Free Response to Proposed Additional Facts - District Court of Federal Claims - federal

Case 1:05-cv-00999-MMS

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Filed 02/28/2007

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS
(Judge Sweeney)

No. 05-999 T
EPSOLON LIMITED, by and through SLIGO (2000) COMPANY, INC., Tax Matters Partner,
Plaintiff,
v.

THE UNITED STATES OF AMERICA,
Defendant.

DECLARATION OF STUART D. GIBSON

I, Stuart D. Gibson, pursuant to 28 U.S.C. § 1746, declare as follows:
1. I am a Senior Litigation Counsel, employed in the Office of Civil Litigation, Tax

Division, United States Department of Justice. I have worked at the Tax Division since 1984.
2. I make this declaration to respond to a number of matters alleged in the

Supplemental Statement of Undisputed Facts which the plaintiff in this lawsuit contends are not
disputed but which are, in fact, either misleading or in dispute.
3. The matters alleged in iJ3 of the Supplemental Statement of

Undisputed Facts are

not entirely accurate, in the following respects:
a. iJ3 suggests that there was some relationship between the case entitled

Department of Justice, Tax Division, v. KPMG LLP, Misc. No. 02-ms-295 (D.D.C.) (the
summons case) and the case entitled Doe 1 v. KPMG LLP, Civil Action No. 03-2036 (N.D. Tex.)

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(the injunction case). In fact, the two cases were related only in that they involved IRS attempts

to obtain information from KPMG. I explain the differences below.
I filed the summons case in July 2002, to compel KPMG to comply with nine of

the 25

summonses that the IRS had issued to KPMG in connection with a tax shelter promoter penalty
investigation of

KPMG. In the injunction case, the plaintiffs sued to enjoin KPMG from

providing their identities (among other things) to the Internal Revenue Service, in response to a

summons issued in connection with a tax shelter promoter penalty investigation ofKPMG. The summons at issue in the injunction case - the so-called Notice 2000-44 summons - was not
among the nine summonses that were at issue in the summons case. Because the summons case
did not involve the Notice 2000-44 summons, I objected when the Doe plaintiffs attempted to
intervene in the summons case. Ultimately, the Doe plaintiffs decided not to pursue intervention
in the summons case. But when the court permitted the United States to intervene in the

injunction case, the Doe plaintiffs did move for reconsideration.
b. iJ3 represents that on March 9, 2004, I forwarded the "Baker Doe"

engagement letters to KPMG's attorney in the summons case, Armando Gomez. This phrasing suggests that I knew the letters attached to my March 9,2004 letter were the "Baker Doe"
engagement letters, and that I may have known the identities of the taxpayers to whom the letters

related. This is not the case and, in fact, the March 9, 2004 letter was sent in a different context,
as described below.

In December 2003, I leared that KPMG had hired the Skadden, Arps law firm as its lead
counsel in the summons case, effectively replacing the King & Spalding and Kronish Lieb firms.

When they first contacted me, the attorneys at Skadden, Ars told me and others at the Tax
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Division that KPMG was interested in changing the tone of its relationship with the IRS from

one of confrontation to one of cooperation. Inviting KPMG to demonstrate its good faith, I sent
Gomez copies of letters evidencing tax shelters that KPMG had not previously disclosed to the

IRS, and asked KPMG to identify all tax shelters and all clients in those tax shelters, which
KPMG had not already identified to the IRS. My letter to Gomez of

March 9,2004 reflected my

effort to follow up, by suggesting to him that KPMG had not yet identified all tax shelters or

clients. The letters attached to the March 9, 2004 letter did not identify the paricular tax shelters
to which they relate, nor did they identify the participants in those tax shelters. It would be

incorrect, therefore, to infer from reading my March 9,2004 letter or the attachments that either
the IRS or the Tax Division knew the identities of

the "Baker Does."

4. iJ4 alleges that between March 9 and March 30, 2004, Gomez and I "discussed

this matter." The paragraph does not allege what "this matter" is. Between March 9 and March
30,2004, Gomez and I did discuss KPMG's agreement to cooperate with the IRS, by identifying

all the previously undisclosed tax shelters and tax shelter participants. I also discussed with
Gomez and Skadden, Arps parner Robert Bennett what we wanted to say to the court at the

April 1, 2004 status conference. Bennett's letter to me of March 31, 2004 reflected his attempt to

address before the status conference the matters stil outstanding from my letter of March 9. His
statement to me quoted in iJ4, confirms my recollection that when I wrote the March 9, 2004
letter to Gomez, I was not aware of

whether the letters attached to my March 9, 2004 letter had

anything to do with the "Baker Does." In fact, Bennett's March 31, 2004 letter to me indicates
that he was not entirely certain that the letters attached to my March 9, 2004 letter related to the

