FOR IMMEDIATE RELEASE|
TUESDAY, MAY 18, 2004
TDD (202) 514-1888
JENKENS & GILCHRIST ORDERED TO DISCLOSE CLIENT IDENTITIES
AND PRODUCE CLIENT FILES IN IRS TAX SHELTER INVESTIGATION
WASHINGTON, D.C.- The Justice Department’s Tax Division announced today that late Friday, May 14, the U.S. District Court for the Northern District of Illinois ordered the law firm Jenkens & Gilchrist, P.C., to comply with IRS summonses seeking identities and other information relevant to the IRS investigation into certain tax shelters promoted by the firm.
“Tax shelter customers and promoters have thrown up one obstacle after another in their effort to keep the IRS from learning their identities and the details of their transactions. As one court after another takes a close look at the tax shelter industry, those obstacles are falling like dominoes,” said Eileen J. O'Connor, Assistant Attorney General for the Department of Justice Tax Division. “The Court's order affirms the government's position that customers of tax-shelter promoters cannot shield their identities from the government, even if the promoter is a law firm.”
“This is yet another in a string of victories in the tax shelter battle,” said IRS Commissioner Mark W. Everson. “The courts are rapidly dismantling the baseless claim of privilege invoked by attorneys and accountants attempting to hide abusive transactions from IRS scrutiny. The government is winning. The message to taxpayers who invested in these schemes is clear: We are going to find you.”
“Treasury has been working hand in hand with the IRS and DOJ to have the right policies and rules to effectively address the problem of abusive tax avoidance transactions,” said Treasury Acting Assistant Secretary for Tax Policy Greg Jenner. “We need to ensure that the IRS has the information necessary for it to fully and fairly enforce the tax laws. The Court Order makes it clear that tax shelter promoters and customers can run, but they can't hide.”
IRS Chief Counsel Donald L. Korb said, “ "Judge Moran's Order again confirms that tax shelter investors and their promoters cannot use privilege to hide from the IRS, even where the promoters are lawyers. We applaud the Court's strong message that privilege should not be used as a delaying tactic.”
The District Court's order rejects Jenkens & Gilchrist's arguments for concealing the identities of the investors who purchased the tax shelters it marketed, and it required disclosure to the government of all their identities by May 17. The order permits the customers to seek to intervene in the matter to assert attorney-client privilege as to particular documents, but otherwise requires Jenkens & Gilchrist to turn over client files, too. The Court's order warns clients who may want to assert a privilege to prevent disclosure of particular documents that the Court found little basis for existence of a privilege among the documents it has already examined, and that it would consider imposing sanctions for frivolous claims of privilege.
The Court’s order follows its April 20, 2004, order holding that the identities of Jenkens & Gilchrist’s clients are not privileged.
The United States was represented in this matter by Department of Justice Tax Division trial attorney John Lindquist.