Tax Notes - Was DOJ Attorney Unfairly Maligned in Release of KPMG Client Names?


By Amy Hamilton

According to sources inside the government -- including in the Justice Department – Justice acted alone in attaching the privilege log disclosing the names of hundreds of KPMG LLP clients who received tax shelter advice to the summons enforcement action against the accounting firm.

Meanwhile, the Justice Department's Office of Professional Responsibility has opened an investigation into the matter. Stuart D. Gibson, the Justice attorney leading the prosecution against KPMG, confirmed that he is under investigation by the OPR for his role in the release of taxpayer names in the filing. Gibson, a Democrat who chairs the county school board in Fairfax, Va., told a local reporter, "I'm confident that when the investigation is completed, I will be absolved of all wrongdoing." ("Lawsuit Prompts Probe of Gibson," Fairfax Journal, Aug. 7, 2002.)

Defending the Attorney

A former IRS commissioner and a former attorney general for the Justice Department's tax division told Tax Analysts that the press has done Gibson an injustice. The former officials said some media have singled Gibson out of the bureaucracy -- through which all court filings first must move as they are reviewed and approved -- and suggested that the line attorney had either the power or opportunity to disclose the names out of political malice toward the Republican Party.

Both Wall Street Journal editorials on the KPMG action to date have referred to Gibson by name and described him as "a well-known Democratic activist in Virginia" in connection with what the editorial staff described as the "partisan odor surrounding these actions." (The Wall Street Journal, July 17, 2002, and July 25, 2002.)

"I thought blaming him was a terrible criticism that was unjustified and unwarranted," said Roger M. Olsen, a former attorney general for the Justice Department's tax division. He said a line attorney cannot bypass the senior-level review process and just submit whatever he wants to the court. Olsen said he believes that whatever happened at the Justice Department that led to the disclosure of names in the filing was a mistake. "I don't think there was a hidden agenda at all," he said. "I don't think the Republic's going to fail. It's happened, now let's go on to something else."

Former IRS Commissioner Sheldon S. Cohen said Gibson won his spot on the county school board in a nonpartisan race. "They went after him like he was Attila the Hun," Cohen said of The Wall Street Journal. He noted that the paper broke the news that the names of prominent Republicans had been disclosed in the court filing by publishing their names on its front page. "I found it strange that the very people who published the names -- in prurient fashion, I have to say -- are the same who decried the publishing of the names! That's an odd fact."

Also, Cohen said, there is no political significance to the underlying summonses enforcement action beyond the fact that it makes it clear the IRS is going to try to enforce the shelter rules. "It's a routine summonses enforcement!" The government should have blacked out the third-party names for this summonses enforcement action, Cohen said, and "in 20-20 hindsight, where we all have perfect knowledge" the government now agrees. "For this purpose," Cohen said, "there was no need to publicize the names. But there may be a need at a later date."

The suit is about KPMG's obligation as a shelter promoter to maintain investor lists and to register shelter transactions. The privilege logs prepared by KPMG in response to the summonses -- that is, the logs the Justice Department attached to its filing without redacting taxpayer names -- describe the type of documents KPMG has relating to the IRS summonses for information regarding potentially abusive shelters, the names of the senders and the recipients, and the reason KPMG is not disclosing the contents of those documents to the

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