IRS, Treasury officials say disclosure of tax shelter clients a mistake
WASHINGTON (AP) – The disclosure of the names of tax shelter clients in a government lawsuit against the KPMG LLP accounting firm was a mistake that should not be repeated, top Treasury Department and IRS legal officials say. The list of names made public earlier this month included Bill Simon, the Republican candidate for governor of California as well as his late father, former Treasury Secretary William E. Simon. Other names on the list are the late stock car driver Dale Earnhardt, New Line Cinema Chairman Bob Shaye and Gary Winnick, chairman of bankrupt telecom company Global Crossing Ltd.
Critics immediately complained of IRS bullying tactics that caused people unnecessary embarrassment as the agency seeks to crack down on tax shelters, even though no law was violated by releasing the list. KPMG also complained.
In letters to the editor of The Wall Street Journal published Monday, Treasury general counsel David Aufhauser and John Williams, chief counsel at the Internal Revenue Service, said in most such cases the names of third parties are removed or the documents are placed under court seal.
Both said that should have happened in the KPMG case. Aufhauser noted the list was released by the Justice Department in support of the IRS case.
“The absence of such measures is inexcusable,” Aufhauser wrote. “All future referrals from Treasury to Justice will require appropriate protections” unless there is a clear reason for disclosure, he added.
In his letter, Williams said the IRS and Justice are “working on procedures that should avoid similar missteps in the future.” That letter was also signed by Eileen J. O’Connor, assistant attorney general for Justice’s tax division.
The lawsuit against KPMG asks a judge to order the accounting firm to disclose more information about tax shelters promoted by the firm. The company has responded that most of what the IRS wants is protected by attorney-client or accountant-client privilege.
Over the weekend, House Ways and Means Committee Chairman Bill Thomas, R-Calif., suggested that the list was released to bolster anti-shelter forces with a splash of publicity. The committee chaired by Thomas has oversight of the IRS. “The question of when you release names and how you release names oftentimes is not a legal question, it’s a political question,” Thomas said on “John McLaughlin’s One on One.”