Businessman’s federal tax refund lawsuit may result in $2M settlement

A businessman’s $5.6-million federal tax refund lawsuit against the United States of America may possibly end with a settlement of more than $2 million.

U.S. Department of Justice Tax Division’s trial attorney Lauren M. Castaldi stated that due to the amount at issue in John K. Baldwin’s suit, “settlement proposals may involve a concession of more than $2 million.”

Castaldi asked the U.S. District Court for the NMI to excuse the U.S. government from the requirement that a person with full settlement authority attend the settlement conference in this case.

Castaldi said instead he and trial counsel for the U.S. Jeremy Hendon will personally appear at the settlement conference and Deborah Meland, the chief of the Tax Division’s Office of Review, will be available by phone.

Castaldi said only by centralizing decision-making in these cases, can the Internal Revenue Service and the DOJ hope to be able to treat all taxpayers similarly, so that the burdens of government are fairly shared by all.

He said the DOJ’s settlement authority regulations serve the goal of placing the power to decide cases involving significant amounts of money or implications for broad classes of cases in the hand of officials with policy-making authority.

Castaldi said the settlement regulations applicable here assure that settlements made in cases involving payment of substantial sums from the public treasury or cases in which the agency involved in the litigation opposes the proposed settlement should be made by officials with political accountability.

U.S. District Court Senior Judge Alex R. Munson last Sept. 9 denied the U.S. government’s request to be excused from a requirement that an individual with full settlement authority personally attend the settlement conference.

The settlement conference in Baldwin’s suit is currently scheduled for Oct. 17, 2011 in Idaho before Munson.

In his order, Munson said in 29 years of facilitating settlement negotiations, he has never brought about a settlement agreement without having present on each side a person with full authority to reflect such an agreement.

Under the requirement, the Principal Deputy Assistant Attorney General for the Tax Division in consultation with the Congressional Joint Committee on Taxation has final settlement authority for a refund of this amount.

Munson’s ruling prompted the U.S. government to file on Saturday an emergency motion citing that if the court denies the relief that they requested, DOJ needs an opportunity to consider whether to bring the issue to the U.S. Court of Appeals for the Ninth Circuit prior to the settlement conference date.

Castaldi argued that to have the person(s) with full settlement authority present at the conference would be inappropriate as it is impracticable for the Principal Deputy Assistant Attorney General to personally attend all settlement conferences that may be within his authority.