"John Doe plaintiffs" in the injunction case.
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5. I agree that I said the things attributed to me in iJ5. Those statements were made

toward the end of the April I, 2004 status conference in the summons case, in the course of my
responding to questions from the court (Hogan, C.J.), about the status of

the injunction case. The

questions were posed in the context of what matters remained for decision in the summons case,

and what matters were still in dispute in litigation over KPMG-marketed tax shelters. My
reference to the Baker Does "fighting a multifront war" in the quotation in iJ5 referred to the fact

that the Baker Does had fied suit in Texas to enjoin KPMG from disclosing their identities to the
IRS, and had also intervened in a summons enforcement case that the IRS had fied against
Sidley Austin Brown & Wood (SABW) in Chicago, where they sought to prevent the IRS from

obtaining their identities and documents from SABW in that case. At the time I made the
statement, KPMG had been temporarily enjoined from disclosing the identities of

the Baker

Does, and the court in Chicago had not yet decided whether to compel SABW to comply with the
IRS summons.
6. I agree that Tucker had filed certain documents in the injunction case, including a

declaration and other documents, as represented in iJ6. I agree that Tucker's sealed declaration

contains his name and address. Those documents - including Tucker's identity and address were filed under seal, and remained sealed by Order of Judge Barefoot Sanders of September 1 i,

2003, until Judge Sanders unsealed the documents in his Memorandum Opinion and Order of
April

12, 2004.
7. I agree that KPMG filed 2,499 pages of documents under seal in the injunction

case, as represented in iJ7. Those documents were fied on March 26,2004 as Exhibit E to
KPMG's Response to Plaintiffs' Motion for Summary Judgment and Cross-Motion for Summary
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Judgment. The documents in Exhibit E contain the information represented in subparagraphs (i)

and (ii) ofiJ7. As to subparagraph (iii), the documents that KPMG filed under seal contain some,
but by no means all, of

the information concerning the KPMG tax shelter that Tucker

paricipated in. I do not know whether the 2,499 pages fie by KPMG under seal in the
injunction case are responsive in any way to the IRS summons issued to SABW, which was stil
pending before the cour in Chicago on April

12, 2004, the date that Judge Sanders unsealed the

record in the injunction case.
8. I had no role in the SABW summons litigation, nor do I know what information

was sought about Tucker in the summons issued to SABW. Therefore, I do not know whether
the declaration of

Tucker, and the documents contained in Exhibit E, both filed under seal,

contained "all of

the information expressly requested in the SABW sumons," as asserted in iJ8.
12, 2004, Judge Sanders issued a IS-page Memorandum

9. On the morning of April

Opinion and Order in the injunction case. In his Order Judge Sanders denied the plaintiffs'
motion for summar judgment, and awarded sumar judgment to KPMG and the United States.

Among other things, the Order also directed the Clerk to unseal the declarations of the plaintiffs
filed September 9,2003, and Exhibit E ofKPMG's Appendix. I leared of the entry of

that

Order shortly after it was issued. As soon as I learned of

the Order, I arranged for an employee of
the Clerk of

the Office of

the United States Attorney in Dallas to go to the offce of

the U.S.

District Court for the Northern District of

Texas in Dallas, look through the documents that had

been unsealed, identify the two John Does who were the plaintiffs, and let me know their
identities. As a result, I leared Tucker's identity by mid-afternoon on April 12,2004, and I

provided that information that afternoon to an agent at the Internal Revenue Service. Because of

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the problems inherent in trying to copy nearly 2,500 pages of a fie in the Clerk's offce, my
recollection is that the United States Attorney's Office did not obtain a copy of

Exhibit E until

April

13, 2004, and I did not receive that copy until sometime later during the week of April 12,

2004.

10. Shortly after the Court issued its Order, on April 12, 2004, the plaintiffs in the

injunction case filed a Notice of Appeal, along with an Emergency Motion asking the District

Cour to stay its ruling, and re-seal the documents pending appeaL. According to the plaintiffs,
they were informed by the district court that the court did not intend to rule on that motion until

after April 12,2004.
11. By facsimile on the afternoon of April 12, 2004, the plaintiffs in the injunction

suit transmitted to the Fifth Circuit Court of Appeals in New Orleans, a Certificate of Interested
Persons, in advance of filing an Emergency Petition for Writ of Mandamus in the injunction suit.

By facsimile later in the day on April 12, 2004, the plaintiffs in the injunction suit transmitted to

the Fifth Circuit Court of Appeals an Emergency Petition for Writ of Mandamus. In their
Emergency Petition, the plaintiffs in the injunction suit asked the Fifth Circuit to stay the April
12,2004 Order of

the District Court unsealing the documents containing the plaintiffs' identities.

At the time they fied that mandamus petition, the United Stat~s had already obtained the
identities of the plaintiffs in the injunction case. To the best of

my recollection, however, the

United States had not yet obtained the documents comprising Exhibit E to the KPMG Appendix.

12. On April 13,2004, the United States filed its opposition to the emergency motion
filed in the District Court. In that opposition, the United States observed that it had already
obtained the plaintiffs' identities and had made copies of

Exhibit E. Later that day, the paries
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reported this development to the Cour, and as a result the plaintiffs withdrew their emergency

motion in the District Court and their emergency mandamus petition in the Fifth Circuit Court of
Appeals.
I declare under penalty of perjury that the foregoing is true and correct. Executed in

d)
Washington, D.C., on this 2Z day of

Februar, 2007.

STUAR . GIBSO
Senior Litiga 1 ounsel
Tax Division U.S. Deparment of Justice Post Office Box 403

Ben Franlin Station
Washington, DC 20044

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