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

Case 1:05-cv-00999-MMS

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IN THE UNTED 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.

SUPPLEMENTAL DECLAR nON OF JOHN LINQUIST

I, John A. Lindquist, pursuant to 28 U.S.C. § 1746, declare as follows:

1. I am a Trial Attorney with the U.S. Deparment of Justice, employed in the Tax

Division, Northern Region, with a post of duty at Washington, D.C. I am fiing this Declaration
to supplement my Declaration of

May 9,2006, which was attached to the United States Cross-

Motion for Partial Summary Judgment and Alternative Rule 56(f) Motion filed in this matter on
May 12, 2006.
2. As part of my duties as a tral attorney with the Tax Division, I was responsible for

obtaining authorization for service by the IRS of a "John Doe" summons upon Sidley Austin
Brown & Wood, LLP (now known as Sidley Austin, LLP) ("Sidley Austin"). As part of

my

duties, I was also assigned to enforce the "John Doe" summons.
3. On October 14,2003, the United States District Court for the Northern District of

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Ilinois, issued an order granting leave for the IRS to serve a John Doe summons upon Sidley
Austin. A true and correct copy ofthe Court Order was attached to my Declaration of

May 9,

2006, as Exhibit 1.
4. On October 15,2003, the IRS served a "John Doe" summons upon Sidley Austin (the
"John Doe" summons). A true and correct copy of

the "John Doe" summons was attached to my

Declaration of

May 9,2006, as Exhibit 2.

5. As set forth in the rider to "John Doe" summons, the summons required Sidley Austin
to produce:

the name, address and taxpayer identification number for each United States
taxpayer who, during any par of the period Januar 1, 1996 through October 15,

2003, paricipated in a transaction which was or later became a 'listed transaction' or other 'potentially abusive tax shelter' organized or sold by the law firm of Sidley Austin Brown & Wood LLP and its predecessor Brown & Wood LLP.
6. By letter dated October 27,2003, Sidley Austin provided the Service with the

identities of some, but not all, of the participants in the described transactions. Sidley Austin
represented that it was withholding the identities of those who had either failed to consent or
refused to consent to its disclosure of

their identities pursuant to the "John Doe" summons.

Tucker's identity was not among the identities revealed by Sidley Austin to the IRS in its letter
dated October 27,2003. A true and correct copy of

that letter was attached to my Declaration of

May 9,2006, as Exhibit 3.
7. On December 27,2004, I fied a petition on behalf of

the United States to enforce the
that petition that I filed in United States v.

"John Doe" summons. A true and correct copy of

Sidley Austin Brown & Wood LLP, No. 03-9355 (USDC N.D. I11.)("the Court") was attached to
my Declaration of

May 9,2006, as Exhibit 4.

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8. On January 14, 2004, the Court ordered Sidley Austin to give its clients who were
subject to the "John Doe" summons until Januar 23,2004, to advise Sidley Austin of

their

intention to assert that their identities were protected by privileges. i

9. Pursuant to the Order of January 14, 2004, Sidley Austin was also directed to provide

copies of all such letters it received to the United States, with client names redacted.
10. Pursuant to the Order of Januar 14, 2004, the United States received multiple

redacted letters from Sidley Austin, including two letters dated January 22,2004, from Thomas
Linguanti of Baker & McKenzie. True and correct copies of these two letters were attached to
my Declaration of

May 9,2006, as Exhibit 6.

11. On February 6, 2004, the Court issued an Order pursuant to which all persons who
objected to the disclosure of

their identities to the Internal Revenue Service ("Service") would be

permitted to intervene in the summons enforcement proceeding.
12. Pursuant to the February 6,2004 Order, a motion to intervene was filed on Februar

26, 2004, by Baker & McKenzie on behalf of two clients whom it identified as "Baker Doe 1"
and "Baker Doe 2." A copy of the Motion to Intervene was attached to my Declaration of

May 9,

2006, as Exhibit 8.

