each factor, as explained herein, we found the cumulative weight of the factors to favor denying the stay.” 2012 T. C. Mem. 158, at p. 6.

The bottom line, however, is “…petitioners are not at risk of criminal prosecution (thereby reducing the possible future use of collateral estoppel to zero), and it does not appear likely that Mr. Haber is in criminal jeopardy. Given that it is uncertain whether Mr. Haber will even be indicted, granting the motion could result in the imposition of a lengthy and indeterminable stay for no reason.” 2012 T.C. Mem. 158, at p. 9.

No stay, guys, and Section 7459(d) gives IRS judgment for the amounts stated in the SNODs upon dismissal of the petition on any ground other than want of jurisdiction. “The acceptance or rejection of a proffered concession is a matter within the discretion of this Court, and we should exercise our discretion in accordance with the ‘interest of justice’. See Jones v. Commissioner, 79 T.C. 668, 673 (1982); McGowan v. Commissioner, 67 T.C. 599, 607 (1976). Respondent has not suggested how the interests of justice would compel us to deny petitioners’ motion, and we can conceive of no injustice in granting petitioners’ motion.” 2012 T.C. Mem. 158, at pp. 10-11 (Footnote omitted).

Oh, and here’s the omitted footnote: “Respondent has stated that petitioners’ motion is merely an attempt to delay the proceedings and that judicial economy requires either a decision on the merits or else execution of ‘a stipulated decision effectuating a final, full, and complete concession of this case by petitioners.’ However, respondent has not specified how granting petitioners’ motion would delay the proceedings. We note that ‘A decision rendered upon a default or in consequence of a dismissal, other than a dismissal for lack of jurisdiction, shall operate as an adjudication on the merits.’ Rule 123(d); see also Settles v. Commissioner, 138 T.C. ___, ___ (slip op. at 4) (May 8, 2012); Estate of Ming v. Commissioner, 62 T.C. 519, 522-523 (1974.).” 2012 T.C. Mem. 158, at p 11, footnote 4.

As to Settles, above cited, see my blogpost “Dismissed!”, 5/8/12. And as to IRS’ demand for “either a decision on the merits or else execution of ‘a stipulated decision effectuating a final, full, and complete concession of this case by petitioners’”, see my blogpost “Victory is not Vindication”, 5/1/12. If the taxpayer can’t get “full, final and complete concession”, neither can IRS. You won, so go away.

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