[00:00:00] Speaker 04:
Case number 23-1160, Thomas James at balance versus commissioner of internal revenue.

[00:00:07] Speaker 04:
Ms.

[00:00:07] Speaker 04:
Blank for the balance, Ms.

[00:00:09] Speaker 04:
Abebe for the envelope.

[00:00:12] Speaker 00:
Good morning.

[00:00:12] Speaker 00:
Before we get started, I just wanted to confirm.

[00:00:16] Speaker 00:
So we're having open proceedings in court today.

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And do parties agree that also the briefs that you filed?

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in the court are open and if not clarify or and maybe submit something in writing.

[00:00:36] Speaker 04:
The government agrees.

[00:00:37] Speaker 00:
Terrific.

[00:00:38] Speaker 00:
All right.

[00:00:39] Speaker 00:
We have that on the record and then we're ready to proceed Ms.

[00:00:42] Speaker 00:
Blank when you are ready.

[00:00:49] Speaker 00:
morning.

[00:00:50] Speaker 00:
If you want the podium down, you can adjust it, but it's fine.

[00:00:55] Speaker 00:
You're fine.

[00:01:02] Speaker 02:
Good morning and may it please the court.

[00:01:03] Speaker 02:
My name is Stacy Blank.

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I'm here today on behalf of the appellant Thomas Shands and I have reserved two minutes of my time for rebuttal.

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Mr. Shands seeks a whistleblower award in connection with OVDI proceedings involving the US clients

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of the Swiss bankers and banks he identified in his whistleblower information.

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The IRS denied Mr. Shands claim for the purported reason that it did not take any action with respect to any taxpayer who participated in the 2011 OEDI program.

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Mr. Shands sought review of that denial in the tax court and the tax court dismissed his petition for lack of subject matter jurisdiction for the same reason.

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that the IRS took no action with respect to any taxpayer.

[00:01:54] Speaker 03:
Can you clarify what your client was requesting?

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Because it seemed like he might have been requesting 30% of the $2.1 billion that the entire program brought in.

[00:02:05] Speaker 03:
But then on appeal, you seem to be trying to narrow that to certain particular taxpayers.

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But that's not really in the record who that would be.

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And it's not clear that that was requested in the court below.

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From the very beginning, from the Form 211, Mr. Shands indicated that his claim would encompass the proceeds that the IRS collected from others, including the clients of the bankers and the banks.

[00:02:31] Speaker 03:
So all of them, including the specific ones?

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Correct.

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And so the ones who were particularly the customers of the bankers and the banks were a subset of the broader.

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But again, keep in mind that this has always been limited by the fact that in a related action, you cannot be more than one step removed from the original actors.

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I would not say that it's an alternative theory.

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I think that the related action addresses the concern that the government raised that

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The participants in the OVDI proceeding are not specifically identified.

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And so in a related action, of course, you don't have to specifically identify.

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And so that's why the related action is important to address the issue with respect to the specific U.S.

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clients, that there was no requirement for Mr. Shands to identify them.

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so long as they met the remaining tests for being a related action.

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I see.

[00:03:42] Speaker 00:
Thank you.

[00:03:42] Speaker 00:
Ms.

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Blank, if we were to agree with you that the tax court did have jurisdiction over the petition, what would you have us do?

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It's, should we reach the merits and decide?

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You say at some places the court should decline to reach the merits.

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Then you say to the extent the court is inclined to consider the merits.

[00:04:07] Speaker 02:
I think it depends on how strongly you agree with me and on what points.

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Mr. Shands contends that all of the OVDI proceedings are administrative action.

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And if in fact that's

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the conclusion that the court reaches, then I think the appropriate remedy would be to remand to the tax court with instructions that the tax court then further remand to the IRS for calculation of the award.

[00:04:39] Speaker 00:
Well, Eric, I mean, administrative action is only a threshold question.

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And it's unclear to me whether we would need to reach that.

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I know that's the ground on which the tax court relied.

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But I take your position in part to be that the Form 211 here is the base.

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In fact, in part, but wholly, that the Form 211 that was filed is the basis of this action.

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And therefore, that to the extent the IRS is treating

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the OVDI taxpayers' claims as a separate action, you would be arguing, no, no, they are a related action or because of they were based on the 211.

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So whether it's based on or related,

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Your argument is, in a sense, it's beside the point, whether there was any administrative proceeding separate and distinct from the undisputed administrative proceeding that already supports the whistleblower award that Mr. Chance has received.

[00:05:46] Speaker 02:
I think that's right.

