Free Joint Status Report - District Court of Federal Claims - federal

Case 1:05-cv-00545-EJD

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

PLATINUM TRADING, LLC, by and through William B. Guzy, A Partner Other Than the Tax Matters Partner, Plaintiff, v. UNITED STATES OF AMERICA, Defendant.

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No. 05-545 T Chief Judge Edward J. Damich

JOINT STATUS REPORT Pursuant to the Order of this Court entered January 10, 2008, the parties file this Joint Status Report with respect to how they wish to proceed in light of the decision in Jade Trading, LLC, et al. v. United States, Fed. Cl. No. 03-2164T. Plaintiff's counsel has reviewed the contents of this report and has authorized Defendant to file it as a joint report. On December 21, 2007, the Court of Federal Claims entered its decision in favor of the Government in Jade Trading. On December 26, 2007, judgment was entered. On January 4, 2008, the Tax Matters Partner of Jade Trading filed a motion for leave to participate and for leave to file a motion to reconsider the Court's decision as to one of the alternative penalties in the case. On January 9, 2008, the Government filed an opposition to the Tax Matters Partner's motion for leave to participate on the basis that the motion was untimely. By Order dated January 30, 2008, the Court of Federal Claims has allowed the Tax Matters Partner to participate in the Jade Trading proceedings for the limited purposes of pursuing a motion for reconsideration which the Court accepted as filed nunc pro tunc; however, the Court has not yet ruled on the Tax Matters Partner's Motion to Reconsider. The Order also granted Plaintiff and Defendant

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leave to respond to the Tax Matters Partner's motion by February 15, 2008 with replies due by March 3, 2008. As of the date of this Joint Status Report, it is unknown whether the plaintiff in Jade Trading will appeal the decision to the Circuit Court of Appeals for the Federal Circuit. On October 23, 2007, opening statements were scheduled to begin in the criminal case in the Southern District of New York, United States v. Stein, Docket No. S05-888. On October 18, 2007, the trial judge removed counsel to one of the defendants in that case. By Order dated November 29, 2007, the Stein Court has scheduled that case for trial in September of 2008. Plaintiff recommends the stay continue pending further proceedings in Jade Trading, including any potential appeal, for reasons stated in its Motion to Stay dated March 16, 2006. Plaintiff believes that an appeal to the Federal Circuit and a decision by that Court, should an appeal be taken, would, at a minimum, be instructive to the determination of the issues in this case. Defendant is not opposed to continuing the stay in this matter because it is possible, although not certain, that an appeal to and decision by the Federal Circuit in Jade Trading could enable the parties to narrow the discovery required for this case and provide some instruction as to the legal analysis of the case. Furthermore, the United States Attorneys Office for the Southern District of New York has continued its request that it be kept apprised of the proceedings in this action in order to ensure that this action does not adversely affect its pending criminal investigations. Thus, the potential remains that the government may seek a stay in the future if the criminal matter and this case intersect. On a separate matter, on or about June 19, 2006, the Internal Revenue Service (the "Service") retained $74,834.95, and, on or about September 17, 2007, retained $65,010.56 (the "Refunds"), which represented refunds of tax due William Guzy for taxable year 2005 and 2006,

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respectively, taxable years not subject to this proceeding. The Service applied the Refunds to interest due on the tax assessed Guzy for taxable year 2001, a year that is subject to this proceeding. Because of this action by the Service with respect to the Refunds, Plaintiff will file a Motion for Leave to File a Supplemental Complaint to add claims seeking recovery of the Refunds. These claims are procedural in nature given that the basis for such claims has been stated in the existing Complaint. In the event Plaintiff files a Motion for Leave to File a Supplemental Complaint to add claims seeking recovery of the Refunds, Defendant expects to object on the basis that the Court lacks jurisdiction to order a refund to a partner in an action brought under TEFRA for the redetermination of adjustments made in a final notice of administrative adjustment to partnership items. At this time, Defendant's attorneys lack knowledge or information sufficient to form a belief in the truth of Plaintiff's allegations that on or about September 17, 2007, the Service retained the amount of $65,010.56 and applied it to Mr. Guzy's 2006 taxable year. Respectfully submitted, 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 NATHAN J. HOCHMAN Assistant Attorney General DAVID GUSTAFSON Chief, Court of Federal Claims Section s/David Gustafson

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