13. By order dated March 4, 2004, the Court required all of the proposed interveners to
produce to me redacted copies of any engagement letters between themselves and Sidley Austin.
14. By letter dated March 5, 2004, the Baker Does produced redacted versions of

their

engagement letters with Sidley Austin, true copies of

which are attached hereto as Ex. 14.

i Although the Order referenced "clients" of Sidley Austin, the summons required
production of

the identities of all U.S. taxpayers that had participated in the transactions specified in the "John Doe" summons.
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15. The redacted versions of

the Baker Does' engagement letters referenced that Sidley

Austin had previously represented or advised Diversified Group, Incorporated ("Diversified")

and provided that, by acceptance of these letters, the Baker Does waived any legal conflct that

might arise from such current, past or future representations. Ex. 14.
16. As of

March 5, 2004, based upon published litigation involving Diversified, it
tax shelters. See Diversifed Group, Inc. v..

appeared that Diversified was a promoter of

Daugerdas, 139 F. Supp.2d 445 (S.D.N.Y. 2001) and Diversifed Group, Inc. v. Daugerdas, 304
F.Supp.2d 507 (SDNY Sept. 5, 2003).

17. Based upon the reference to Diversified in the Baker Does' engagement letters, I

suspected that the Baker Does were paricipants in a Diversified tax shelter.
18. The redacted versions of

the Baker Does' engagement letters with Sidley Austin also

contained a fax line at the top of the last two pages which reflected that the engagement letters

had been faxed by KPMG on February 5,2001. Ex. 14.
19. Based upon this reference to KPMG in the copies of

the baker Does' engagement

letters, as of

March 5, 2004, I suspected that the accounting firm ofKPMG LLP ("KPMG") was

also involved in the Baker Does' tax shelter transaction.

20. I subsequently learned in March, 2004, that Thomas Linguanti was also counsel of
record for two clients in a Texas district court action against KPMG, wherein it appeared that the
Texas Does were attempting to stop KPMG from complying with an IRS summons.

21. I suspected that the Baker Does and the Texas Does were the same based upon the
correlation between the Baker Does and the Texas Does - namely, both cases involved two
taxpayers who, through the same counsel, were attempting to prevent the IRS from discovering
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their paricipation in a tax shelter that involved KPMG.
22. On or about April

13, 2004, I learned that there had been a decision in the Texas

district court case and that the identities of

the Texas Does had been made public. See John Doe

1 v. KPMG, LLP, 325 F.Supp.2d 746 (N.D. Tex. 2004).
23. On April

13, 2004, I left a phone message for Mr. Thomas Linguanti that I had

learned that the identities of

the Texas Does had been made public and that, insofar as it appeared

that the Baker Does were the same as the Texas Does, the Baker Does should withdraw their
pending motion to intervene.
24. Mr. Thomas Linguanti did not return my phone message of April

13, 2004.

25. On April

14, 2004, "Baker Doe 1" and Baker Doe 2" filed a Motion to Withdraw

their Motion to Intervene in the summons enforcement action in United States v. Sidley Austin
Brown & Wood, LLP, Dkt No. 03-9355 (N.D. I11.). A tre and correct copy of

that Motion was

attached as Exhibit 9 to my declaration dated May 9,2006, filed in this case. 26. I did not personally receive a copy of the Baker Does' motion to withdraw prior to a
hearing on April

15, 2004, in which that motion to withdraw was granted as an unopposed

motion. At the same hearing, the remaining taxpayers' motions to intervene were granted.

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27. The Baker Does' Motion to withdraw suggests that I had told Mr. Thomas Linguanti
on April 13, 2004, that I knew the identities of

the Baker Does. Mr. Thomas Linguanti reiterates

this allegation in a declaration dated June 10, 2006, filed in the above-captioned action, asserting
that:

United States of America: (i) had discovered the identities of

Counsel for the United States, Mr. John Lindquist, represented to me that the Messrs. Tucker and Hechler; (ii) knew that Messrs. Tucker and Hechler were Baker Doe 1 and Baker Doe 2, respectively; and (iii) would not oppose a motion to withdraw Baker Doe 1 and Baker Doe 2 from intervention in the SABW matter because the knowledge of the Untied States with respect to the foregoing matters "resolves your issues in this case."

