Font Size: 
Lawyer Charges IRS Retaliated Against Him for Complaint Over Agent's Practices
New Jersey Law Journal
February 23, 2009
Princeton, N.J., tax lawyer Robert Kenny says he's paying a steep price for taking on the Internal Revenue Service on behalf of clients: a retaliatory strike that has put his livelihood and his law license at risk.
In a federal court suit, Kenny alleges that when he complained to the Treasury Inspector General for Tax Administration that an IRS agent was telling taxpayers to forgo representation, the IRS lodged a professional complaint against him.
Though the suit, Kenny v. United States, 08-Civ.-3921, alleging tax-law and constitutional-rights violation, was dismissed, Kenny says he is appealing.
According to his suit, Kenny filed three complaints with TIGTA over a three-year period, accusing IRS agent Steven Wald of deterring taxpayers from hiring representatives and, when they did so, trying to interfere with them.
TIGTA was created by Congress in 1998 to provide independent oversight of the IRS, but instead of investigating, the agency sent the complaints to the head of the IRS operating unit that includes Wald's Trenton, N.J., office. The manager, Andria Greenidge, asked Wald whether he had made the alleged statements and looked at his contact log but never interviewed Kenny or the taxpayers involved before dismissing the complaints as groundless, Kenny alleged.
Greenidge then recommended that Wald file a practitioner misconduct case against Kenny, the result of which was an IRS investigation of Kenny's tax records, which uncovered two late-filed returns, for 2001 and 2005, he alleged.
Kenny, who is also a CPA, says his failure to obtain an extension was careless but when he realized his error, he filed accurate returns and paid what he owed, well before the IRS began its probe. He took care of the 2001 return in 2003 and the 2005 return in 2007.
Last May 14, however, he heard from the IRS Office of Professional Responsibility, which regulates practice by the lawyers, accountants, "enrolled agents" and "enrolled actuaries" who represent taxpayers before the IRS.
In a letter, the OPR accused him of willful failure to file a return, as well as giving false information and attempting to influence an IRS employee by making false accusations. If the charges stick, Kenny can be permanently barred from IRS practice, suspended, censured or fined. In addition, some states will disbar a lawyer whose right to practice before the IRS is revoked, and New Jersey might be one of them, says Kenny.
Last July, after he learned of the OPR action, Kenny filed another complaint with TIGTA, asserting that he had been falsely accused in retaliation for his complaints against Wald. He says he does not know the status of that complaint or of the pending OPR matter.
The following month, he sued the U.S. government, Wald, Greenidge and Mark Tryba, Wald's supervisor, who allegedly ignored Kenny's complaints. The pro se suit alleged four counts:
• retaliation against Kenny with false accusations under §7804 of the Internal Revenue Code, which requires termination of an IRS employee who violates the code for the purpose of retaliating against or harassing a taxpayer or representative;
• filing a false practitioner allegation, entitling Kenny to civil damages under §7433;
• investigation of his tax account for an improper purpose, amounting to unauthorized disclosure of returns; and
• violation of his free-speech and due-process rights, giving rise to a Bivens claim against the three IRS employees. Bivens is a 1971 Supreme Court case that allowed suit against FBI agents for violating constitutional rights.
The government never answered but filed a motion to dismiss, which U.S. District Judge Garrett Brown Jr. granted on Feb. 5. Brown held that there is no private right of action for the retaliation claim under §7804; that Kenny failed to exhaust administrative remedies on his civil damages claims under §7433; that he did not specify the statutory provision infringed by the allegedly improper disclosure; and that no Bivens claim had ever been recognized against IRS agents and Kenny thus failed to state one.
Brown also denied Kenny's motion for a preliminary injunction against the OPR.
Kenny says he will appeal the dismissal of the unauthorized disclosure count because if, as Brown said, he failed to state with particularity what subsection of the code was violated, he should have been allowed to amend the complaint.
He will also appeal dismissal of the Bivens count, saying it is tantamount to holding that unlike other federal employees, "an IRS employee cannot be held personally liable no matter what violation of the constitution he commits, no matter what the circumstances, simply because he is an IRS agent."
Kenny has publicized his plight to protect himself from what he describes as a "Star Chamber proceeding."
He remarks, "If they do this all in secret, God knows what will happen to me, so I went public."
He issued a press release when he filed his complaint, raised it on an American Bar Association listserv and spoke with lawyers knowledgeable about that area of the law.
One of them is Kevin Thorn, of Williams Mullen in Washington, D.C., who once worked for the OPR and devotes a large part of his practice to representing lawyers and accountants in OPR proceedings.
"Tax practitioners should sit up and take notice of this," he says.
There seems to be a connection between Kenny's filing of a TIGTA complaint and the OPR complaint against him, says Thorn, adding that an OPR complaint is a serious matter and can lead to loss of a law license.
By Thorn's estimate, the OPR gets about 400 to 500 complaints a year, of which about 20 percent result in discipline, mostly for nonfiling and compliance issues.
The most recent IRS bulletin, No. 2009-5, issued on Feb. 2, lists 23 lawyers and eight accountants across the country, none from New Jersey, who were disciplined, all with indefinite suspensions.
Thorn is not surprised by the dismissal of Kenny's lawsuit, saying there are internal channels to deal with ethics violations and "the message I took away is that the court wants to pursue those internal channels."
As for Kenny's allegations that Wald discouraged and interfered with representation, Thorn has not heard anything to indicate that is a common problem.
New Jersey tax lawyer Dennis Haase, however, says he has encountered it more than once. "I have had clients come to me and say the IRS told them 'you don't need someone to represent you, you only need to produce the records,'" says Haase, of Sweeney Lev in Montclair.
"We find it chilling. We find it scary," says Barton Goodeve, an accountant in Peterborough, N.H., who practices before the IRS as an enrolled agent and, along with Kenny, is a member of the National Council for Taxpayer Advocacy, a group of about 20 longtime tax practitioners around the country. "It puts a little restraint in your willingness to be as aggressive as you arguably should be for your client," he adds.
Another enrolled agent, Bryan Gates of Clearwater, Fla., says, "no one has ever hit the fence the way Kenny has with direct and probably wrongful retaliation, but many tax representatives have run into situations where the IRS is interfering with taxpayers' rights to be represented." Gates, a former IRS employee, is the editor of West's "Internal Revenue Manual -- Abridged and Annotated."
Defense attorney E. Christopher Lambert of the Department of Justice in Washington, D.C., referred a request for comment to the IRS press office. IRS spokesman Gregg Semanick declines to comment.
