Free Motion for Extension of Time - District Court of Federal Claims - federal

Case 1:05-cv-00576-FMA

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Filed 10/21/2005

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS No. 05-576 T (Judge Allegra) ________________________

PRESTOP HOLDINGS, LLC, JL INVESTMENT TRUST, JOHN M. LARSON, GRANTOR/TRUSTEE, TAX MATTERS PARTNER FILING AS NOTICE PARTNER, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. __________________________ DEFENDANT'S MOTION TO EXTEND TIME FOR FILING THE JOINT PRELIMINARY STATUS REPORT __________________________ Pursuant to Rule 6(b) of the Rules of the Court of Federal Claims, the defendant respectfully moves for a ten-day extension for filing the Joint Preliminary Status Report in this case, from October 24, 2005, to November 3, 2005. Plaintiff's counsel has no objection to the requested 10-day extension. This is the first extension requested for this purpose, and the second extension requested - the first extension being for 7 days and requested by plaintiff. The defendant requests the extension to permit the Department of Justice to determine whether to seek a stay of this case pending the criminal investigation and prosecution of the named plaintiff, John M. Larson, on the grounds that discovery in this civil matter might interfere with a criminal investigation.

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Case 1:05-cv-00576-FMA

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In support of this motion, the defendant states the following: 1. On August 29, 2005, the named plaintiff in this case, John M. Larson, and Robert Pfaff, who was the other partner in Prestop through his grantor trust, were indicted in the United States District Court for the Southern District of New York, along with seventeen others, for conspiracy to defraud the Internal Revenue Service, evade taxes, and file false returns in connection with their design, marketing and implementation of illegal tax shelters. Stein, 05 Cr. 888 (S.D.N.Y. August 29, 2005). The indictment references FLIP, OPIS, BLIPS, and SOS shelters, which Larson and Pfaff helped to devise, market, and implement. A true and correct copy of this Indictment is being filed as Attachment A. 2. On October 17, 2005, a Superseding Indictment was filed against John M. Larson and Robert Pfaff, along with 17 others, in which Larson and Pfaff were indicted for conspiracy to defraud the Internal Revenue Service, evade taxes, and file false returns in connection with their design, marketing and implementation of illegal tax shelters, as well as using the illegal tax shelters to evade their own taxes. Stein, S1 05 Cr. 888 (LAK) (S.D.N.Y. October 29, 2005). A true and correct copy of this Indictment is being filed as Attachment B. 3. The partnership in this TEFRA proceeding used a tax shelter to offset income from other transactions so that the income was not properly reported on plaintiff Larson's tax return. According to the Superseding Indictment, Larson and others created entities, such as the ones in this case, to execute tax shelter transactions and to conceal the tax shelter and the resultant use of losses produced by the shelter. (Superseding Indictment Para. 80.) 4. The Superseding Indictment includes not only counts with respect to Larson and Pfaff's activities regarding the taxes of clients, but also counts for tax evasion with respect to

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Filed 10/21/2005

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their individual tax returns and liabilities. 5. Because the partnership items involved in this proceeding flow through to the individual returns of Larson and Pfaff, the government is considering the possibility that discovery in this case may interfere with the criminal investigation described above and is determining whether a motion for stay should be filed in this case. 6. Due to the coordination required between the Tax Division of the Department of Justice and the United States Attorney's Office for the Southern District of New York, the government requests an extension of 10 days for filing the JPSR in this case to permit a determination to be made on whether the government will move for a stay in this case. WHEREFORE, the defendant prays that its motion for stay of this proceeding be granted. Respectfully submitted, October 21, 2005 s/David R. House DAVID R. HOUSE Attorney of Record U.S. Department of Justice - Tax Division Court of Federal Claims Section Post Office Box 26 Ben Franklin Station Washington, D.C. 20044 (202) 616-3366 EILEEN J. O'CONNOR Assistant Attorney General MILDRED L. SEIDMAN Chief, Court of Federal Claims Section DAVID GUSTAFSON Assistant Chief Of Counsel

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