Judge Christian N. (“Speedy”) Weiler loses no time in finding IRS’ counsel guilty of bad faith in continuing to rely on a backdated lead sheet for chops, while keeping knowledge of same concealed from Tax Court and Lakepoint Land II, LLC, Lakepoint Land Group, LLC, Tax Matters Partner, T. C. Memo. 2023-111, filed 8/29/23.

IRS’ thirteen (count ’em, thirteen) attorneys claim “… his actions—and those of his counsel— fall short, but he contends that these actions do not rise to the level of fraud or bad faith and therefore do not warrant the imposition of any sanctions. Respondent argues that his counsel has complied with ABA Model Rule 3.3(a)(1) and (3) and with Rule 201 requiring candor to the Court.” T. C. Memo. 2023-111, at p. 6.

Judge Speedy Weiler kicks IRS’ protestations to the cliché, vacates the summary J on chops he gave IRS back in March (which I didn’t blog because it looked like the usual), and unloads on IRS’ counsel.

“…we find respondent’s counsel knew or should have known, no later than November 2, 2022, that his representations made to this Court were less than accurate and lacked candor and that RA B’s Declaration was false. Under ABA Model Rule 3.3, respondent’s counsel has an ongoing obligation to correct these misrepresentations of fact but failed to do so. Rather than correcting this material misrepresentation found in respondent’s Motion for Partial Summary Judgment, respondent’s counsel sought to pivot and present additional evidence on an alternative legal theory without withdrawing or conceding the original legal theory for why summary adjudication was appropriate here. Furthermore, no other remedial action was taken with the Court to correct the error until April 10, 2023, which was after this Court had issued its Order granting respondent’s Motion.

“In sum we find respondent’s counsel failed to timely advise the Court of RA B’s erroneous Declaration. Accordingly, we find the actions of respondent’s counsel to be in bad faith and to have multiplied the proceedings in this case unreasonably and vexatiously. See I.R.C. §6673(a)(2). In fact the actions of respondent’s counsel have, among other things, resulted in petitioner’s retaining additional counsel to elicit the truth regarding the section 6751(b) issues in this case and have substantially increased the discovery and motion practice required. However, the actions of these actors should not be attributed to respondent directly.” T. C. Memo. 2023-111, at pp. 11-12. (Name and footnote omitted).

Hey taxpayers, note that these shenanigans “… brings down upon the United States, subjects the United States to, and makes the United States vulnerable to liability for the costs, expenses, and fees attributable to the services of the taxpayer’s attorney’s professional services that are required as an appropriate response to the misconduct. I.R.C. § 6673(a)(2). The United States incurs the attorney’s fees by operation of law under section 6673(a)(2)(B), just as a taxpayer incurs a penalty for his own misconduct under section 6673(a)(2)(A). T. C. Memo. 2023-111, at p. 13.

That means us, troops.

However, my suggestion back last week, about a Rule 104 sanctions order barring any evidence of Boss Hossery, (see my blogpost “La Commedia È Non Finita,” 8/22/23) is a no-fly. The Lakepoints were trying Rule 123(b) “decide against any party any issue as to which such party has the burden of proof.” “Inappropriate,” says Judge Speedy Weiler.

And Judge Speedy Weiler will decide what excess costs, expenses and attorneys’ fees were reasonably incurred after the trial.

I cannot think this is the last we’ll hear of this sort of jiggery-pokery. Here comes the silt.