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Y 4.F49:5. hrg. 99-1062/pt. 1

S. HRG. 99-1062, Pt. 1

OVERSIGHT OF IRS AND JUSTICE DEPARTMENT

PROSECUTION OF SEVERAL TAX CASES

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BOB PACKWOOD, Oregon, Chairman ROBERT J. DOLE, Kansas

RUSSELL B. LONG, Louisiana WILLIAM V. ROTH, JR., Delaware

LLOYD BENTSEN, Texas JOHN C. DANFORTH, Missouri

SPARK M. MATSUNAGA, Hawaii JOHN H. CHAFEE, Rhode Island

DANIEL PATRICK MOYNIHAN, New York JOHN HEINZ, Pennsylvania

MAX BAUCUS, Montana MALCOLM WALLOP, Wyoming

DAVID L. BOREN, Oklahoma DAVID DURENBERGER, Minnesota

BILL BRADLEY, New Jersey WILLIAM L. ARMSTRONG, Colorado

GEORGE J. MITCHELL, Maine STEVEN D. SYMMS, Idaho

DAVID PRYOR, Arkansas
CHARLES E. GRASSLEY, Iowa

WILLIAM DIEFENDERFER, Chief of Staff
WILLIAM J. WILKINS, Minority Chief Counsel

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SUBCOMMITTEE ON OVERSIGHT OF THE INTERNAL REVENUE SERVICE

ROBERT J. DOLE, Kansas, Chairman CHARLES E. GRASSLEY, Iowa

DAVID PRYOR, Arkansas

(II)

CONTENTS

PUBLIC WITNESSES

Page
95

127
223

Winner, Hon. Fred M., partner, Baker & Hostetler
Kilpatrick, William A., president and owner, United Financial Operations,

Inc
Grossman, Robert D. Jr., senior partner, Grossman & Flask, P.C...........
Waller, William C. Jr., Esq., Waller, Mark & Allen, P.C., accompanied by

Dennis Mark
Russell, David, president, National Association of Criminal Defense Lawyers...
Vaira, Peter F., partner, Lord, Bissell & Brook, and vice chairman, Grand

Jury Committee, American Bar Association ..

282
311

353

26

108

111

125

134

229

288

324

384

(III)

OVERSIGHT OF IRS AND JUSTICE DEPARTMENT

PROSECUTION OF SEVERAL TAX CASES

THURSDAY, JUNE 19, 1986

U.S. SENATE,
SUBCOMMITTEE ON OVERSIGHT
OF THE INTERNAL REVENUE SERVICE,

COMMITTEE ON FINANCE,

Washington, DC. The subcommittee met, pursuant to notice, at 10:05 a.m., in room SD-215, Dirksen Senate Office Building, Hon. Charles E. Grassley presiding.

Present: Senators Grassley and Armstrong.

[The press release announcing the hearing and the opening statement of Senator Armstrong follow:]

[Press Release No. 86-048]

FINANCE SUBCOMMITTEE SETS HEARING ON OVERSIGHT OF INTERNAL REVENUE AND

DEPARTMENT OF JUSTICE ACTIVITIES IN THE CRIMINAL PROSECUTION OF SEVERAL Tax CASES

Senator Packwood (R.-Ore.), chairman of the Senate Committee on Finance, announced today that the Subcommittee on Oversight of the Internal Revenue Service will hold hearings the mornings of June 19, 20, and 23, on possible improper activities by the Internal Revenue Service and the Justice Department in the prosecution of several tax cases. The hearings will be chaired by Senator Charles Ē. Grassley (R.-Iowa) and Senator William L. Armstrong (R.-Colo.).

Of particular interest to the subcommittee will be testimony relating to two recent Federal District Court decisions, United States v. Kilpatrick (D. Colo. 1984), and United States v. Omni International Corporation (D. Md. 1986), where the courts dismissed the indictments because of IRS and/or Justice Department abuses committed either before the grand jury or the District Court in opposition to motions to dismiss the indictments.

The subcommittee will also review the activities of the IRS and the Justice Department in the investigation and prosecution of cases involving abusive tax shelters and/or foreign investments.

Finally, the Subcommittee will review the Justice Department's attempt to keep a Federal District Court opinion, which was critical of the Department's handling of the Kilpatrick case, from being published in the Federal Court reports.

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