Free Status Report - District Court of Federal Claims - federal

Case 1:05-cv-00299-EJD

Document 32

Filed 05/31/2006

Page 1 of 4

IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________ No. 05-299 T (Chief Judge Edward J. Damich) (Consolidated with: No. 05-300 T, No. 05-301 T, No. 05-302 T, No. 05-303 T) INSTASHRED SECURITY SERVICES, LLC, by and through ISS ACQUISITIONS, LLC, a Partner Other Than the Tax Matters Partner Plaintiff, v.

THE UNITED STATES, Defendant. ______________ JOINT STATUS REPORT ______________ Pursuant to the Court's order of October 24, 2005, the parties hereby provide this Joint Status Report. The criminal proceedings in the Southern District of New York that led the Court to stay this case in October 2005 are continuing. United States v. Stein, et. al. (No. S1 05 Cr 888, S.D.N.Y.). The criminal trial remains scheduled for September 2006. The promoter of the alleged tax shelter transaction at issue here, David Greenberg, a former KPMG partner, is a defendant in the criminal proceeding. The continued stay of these proceedings will prevent harm to the criminal prosecution and permit the United States the opportunity to mount a full and complete defense in this case unencumbered by claims of Fifth Amendment privileges and with access to all relevant information once the criminal proceedings are concluded. -1789.1

Case 1:05-cv-00299-EJD

Document 32

Filed 05/31/2006

Page 2 of 4

There are a total of five docketed cases involving transactions similar to the one executed by the taxpayers in this case. Three are in the Court of Federal Claims and two are in the Northern District of California. All of the Court of Federal Claims cases are now stayed due to the pending criminal proceedings. In addition to this case, these are MIPW Acquisitions, LLC, et. al., v. United States, No. 05-304 T, and FFRE Holdings, et. al. v. United States, Nos. 05-785 T to 05-792 T. One of the district court cases is now stayed, AWS Management, et. al. v. United States, No. 05­010506 CW (N.D. CA. 2005), and a motion seeking a stay is anticipated for the remaining case, DR Management v. United States, No.05-01010 M.C. (N.D. CA. 2005). The Internal Revenue Service has identified many other transactions similar to those in the five docketed cases. In December 2005, the IRS included this type of transaction within the umbrella of Announcement 2005-80 which set form terms for settlement for a multitude of tax shelters. Many non-docketed taxpayers have taken advantage of the IRS action with respect to transactions similar to those in the docketed cases. Settlement of docketed cases is within the jurisdiction of the Department of Justice, and not the IRS but the Department is entertaining offers to settle docketed cases even though the cases have been stayed pending proceedings in Stein. The plaintiffs here submitted an offer on January 23, 2006, to settle all the issues in these consolidated cases. Counsel for both parties exchanged correspondence on January 30, 2006, and February 28, 2006, regarding the details of plaintiffs' offer. The Tax Division requested the views of the Internal Revenue Service on March 2, 2006, regarding plaintiffs' offer. The IRS views were received on May 26, 2006. The Department of Justice is considering plaintiffs' offer.

-2-

789.1

Case 1:05-cv-00299-EJD

Document 32

Filed 05/31/2006

Page 3 of 4

The parties support a continuance of the stay in this action pending the completion of the proceedings in the related criminal proceedings. The pending settlement offer from the plaintiffs is further reason for continuing the stay. The parties propose a further joint status report for December 1, 2006, to advise the Court of the status of the criminal proceedings in Stein and settlement prospects. Respectfully submitted, 5/30/2006 Date s/Bradley A. Patterson BRADLEY A. PATTERSON Goddard LLP 18101 Von Karman Ave., Suite 330 Irvine, California 92612 (949) 253-0500 Counsel for Plaintiff 5/31/2006 Date s/Robert J. Higgins ROBERT J. HIGGINS Attorney of Record U.S. Department of Justice Tax Division Court of Federal Claims Section Post Office Box 26 Ben Franklin Post Office Washington, D.C. 20044 (202) 307-6580 EILEEN J. O'CONNOR Assistant Attorney General DAVID GUSTAFSON Chief, Court of Federal Claims Section 5/31/2006 Date s/David Gustafson Of Counsel Attorneys for Defendant

-3-

789.1

Case 1:05-cv-00299-EJD

Document 32

Filed 05/31/2006

Page 4 of 4