28. These representations by Mr. Thomas Linguanti are not correct. I did not know the
identities of the Baker Does on April

13, 2004 and did not tell Mr. Thomas Linguanti that I knew

the identities of

the Baker Does.

29. As Mr. Thomas Linguanti well knows, the only way that I could have known that the
Baker Does and the Texas Does were in fact the same would have been if either he or Sidley
Austin had disclosed the Baker Does' identities to me.
30. Mr. Thomas Linguanti never disclosed the identities of

the Baker Does to me and did

not disclose their identities in the Baker Does' motion to withdraw their motion to intervene.
31. Upon withdrawal of

the Baker Does' motion to intervene, I requested that counsel for

Sidley Austin turn over the identities of

the Baker Does. In response to this request, counsel for
the Baker

Sidley Austin apprised me that Sidley Austin would not turn over the identities of

Does to the Service without a court order or written consent from the Baker Does.
32. Shortly thereafter, counsel for Sidley Austin informed me that Sidley Austin had

requested that counsel for the Baker Does provide Sidley Austin with wrtten consent to disclose
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the summoned identities of the Baker Does to the Service and that the Baker Does had refused to
provide Sidley Austin with written consent.
33. On April 28, 2004, the Court entered

judgment granting the United States' Petition to
that

enforce the "John Doe" summons. A copy of

judgment was attached to my Declaration of

May 9,2006, as Exhibit 10.
34. On June 29, 2004, after the expiration of

the period during which an appeal from the

Court's April

28, 2004 order could be taken under FRA 26(a), Sidley Austin sent me an e-mail

in which it represented that it was disclosing the "balance of

the names and address ofthe

interveners in the John Doe action," to which was attached a list which included the name "Keith
Tucker." A redacted true and correct copy of

that email and list was attached to my Declaration

of

May 9,2006, as Exhibit 12.
35. In the list attached as Exhibit 12, Sidley Austin disclosed the name "Keith Tucker"

under the heading "Diversified - Spread Options," but did not disclose the identifyng Social
Security Number for Keith Tucker. Nor did Sidley Austin disclose, at that time, the names and
identifying Employment Identification Numbers for any participating entities, including, but not

limited to, the controlled U.S. entities Sligo (2000) and Epsolon.

36. At that time, upon my inquiry, counsel for Sidley Austin represented to me that this

additional summoned information was not readily available because the New York offces of

Sidley Austin had been destroyed on September 11,2001. However, upon my demand, Sidley
Austin was subsequently able to recover the names of the participating entities from its retained
copies of the opinions which it had issued.

37. On March 3, 2005, counsel for Sidley Austin hand delivered to me a supplemental
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response to the "John Doe" summons in which Sidley Austin for the first time identified the
names of

participating entities, including, but not limited to, the controlled u.s. entities Sligo

(2000) and Epsolon. A redacted true and correct copy of

Sidley Austin's supplemental

production on March 3, 2005, was attached to my Declaration of

May 9,2006, as Exhibit 13.

I declare under penalty of perjury that the foregoing is true and correct. Executed in

i ..

Washington, D.C., on this?ø day of

Februar, 2007.

A. L QUI
. al !Attorney, Tax Division

S.lbeparment of Justice Po Offce Box 55 Ben Franklin Station Washington, DC 20044

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1673358.1

Case 1:05-cv-00999-MMS

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One P_ Pl. SVita 3500

Cltic. IlInoi- 601, USA
Tel: +1 312 811:1 80

130 East Ralp Dr
F.., +1 312 88 2818

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Joh Lindquist Es.
Po Ofce Box S5

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Be Frain Staon

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Wasn, D.C. 200
Re: Uni Staes of Amca v. Sidey Aust Brwn &; Woo LL

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De Mr. Lindquis
Put to Judge Kclys Ma 4, 20, Ord, enlos plea fi rc veions of"Br" Do J an"Ba Do 2's eoment lèt wi Bro & Woo LL. The
sills. Addionly, neer

only reon ma to th eoøe let ar th "Baer Do' nas, addæ an

c. iirl
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wi Bro &; Woo or Sidley Aun Brwn &; Woo.

