Former IRS Lawyers Suspended For Tax Shelter Case

The bar associations in Oregon and Arkansas have suspended the law licenses of two former Internal Revenue Service lawyers for two years, the New York Times reported.

The state organizations' actions come after a federal court ruled last year that the two defrauded the courts to help the IRS prevail in 1,300 tax shelter cases, many of them involving airline pilots, the Times reported.

Oregon suspended the license of W. Kenneth McWade and Arkansas suspended the license William A. Simms. In addition, the U.S. Tax Court suspended both men for two years and the IRS director of practice suspended them indefinitely, the Times reported. Both left the IRS as their conduct was investigated.

Houston lawyer Michael Louis Minns brought complaints on behalf of 124 tax shelter buyers. One is seeking a refund of $6 million.

The two attorneys were found to be responsible for “extreme misconduct” by the Federal Court of Appeals for the Ninth Circuit in San Francisco in January 2003, the Times reported. The attorneys were found to have defrauded the court by convincing some of the pilots who bought the shelters in the 1970s and 1980s to testify against others in exchange for protection from tax-collection action, the Times reported.

The court questioned the fact that the attorneys were given $1,000 bonuses for their work on the cases and asked why the IRS didn't discipline the men, the Times reported.

The men fought Minns' effort to compel the IRS to disclose what states they were licensed in so he could seek their disbarment, filing court papers saying they had acted properly. The IRS refused to hand over the information, citing confidentiality.

McWade, reached at home in Hawaii, told the Times, "I guess the court has decided that Oregon lawyers are not entitled to due process." Sims did not respond to voice mail and e-mail messages, the Times reported.

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