A Future War Story at Chief Counsel’s Office

A few weeks ago we posted about the big mess at Chief Counsel’s Office.  You remember, the examining agent forgot to get supervisor approval before assessing penalties and when kinda sorta told to fix it by any means necessary back-dated a document, neglecting to inform Chief Counsel who thereafter presented the document as true and accurate in Tax Court thereby securing $8 million in penalties on the disallowance of a $57 million conservation easement deduction, meanwhile risking ethical complaints and having to explain to the bar and the court with egg all over his face?  Yeah, that case.  Chief Counsel pretty much admitted the whole thing but said it was . . . yep, a failure to communicate rather than an intentional lie.  

I’ve been in trouble with the judge before.  I was an Army JAG long ago so I know what it feels like to be made to stand at the position of attention in front of the Military Judge and Panel because trial counsel said something snarky and I said something snarky right back.  So I hope the attorneys in Chief Counsel’s Office realize that one day soon they are gonna probably spit beer laughing so hard about this and how deep into the poop sandwich they were.  

Anyway, so you might recall that Taxpayers filed a likely winnable motion for sanctions, though who’s to say the sanction must be forfeiture of the penalties.  Lord knows the conservation easement syndicate deserves penalty in this case.  In pursuit of the motion, Taxpayers’ filed a whole list of very uncomfortable interrogatives and stipulation requests that pretty much brush aside the work product doctrine and whatever attorney-client privilege yet existed.  Chief Counsel protested but in an Order served yesterday, Judge Weller basically said she didn’t want to hear it:

We will therefore direct respondent to make a forthright and comprehensive response to Interrogatory No. 10, providing petitioner with the specific dates (or close approximation thereof). To the extent respondent asserts that the requested information does not exist or cannot be secured, he must certify that he made a reasonable search and/or request for the information and that, to the best of his knowledge, the response is complete. See Dynamo Holdings v. Commissioner, T.C. Dkt. Nos. 2685-11 and 8393-14, 2016 WL 4204067, at 5 (Aug. 15, 2016) (Order) (“[T]he Tax Court Rules require that the responding party make a ‘reasonable inquiry’ before submitting the response.”). Moreover, if respondent determines that he is not able to produce the requested information on the basis of a claimed privilege, he must provide the Court with a detailed privilege log.

Don’t go back-dating those privilege logs, I’ll tell you that much.  So no, this is not going well for Chief Counsel.  But don’t lose hope.  War stories are hilarious after the war is over.

darryll k. jones