Breaking and associated brands will be offline for scheduled maintenance Friday Feb. 26 9 PM US EST to Saturday Feb. 27 6 AM EST. We apologize for the inconvenience.


Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A seven-year-old secret report by a special trial judge of the U.S. Tax Court in the lengthy and complex fraud trial of a renowned tax lawyer and his business partners found no fraud — not even a suspicion of fraud — by the three men, despite a subsequent Tax Court decision to the contrary. The conflict between the original report and the Tax Court decision has prompted some to raise ethical questions about Tax Court procedures and to call on Congress to examine them. The Tax Court recently released the report after the U.S. Supreme Court held earlier this year that “no statute authorizes, and the current text of [Tax Court] Rule 183 does not warrant,” the concealment of special trial judge reports by the Tax Court. The Supreme Court ruling — Ballard v. Commissioner of Internal Revenue, No. 03-184, and Estate of Kanter v. Commissioner of Internal Revenue, No. 03-1034 — followed years of litigation over the report in three federal circuits by lawyers for estate and tax attorney Burton W. Kanter and his business partners Claude Ballard and Robert Lisle, all of whom believed the report would exonerate them. “One of the enormous frustrations about the case, now that we’ve seen what the presiding judge found, is that the taxpayers, who had their reputations severely damaged, have been litigating for years and have spent a fortune just to get to [the] point of having the original findings of the judge who presided at trial,” said Richard Pildes of New York University School of Law, counsel to the estate of Burton Kanter. “Two of the three taxpayers have died.” Special Trial Judge D. Irwin Couvillion oversaw the five-week trial in 1994 in which the government charged Kanter, Ballard and Lisle with $30 million in tax deficiencies and civil fraud penalties in three alleged kickback schemes. In his 300-page report, produced four years later, Couvillion, who did not have authority to issue the Tax Court’s final decision, said the court “cannot find or conclude” that the claimed kickback schemes existed or, if they did exist, that there was tax fraud in connection with them. He also said that the transactions on which the government based its fraud allegations “amount to only respondent’s suspicious [sic] of fraud. The Court, however, does not consider these transactions as even rising to the level of suspicion of fraud.” A year later, Senior Judge Howard A. Dawson issued the final decision, saying he was “adopting the opinion of Special Trial Judge D. Irvin Couvillion,” but ruled for the government on the fraud and most of the tax liability issues. UNKNOWN DIFFERENCES Because Couvillion’s original report was secret, no one would have known of the differences between the two but for another Tax Court judge and the chief special trial judge at the time who contacted Kanter’s trial lawyer and informed him of the reversal of the findings of fact. The Tax Court denied requests for the report, saying in an order, “Judge Dawson states and Special Trial Judge Couvillion agrees, that, after a meticulous and time-consuming review of the complex record in these cases, Judge Dawson adopted the findings of fact and opinion of Special Trial Judge Couvillion,” and Dawson gave “due regard” to Couvillion’s credibility findings. ‘DISTURBING’ DIFFERENCES But the report is “very different” from the 1999 opinion, said tax scholar Leandra Lederman of the Indiana University School of Law-Bloomington. “Most important, the original report did not find that the taxpayers committed fraud; the opinion did,” she emphasized. “These differences are disturbing. They raise questions about what the Tax Court means in Rule 183 cases when it says it ‘agrees with and adopts’ the findings of the trier of fact. This type of question may undermine confidence in the Tax Court’s practices in Rule 183 cases.” Tax Court Chief Judge Joel Gerber did not respond to a request for comment on Rule 183. The 11th U.S. Circuit Court of Appeals in the Ballard case (Ballard is the only survivor) ordered the Tax Court to produce the report and the parties to brief what should happen next. The 7th Circuit in the Kanter case sent his case back to the Tax Court over a strong dissent. The 5th Circuit in the Lisle case had much earlier overturned the fraud decision and sent the case back to the Tax Court on deficiency issues, where it remains. “We want the fraud and deficiencies — which total about $10 million — reversed,” said Steven S. Brown of Chicago’s Martin, Brown & Sullivan, counsel to Ballard and Lisle. “We think the 11th Circuit has all it needs to make its decision. We want the Tax Court to vacate its opinion [in Lisle].”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.