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If yo have any que regaing th re ent lett. or th abnc of

co agcmls plea cota Tom Linti at (312) 861-2623 or me at (312)

Si~J1861-829.

St. -ti

Grgoiy S. Lyn
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Enclosu
cc: Willam F. Conln, Siey .Austi Brown &: Woo LL

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B ROW '" &. WOO 0 Li.P
ONE WOrt..O TRACIE Ce:NTER

New Yo"K. NY 100-48-01557

, Tiil.tt_r; .1..-i.'.3
,...... ...c: t 12..a....9

Decemer 26, 2000

Re: Søe VA 'eder illCDIB Tai Coai"

De
You ha ut th VI ac IS sp U.S. fe iDe ta co to ~ in
conntion with c:c: invca tr in wbeb yo\l have engap involvi th

acuisition of an in iii a forcp çoration th~ an S corpracm an your ente¡ \11

varo\l cUgita fopi.c opti tn bo in your iDcm caity and di~sh th

forep coraOJ ("1nncmU). ID th caity, you have as th we pmvi you with
an opwon ropr ce oftbo U.s. fed iii iu coucca of'th Trations (i)
in conntion w.tth th ciOsi of th TrICOD and (ii) in coai with your fiUig a U.S.

fe inme ta ro rep th lrcm 00 April 1S, 2001. In th ea oftbe laer

opinon we wil ony be o'blipt to pivi sucb opion in the event th th bu be no

adver cbe in th ~ ICos or Idiiistve or judciiÙ mtetation thf
subseqent to the elong of1b Tnon.
You acwle tbt any U.S. fed ince ta opon thai we issue in eoon with )'ut piu8ÛOU in th TT1lCbo wil not gu tho U.S. feer inme ta
c:iiiieica therf: but will prvide olU tht suc tu coeqUees ar "more likely than

not" to occu.

We hery qr to sa Teicscnt )I We wish to poin out th althoug we ar not
reresenting or advig th Oivcitied Gro~ lnçcrpratc or any of iu afat
("Divcrficc'1 in c:tioii with the Trtions in th past we have rerete or advised

Diverfied widi rest to ce mam and may contue to do so in th futu. By your
acepta8 oftbis lSUM you waive any 1ep confict th may ar frm such cui pia or

fu reori

By your acept8cc of this let you agee that any c:lroveny or cla ang out of or

rolatig to thia !., and th matter addr her &hall be seed by aritron
1.0:1 .MCU;~" . ¡JM ,"ANCllIC;O ' W..HIHOTO/l O.C:. . aci.JI..O . TOII..o ..1t""~NT"TIYC O,.,.IC:C "'''I'.LI..TCØ WITot .,.0""" & wooø. .. ..Ui.T..'....'O"..i. P....TitCIlI..P WITIt O,...CES IN 1.0..00.. ANQ "OMG KClNG

Case 1:05-cv-00999-MMS

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ii by th Amca Artnon Asat in 1l~ with its Cciial1bes

aD j11ai on th awar ic by the øbitrr IDY be ea in &1 com bm
jurdic: tbf. Th arttcm pi& sh be c: in New Yor City. New
YOl. Tb ubtr sh ha th auty to aw IDY i-y OT iec! th a cou gf

co jucâoa co ai or pt Ext U ~.. ia Go ~p to c:e
ths lltron pivi or an awa RD he. neth & p. DO an øb may discse th oxllt. co or t- of my ariton bn. wi ib pror wrtI co orboth pu Th plla aih:idp th th ~ evde a tnor
Sove th i:cWlD enamnl oCtb -iit prVÍ
Ple ra an 8dcdpc coy ortbia lett IS eYo of

iiMug intc col!. Tb pa .. tb tJai-d Sta Fat Artrn Ac shall

)lW 8CtlDc elr th

. te baf. .

