Federal Judge: IRS Can't Have BDO Seidman Tax Shelter Papers
The ruling last Wednesday by Judge James F. Holderman, of the Federal District Court for the Northern District of Illinois, is a blow to the IRS's efforts to prove BDO sold and marketed questionable shelters in recent years.
The tax shelter in question is known as a Cobra, which stands for currency options bring reward alternatives. It was never considered valid for deductions by the IRS and the agency banned it in 2000. Twenty of the shelter's participants had filed a petition to stop BDO Seidman from producing the documents the government had requested, even though the identities of the 20 individuals are already known to the IRS, the Times reported.
Holderman's ruling said that BDO did not have to produce for the government 267 documents that cover work done for clients on the shelter in question. He said the IRS had failed to prove widespread illegal practices in the work on the shelter, the Times reported.
The judge agreed with BDO Seidman that the documents investigators want are covered by confidentiality protections pertaining to the secrecy of communications between a firm and its clients, including attorney-client privilege, work product privilege and tax practitioner privilege, the Times reported.
Accountants were given the same privilege protection as lawyers in a 1998 law, but all privileges are waived in cases dealing with fraud or crime. Holderman did make one exception in his ruling for an e-mail message that may be constituted as a crime or fraud situation.
This latest ruling from Holderman mirrors a similar one that he made last July that upheld confidentiality protection for more than 100 BDO Seidman documents that the government had sought, but it contrasts with recent rulings by other judges, including Judge Shira A. Scheindlin of Federal District Court in New York, on similar cases involving BDO Seidman and other firms, the Times reported.