New York (Aug. 24, 2004) -- Two former Internal Revenue Service lawyers have been suspended indefinitely from practice before the agency and had their law licenses suspended as the result of a complaint related to a federal court ruling that they defrauded the courts so that the IRS could win 1,300 tax shelter cases.


Attorneys Kenneth W. McWade and William A. Sims were each suspended indefinitely from practice before the IRS. The Oregon Supreme Court this month suspended McWade for two years, while the Arkansas Supreme Court in March suspended Sims' law license for one year.


Both lawyers were also suspended by the U.S. Tax Court for two years, The New York Times reported.


The suspensions stem from a January 2003 decision by the Federal Court of Appeals for the Ninth Circuit in San Francisco. In the case Dixon v. Commissioner of Internal Revenue, the court ruled that the lawyers, who were both involved with a Tax Court test case to determine the liability of some 1,300 taxpayers who purchased tax shelters in the 1970s and 1980s, defrauded the Tax Court by cutting a secret deal with two of the test case petitioners in exchange for their help in prosecuting the other petitioners.


In the 2003 decision, Circuit Judge Michael Daly Hawkins noted that the IRS "has done little to punish the misconduct and even less to dissuade future abuse. At that time, both McWade and Sims were suspended without pay for two weeks and transferred out of the Honolulu division. Sims accepted the censure, while McWade retired from the IRS, according to court documents.


As a result of that decision, Michael Louis Minns, a Houston lawyer who represented many of the tax shelter buyers, filed grievances against McWade and Sims with their respective bars.


The Times noted that in fighting the suspension, both lawyers filed papers contending that they had acted properly.


-- Melissa Klein Aguilar

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