~ k UwJ '-.

Ver tr )l

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WYI.IBlmn.,61\ i

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F&s.e5-~1 ~9 .3 FRCH.K~M~ "YO 3STH YL

I D, :i 12 tl7a 33 IS

PACE 4/1&

B ROW II & WOOD l.LP
ONt Wo,,~a Tltoi; CEMnll

N~ VOlt, NV 10048-057

"~..ll:a~i:~ ,....~ ...-_aM

. 1) 26. io .

:a S'Dl us l'ederlD.. Tu Co_leI

De
Y 01 have _ee rlt we ac . spl ti.S. feccn iD ta eolO yo in
COo'n .with ~C1 inve tron in wbcb yo ba tI.. iilY \h

acuision of IØ inla in '- fbp co tb aD S ll~lIcm an '" ~ JD

vamø clul foro ciøll op0I1r bo iD yaiD ai iD 1J 1b

forp eøii ("TranOD'. 1n th Clity. yo bro as th we ~)' with

'. . Jl opinon reÏD cc: otth U.S. fe iD tø ~ of- 'I (i)
in coDn with the c1 ortb TfI ID (u; ÌG.~ ~ "P ~ a U.S.
fcd in t1 re res 1l Ulet1l aa Apl S. 201. In 1bCI oftb 1a

opiDon 'Ne will on)' be ob1i¡å to prvide su op iD 1b mø ¡ba .. I~ bo DO
advei chii¡.i in Ui stilUl. ie¡ioø. or lIùi or ju ¡atthf

suhset to th c:loS oftJ 'TfI.
You ")¡owlcdge that -iy U.S. feer In ta op th wO iu ÌD CCon
wltb yo pIdpaion in 1l TrulÇ win not iaa ib U.s. fec li iø

conseuC:li; thf. bo wil1 pI"ide only th Il to coua ar "1 Ubly 1b
no" to oc.
We hey a¡ to so rcrc you. We wi tD po oat th althusb" ue 'Dt
rcrdCDlÌ or ad\'Wng th Dified Or Jn or my or its af
("Di,,~nrtied") b\ ccimcclÎon widt th Traacon. io th put wo have re or tdvi Divcnilcó \Vi ih iespt to cern maDe an Qlay CO \0 do so in lh fi By)'

acepe of this letter you wavt. any leal ~h:t th may .n fr iu cu. put or

futue ICR:entatoft.

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r' r. 9 ° ..S -ill 09.:'Ø F!lC,I', l.P~C HYO :19TH Fi-

10.212 l!72 331S

PACE S.lS

ai 1-i)lir steC"tini;'li of tluilcl you. a¡r th an COva or cl aråDou of or .

~l4tinJ: to ..h~~ lc~ie. in ~ ma ad he. ..ii bo IC by IñUlOl aõ:ui\ôt.:i'd b)O tltt _~.mncan Aliiron AI in ICc; wi Us Co~ 1' ;i judnl\ on tbe aw!l re by1bc: at may 1: .. bi -i CO haYÜ j\Il.iictcin ,h\if. Th ubitn preena sb be ccln New YOi City. Ne
York. The arintO shl hae tbuutbonty to &" my ie orietb acOU of .
compei!l junu:Qn U1ulcl ai or ßI Bx1l1) bl ca Jl~p'to aú \hs arirra~n ~rcslon or an awll Ja~. De. pa no 1f --..y

diclose th c:~. ca or i- of myai bewitb tb pr..um

çcc:t o£bo ~ The pi IdIe tb tb.. ov'~
~(),,-e W inteemoo ai ~ ordu -lua pc
Plea re ai atwledpd ~'Y ordd 1e. Md of

inl".ina ;nlO com~. Th paes ap IÀ Ua St Fed AiinGl Ai tb ..

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