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It's been the government's position that every slice of this has to satisfy the requirements of being a separate administrative action.

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And of course, Mr. Shands has, you know, has disputed that, but I think even if you were to accept the government's position on this, each individual OVDI proceeding with respect to a client would be an administrative action under the definitions in the regulations.

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And so therefore, even if you accept the government's position with respect to, you know, every, it wasn't the,

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the 211 that gave rise to a single action and then everything flowed through that.

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I think that Mr. Shands has demonstrated that even if you reject that position and you look and see whether every separate claim number that was assigned by the service to Mr. Shands claim satisfies the requirement of an administrative action, it does.

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And I mean, I think the service responds every

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tax filing, every taxpayer who files a correction to their, or a missing return or a correction, does that automatically, in your view, become an administrative proceeding?

[00:07:09] Speaker 02:
No, not at all, but this is very different than that.

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Do we know enough to conclude that this is very different from that?

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I think we do.

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I mean, we understand what happens in an OVDI proceeding, even though we don't know exactly what happened in each of these.

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We know what's required in the initial application.

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We know that the taxpayer has to provide not only the original returns and corrected amended returns, but any informational filings that relate to the offshore assets.

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Taxpayers have to file statements identifying all of their offshore assets, all of their bank accounts.

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They have to identify the banks in which those accounts are held.

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And they have to identify all the people, facilitators is the word that she used,

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people who help them manage those assets.

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But in most cases they submit that information and then they just pay what they calculate to be the penalty or the back taxes and there's no action by the IRS.

[00:08:09] Speaker 02:
Well I don't know that to be true because what happens next is that... That's how it works.

[00:08:13] Speaker 02:
Well it's assigned to then a revenue agent or an examiner who then

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conducts a fairly comprehensive review.

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Now I think the government would say not a full examination, but as in my reading, the only thing that's different between what happens then in a full examination is the scope.

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Then the revenue agent can ask.

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So an examination is an audit, right?

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That's exactly right.

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It sounds to me like what they're doing in this OVDI program is not so different from when we file our taxes.

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No, I don't kind of self assess and then we say this is what we owe.

[00:08:48] Speaker 02:
Well, that's the first step, but that's not the only step.

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Then the revenue agent looks at it and says, OK, do I want to ask more questions?

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Do I want to send document requests?

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And they do often.

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Do I want to conduct third party witness interviews, which they do?

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And so I guess the bottom line is sometimes it's an action and sometimes it's not, because if all they do is review the information,

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and accept what you say you're gonna pay, it's not an action against the taxpayer.

[00:09:15] Speaker 02:
Well, I mean, there are a lot of characteristics of it that are much beyond what you do if you just file a corrected tax return.

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You have to sign an agreement, for example, to extend the statutes of limitation on any taxes or- It has to be an action against a taxpayer.

[00:09:30] Speaker 03:
I'm sorry?

[00:09:31] Speaker 03:
Do you agree that to be an action has to be an action against a taxpayer?

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That's in the statute.

[00:09:37] Speaker 02:
Well, I mean, yes, but in the same way that an audit is an action against a taxpayer.

[00:09:43] Speaker 03:
That's very different, though.

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That's the agency taking steps to examine the taxpayer.

[00:09:49] Speaker 02:
Well, I would say it's not really different if the revenue agent to whom the OVDI file was assigned says, OK, I want to bring you in and ask you a lot of questions.

[00:10:00] Speaker 03:
I want to see that.

[00:10:01] Speaker 03:
I'm just saying, in some cases, it's not.

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And if in some cases, it's not, it seems like it's incumbent on your client

[00:10:06] Speaker 03:
to do more to show that in this case it was.

[00:10:09] Speaker 02:
Well, that's an interesting issue because of course the IRS would not give us any of the information in the tax court that we asked for because they said we're not disclosing it to you.

[00:10:21] Speaker 00:
Just to back up for a moment, you had started to elaborate.

[00:10:24] Speaker 00:
I mean, up to a point, it does seem like participation in the OBDI involves a lot of action on the taxpayers' part.

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They have to identify a lot of things and file certain information returns and other returns and identify various banks and facilitators.

[00:10:43] Speaker 00:
But then you started to say, the IRS looks at it, that the taxpayers assign

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an agreement to extend the statute of limitations.

[00:10:49] Speaker 00:
Is there more on that?

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Because one thing that seems just generically different is that under the OVDI, the taxpayers are getting some kind of relief that if they don't participate, they wouldn't be getting.

