The IRS Shows How Corrupt They Are

Devvy Kidd
February 1, 2003

As I have said in so many articles I have written: These people who work for the IRS will lie, cheat and steal to keep their paychecks. This time it didn't work. But, how many Americans have been jailed, bankrupted or killed themselves because of the monumental fraud of this rogue operation?

And, what will happen to these federal suits, attorneys no less, who lied, schemed and deceived? Why, they'll probably get a promotion and a letter of praise from Mr. Bush for their fine work.

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Pilots come out on top in legal battle with IRS

Houston Business Journal
Friday, Jan. 31, 2003
by Monica Perin

Retired Continental Airlines pilot Bob Bowersox of Houston says he's been living in fear of the Internal Revenue Service for the past 28 years.

For Bowersox and 1,300 other pilots and their families, that ordeal is finally over. Three Houston attorneys last week won an extraordinary case against the IRS, two of whose attorneys were found to have committed fraud in order to trump up a multimillion-dollar tax case against the pilots.

In a decision that fully upheld the arguments of the Houston attorneys, the Ninth Circuit Court of Appeals in San Francisco said the two IRS attorneys committed "a fraud on both the taxpayers and the tax court" and in so doing they "defiled the sanctity of the court," according to the court's ruling.

Houston attorney Michael Minns represented 127 of the pilots, including Bowersox and Continental pilot Richard Hongsermeier, also of Houston, who was named as a petitioner in the nearly three-decades-long case.

"It's a huge case," Minns says. "Most tax cases deal with one family. There are 1,300 families in this case, and all of them had their lives, their pensions and their homes up for grabs. They will now get their freedom."

The case dates back to the 1970s, when hundreds of airline pilots invested in business ventures launched by a Honolulu banker, Henry Kersting.

Bowersox invested in several of the businesses, including a car leasing company that was about to go public when the IRS began investigating the tax deductions that the pilots had claimed on their investments.

"The partnerships were legitimate companies," says Bowersox. "And back in the late '70s you could write off interest deductions for virtually any loan."

But the IRS issued "wholesale denials of all those deductions, and they slapped us with penalties and then interest on the penalties," he says.

The pilots took the case to U.S. Tax Court, which initially ruled that the pilots did owe the taxes plus interest.

But what the tax court and the pilots and their attorneys didn't know was that the two IRS attorneys had secretly cut a settlement deal with two of the pilots.

Those two pilots, along with Hongsermeier, were the only ones whose cases actually went to court. The rest of the 1,300 pilots had agreed to be bound by the outcome of those three pilots' cases.

The IRS attorneys sought the secret settlements because, according to Minns, they were worried that they would lose the case.

In exchange for the two pilots' cooperation on the witness stand, the IRS attorneys were found to have doctored the tax return of pilot John Thompson to reduce the amount he owed the IRS and cover his attorneys' fees.

But the full details of the secret settlements are just now being uncovered after the appellate court ruled that all the pilots should get the same deal that Thompson got. "Now they'll fool around deciding what I really owe," Hongsermeier says.

But he expects it will be "something I can bear," whereas before, "I would have lost my house, my car, everything. No one can pay 25 years of penalties and interest." Hongsermeier, like many of the pilots, is a military veteran, having served 12 years in the U.S. Navy plus 35 with Houston-based Continental.

"We're not against the government or paying taxes," he says. "We're not protesters. We thought the deductions were legitimate and we contested the IRS."

Bowersox says paying attorneys continuously for three decades "has cost a huge amount of money."

"We'll never get that back," he says.

Hongsermeier believes the size of the group was the only thing that kept them going and enabled them to ultimately prevail.

Minns, too, says the case was unusual because of its size and because of the strong ruling by the appellate court against the IRS.

In fact, this week the chief counsel for the IRS, John Williams, said he "fully concurs" with the Ninth Circuit's "outrage" over the "fraud and tainted testimony" in the case, which he said "threaten fundamental democratic principles." Williams' comments seem to signal that the IRS will not appeal the case further.

Williams said he sent a copy of the decision to all IRS lawyers with a memo telling them that the "pernicious conduct" of the IRS attorneys in this case must be admitted and never repeated.

He also said he would apologize to the Ninth Circuit for the conduct.

Houston attorney Henry Binder, who along with local attorney Joe Iven also represented pilots in the case, says he was "thrilled" by the circuit court's ruling.

"When you see the checks and balances in the system work and you see the judiciary holding the executive administrative agency to account, just as James Madison set it up in the 18th century - that's moving," Binder says.

For Bowersox and the rest of the pilots, last week's decision marked the end of a long, torturous road.

"I may start going to my mailbox again," Bowersox says.

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