Court Orders Hearing on IRS Whistle-blower Case

The Ninth Circuit Court of Appeals has given whistle-blower status to a former IRS chief tax collector who contends that he was demoted for speaking out about wealthy California taxpayers getting preferential treatment.

Peter W. Coons, the former collection chief in Northern California, was demoted in 1999 after he complained that his supervisors told him to play favorites with several prominent taxpayers facing collection actions, the San Francisco Chronicle reported.

Oakland Raiders owner Al Davis was facing collection actions at the time, as well as an executive of the Golden ADA diamond company of San Francisco who was implicated in a theft and money-laundering scheme.

Coons took his complaints to the Merit Systems Protection Board, which considers federal whistle-blower claims. The New York Times reported that he said he was assigned to a tiny office, given no work and then forced to retire. An IRS spokesman argued that Coons was demoted for improper use of his office computer, which apparently was used to check on personal investments and vacation plans, and had three cookies depicting pictures of naked women.

Coons called those assertions a smoke screen. He had argued that an IRS lawyer, William Sims, had leaked information to Golden ADA but had not been disciplined. Sims also represented a taxpayer before the IRS shortly after he retired, Coons said. The Merit Systems Protection Board denied Coons whistle-blower protection, saying that Sims was no longer a government employee. The court, however, called meeting with Sims “corrupting conduct” on the part of the IRS, the Times reported.

Sims was disbarred in April in a separate action in which the Ninth Circuit Court found that he and another IRS lawyer committed fraud to win tax shelter cases.

In this case, the court ruled that the Merit Systems Protection Board rejected Coons' case improperly, and ordered the board to hear it. "(Coons') disclosures are protected,'' the Ninth Circuit ruled, "and therefore the whistle-blower defense was available to him.''

Coons' attorney, Mary Dryovage, praised the ruling. "Coons is one of those guys that has integrity and blew the whistle on being asked to violate the law and give tax breaks to politically connected people,'' she said. "I'm thrilled.''

Coons called on Congress to provide compensation for the financial, emotional and physical losses of whistle-blowers. He told the Times, "I can never recover" from "the horror show I was put through."

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