[00:11:06] Speaker 00:
And I'd like to know your understanding of the generic steps that seal that deal.

[00:11:12] Speaker 02:
Sure.

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So they may get some relief that they would not otherwise get.

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So there is no guarantee that the taxpayer will receive immunity from criminal prosecution.

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And the IRS retains the right to pursue criminal charges if it determines that that's appropriate after this, you know, what I'll call the comprehensive review if we don't want to use the word examination.

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So I think the first thing is the taxpayer is required to extend the statute of limitations for taxes and penalties.

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The taxpayer is also required to pay

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immediately the taxes, the penalty and interest, or make some sort of good faith arrangement to pay, as opposed to if you just stay in the shadows and take your chances, then maybe they can't find you or they can't find your assets.

[00:12:05] Speaker 02:
So I think those are two things in particular, even if the IRS never asks any follow-up questions

[00:12:13] Speaker 02:
never and of course if the IRS is dissatisfied with the information or for example in a case like ours uses the information that it gained from Mr. Shands to test the submissions made by the taxpayer and it's not content with them then of course it can conduct a full audit and not just of the offshore issues but all of the taxpayers issues.

[00:12:41] Speaker 00:
The tax court already held that in the rubric of no jurisdiction, that the action is not related.

[00:12:50] Speaker 00:
I see I'm woefully over my time.

[00:12:52] Speaker 00:
Our practice is to allow you time until we have asked all our questions, and then we'll give you a little time.

[00:13:01] Speaker 00:
Thank you.

[00:13:06] Speaker 00:
Lost my train of thought.

[00:13:09] Speaker 00:
Sorry.

[00:13:11] Speaker 01:
I have questions, but I don't remember where you were.

[00:13:14] Speaker 01:
Go ahead.

[00:13:17] Speaker 01:
The government says neither Shan's whistleblower claim nor his tax court petition alleged the IRS actually initiated an examination of any particular program participant.

[00:13:30] Speaker 01:
Do you agree with that?

[00:13:31] Speaker 02:
Yes.

[00:13:34] Speaker 02:
Can I qualify that by saying because we don't know?

[00:13:37] Speaker 02:
And we asked in the tax court for them to disclose the information that would have allowed us to do that.

[00:13:44] Speaker 01:
Fair enough.

[00:13:44] Speaker 01:
We were unsuccessful in that effort.

[00:13:47] Speaker 01:
That's helpful.

[00:13:47] Speaker 01:
Appreciate that.

[00:13:50] Speaker 01:
Shands cooperated in, first of all, everything in the briefs.

[00:13:53] Speaker 01:
I know Judge Pillard already confirmed this, but it's not under seal.

[00:13:57] Speaker 01:
It's open.

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I can say anything that's in the briefs.

[00:13:59] Speaker 03:
That is correct.

[00:14:00] Speaker 01:
Shands cooperated in a federal criminal investigation of Swiss bankers.

[00:14:05] Speaker 01:
That's true, right?

[00:14:06] Speaker 02:
That is correct.

[00:14:07] Speaker 02:
With a fair amount of drama, much beyond what you see in a typical tax case.

[00:14:13] Speaker 02:
I mean, he wore a wire that was provided to him by the IRS criminal division.

[00:14:18] Speaker 02:
He had meetings with Renzo Godola where they recorded the conversations and two days later, Renzo Godola was arrested.

[00:14:25] Speaker 02:
And so then the dominoes began to fall from that.

[00:14:28] Speaker 01:
Was he a target of the federal criminal investigation?

[00:14:32] Speaker 01:
Yes.

[00:14:33] Speaker 01:
And he obtained immunity.

[00:14:36] Speaker 01:
That's correct.

[00:14:37] Speaker 01:
And he got eight and a half million dollars.

[00:14:39] Speaker 02:
Correct.

[00:14:40] Speaker 02:
From the top line folks that he identified.

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Those are the people that I identify as the top.

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So there are the eight or nine people, individuals who were the Swiss bankers and BKB, which was the Swiss bank.

[00:14:55] Speaker 02:
And from those folks, the Internal Revenue Service

[00:14:58] Speaker 02:
collecting proceeds in excess of $60 million.

[00:15:01] Speaker 01:
OK, so he was suspected of violating federal criminal tax laws, and he came out of it with $8.5 million.

[00:15:09] Speaker 01:
He had offshore accounts.

[00:15:12] Speaker 01:
But $8.5 million from the US.

[00:15:14] Speaker 01:
Correct.

[00:15:15] Speaker 01:
And then my last question has to do with the related action argument toward the end of the briefs and jurisdiction.

[00:15:21] Speaker 01:
OK.

[00:15:22] Speaker 01:
I think that there is an argument that

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Obviously, a court always has jurisdiction to say it does not have jurisdiction.

[00:15:31] Speaker 01:
But I think there's even beyond that argument that the court had jurisdiction, the tax court to stay on the merits, whether this was a related action.

[00:15:44] Speaker 01:
And assume for the sake of this question that I think it was not a related action.

[00:15:52] Speaker 01:
Is there anywhere in your brief where you make the argument that even if it's not a related action.

[00:15:58] Speaker 01:
The tax court at least had jurisdiction to say that on the merits, it's not a related action.

[00:16:06] Speaker 02:
I think we do say that we do say that where we talk about the fact that

[00:16:13] Speaker 02:
denial because it is not a related action is a determination regarding an award.

[00:16:19] Speaker 02:
And that is the predicate for which the tax court has jurisdiction.

[00:16:23] Speaker 02:
So to decide that it is not a related action for reasons other than whether a related action has to itself be an action separate and apart from the original top line action.

[00:16:39] Speaker 02:
The fact that the government in the award memorandum talked about, well, you didn't identify folks and you didn't.

[00:16:47] Speaker 02:
So those things, I believe, are determinations regarding an award that would have given jurisdiction.

[00:16:52] Speaker 01:
What would be helpful is if maybe when you come back for rebuttal, if Judge Pillard will allow it, if you could point me to the page in the quote where you make that argument and then just to confirm, if we think this is not a related action and the tax court should have said, we have jurisdiction to decide on the merits, but this is not a related action and it's not a related action,

[00:17:18] Speaker 01:
That's something you want us.

[00:17:20] Speaker 01:
If we conclude it's not a related action, that's something you want us to say.

[00:17:23] Speaker 02:
No, I think that the tax court has to say that because the tax court never reached those issues.

[00:17:28] Speaker 01:
The tax court just says we don't think it's a related action because I know if we conclude that it's not a related action.

[00:17:36] Speaker 01:
Do you want us to send it back to the tax court so that they can follow our instructions to decide on the merits?

[00:17:44] Speaker 01:
That is not a related action, or is it all the same?

[00:17:47] Speaker 02:
So I think that if you believe, I think you should not decide that it's not.

[00:17:54] Speaker 02:
You know, it needs to go through the, you know, whatever the fact finding process is that the tax court would undertake.

[00:18:06] Speaker 02:
And I would think that we might be able to change your mind about that if in fact we had the ability to get the facts that we asked for in the tax court and to flesh out those issues.

[00:18:17] Speaker 00:
What do you need from factually to determine whether the actions against the OBDI taxpayers are related to the information provided?

[00:18:30] Speaker 02:
So I don't think we really need anything, except I need to understand what is the factual basis for the position that the government has taken that these folks are not related, that they did not pursue the OVDI proceedings based on the same facts that were included in.

[00:18:53] Speaker 02:
So if they are going to make these arguments,

[00:18:56] Speaker 02:
then I think I'm entitled to know what are the factual predicates that they rely on.

[00:19:01] Speaker 00:
You haven't challenged the regulations, right?

[00:19:03] Speaker 00:
Correct.

[00:19:04] Speaker 00:
So the Treasury Department regulation defines based on a whistleblower's information when the whistleblower information substantially contributed to an action against a person identified by the whistleblower.

[00:19:24] Speaker 00:
And the information Shams provided did not identify any US persons who were COBI participants, did it?

[00:19:32] Speaker 02:
But then it says, or proceeds collected in the action or in any related action.

[00:19:39] Speaker 02:
So if you look further at the regulations.

[00:19:41] Speaker 00:
Wait, wait, wait.

[00:19:42] Speaker 00:
So you're not relying on the base stock.

[00:19:45] Speaker 00:
You're relying on related action.

[00:19:48] Speaker 02:
I think I can meet both of those tests, but if you're asking me why it matters that they're not identified, then yes, I would point you to the related action.

[00:20:00] Speaker 00:
Wait, wait, wait.

[00:20:01] Speaker 00:
So do you have a separate argument?

[00:20:03] Speaker 00:
Because if the recovery is based on information provided by the taxpayer, you don't need to get to relate it.

[00:20:09] Speaker 00:
Correct.

[00:20:10] Speaker 00:
And so my answer, my question is,

[00:20:13] Speaker 00:
What is your argument, and have you made it here, that the recoveries against the OVDI participants are based on information provided by Shands, in particular, identities of US persons who participated in OVDI?

[00:20:34] Speaker 02:
And so what I would point the court to is the client lists

[00:20:38] Speaker 02:
that the IRS recovered from Godola, from BKB and the other bankers.

[00:20:47] Speaker 02:
The IRS required those folks as a condition of their arrangements and the deferred prosecution agreement with BKB that they provide those client lists to the government.

[00:21:02] Speaker 02:
So the government had the names and identities of all of the clients

[00:21:07] Speaker 02:
as a result of the information that Shands provided.

[00:21:11] Speaker 00:
But my understanding is they did not choose to pursue those taxpayers based on the list.

[00:21:16] Speaker 00:
They thought potentially this is a much bigger issue.

[00:21:20] Speaker 00:
We are going to put the onus on the taxpayers, give them incentives, and do that through OVDI.

[00:21:29] Speaker 00:
And if that's correct.

[00:21:32] Speaker 02:
So there was additional compulsion, I think, in addition to asking for the client list,

[00:21:37] Speaker 02:
The government then required the bankers in BKB to tell their clients, we've turned your information over to the government and also to encourage them to enter OVDI if they wanted the prospect of avoiding criminal prosecution.

[00:21:56] Speaker 02:
And so it's a look, I understand that it's, the notice didn't come in the mail that you've been selected for an audit.

[00:22:03] Speaker 02:
but there was a fair amount of compulsion.

[00:22:06] Speaker 02:
And then the federal prosecutor in the Renzo Godola, I mean, this is why his statement was so important because he confirmed then that the information that Shands provided really is what prompted these folks to go into the OVDI.

[00:22:24] Speaker 02:
And if you look at the Awad case and whistleblower 14376,

[00:22:29] Speaker 02:
It says that the government uses that information if it prompts folks to enter into a voluntary disclosure program.

[00:22:37] Speaker 00:
But the standard is not but for causation.

[00:22:39] Speaker 00:
As you know, it is substantially contributed.

[00:22:44] Speaker 00:
And just backing up before my question about whether the service relied on the lists, as you yourself described it,

[00:22:53] Speaker 00:
the information, the lists were obtained not from Mr. Shands, but from the targets that he initially identified.

[00:23:02] Speaker 00:
And so under the terms of the rule, that seems to put it too far of a remove to count as based on his information.

[00:23:12] Speaker 02:
So if in fact the court concludes that, then I would direct you to the related

[00:23:17] Speaker 02:
analysis because that closes that gap.

[00:23:20] Speaker 02:
It's example one in the regs about what constitutes a related action.

[00:23:26] Speaker 02:
And that is when the whistleblower provides the identity of the taxpayer and the taxpayer's accountant.

[00:23:33] Speaker 02:
The IRS secures from the accountant a client list.

[00:23:37] Speaker 02:
And to the extent that folks on that client list were engaged in the same conduct that the whistleblower originally identified

[00:23:45] Speaker 02:
those people are related actions.

[00:23:48] Speaker 02:
Even though they were not identified by the whistleblower, but they were derived from a client list produced by someone who was identified ultimately through the whistleblower information.

[00:24:05] Speaker 01:
The IRS proceeds would be actually against the other person.

[00:24:11] Speaker 01:
We conclude

[00:24:16] Speaker 01:
Could you hear me?

[00:24:17] Speaker 01:
If we conclude that the IRS did not proceed with an action against another person based on the facts described in the information Mr. Shands provided, then you would lose on the related action inquiry, correct?

[00:24:33] Speaker 02:
So I think that goes back to the question that Judge Pollard was asking, which is, is the language that you just read mean

[00:24:43] Speaker 02:
that the tax court was right in saying that every related action must itself constitute a separate and independent administrative action, or is the administrative action that we're talking about the administrative action that was launched by the filing of the Form 211?

[00:25:03] Speaker 02:
And then these are all just sort of strands that flowed from that.

[00:25:06] Speaker 03:
I think it's a little different from what you just said, because I think the tax court was saying

[00:25:13] Speaker 03:
that to be a related action, it has to be an action.

[00:25:17] Speaker 03:
And the action has to be against the taxpayer, et cetera, all the things we've been talking about.

[00:25:26] Speaker 03:
But where I think the tax court may not have been correct is by saying that that's a jurisdictional issue, that it has to be a related action for us to have jurisdiction.

[00:25:36] Speaker 03:
On the jurisdictional point, I think perhaps

[00:25:40] