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Washington-The estate of one of the nation’s top estate tax lawyers and that lawyer’s business partner in an alleged tax fraud last week won in the U.S. Supreme Court a long-running battle to open secret reports of special trial judges in the U.S. Tax Court. Lawyers for the estate of Chicago attorney Burton W. Kanter and businessman Claude Ballard have been fighting in the courts since 1999 for disclosure of the special trial judge’s report in their case, a report that they believe may exonerate the two men. In a 7-2 decision last week, the high court held that “no statute authorizes, and the current text of [Tax Court] Rule 183 does not warrant, the concealment at issue.” Ballard v. Commissioner of Internal Revenue, No. 03-184; Estate of Kanter v. Commissioner of Internal Revenue, No. 03-1034. [NLJ, 12-6-04]. Special trial judges, appointed by the Tax Court’s chief judge, can issue final decisions in trials involving small amounts of money. But in cases where the claimed deficiency is more than $50,000, they conduct proceedings, including a trial, and submit a report, including findings of fact and credibility judgments, to the chief judge, who then assigns the case to one of the Tax Court’s 19 regular judges for final decision. The special trial judge’s findings are entitled to deference. The reports were public until 1983, when the Tax Court changed its rule. Kanter, Ballard and Robert Lisle were charged with $30 million in tax deficiencies and civil fraud penalties for a kickback insurance scheme. The special trial judge in their case submitted his report four years after their lengthy trial. When a regular Tax Court judge and the chief special trial judge at the time informed Kanter’s trial counsel after the final decision that the reviewing Tax Court judge had reversed the special trial judge’s findings on the fraud issue, the battle was on for the report. Besides holding that Rule 183 did not authorize the secrecy, the high court said that the secrecy impeded appellate review of Tax Court decisions and was contrary to the transparency of analogous judicial proceedings. “The backdrop to the decision was the serious due process and statutory questions raised by this practice, but the court found it so obvious the practice violated the Tax Court’s own rules that that was sufficient to resolve the question in this case,” said Kanter’s counsel, Richard Pildes of New York University School of Law, who brought in Stephen Shapiro, a partner at Chicago-based Mayer, Brown, Rowe & Maw to argue the case. A ‘warning shot’ The high court sends a “warning shot” to the Tax Court that simply amending its rule to authorize the secret process would not necessarily make the procedure viable, said tax scholar Leandra Lederman of Indiana University School of Law-Bloomington. “On appellate review in a particular case, an appellate court and potentially the Supreme Court could say whatever new procedure is adopted is not consistent with due process or some federal statute,” she said.

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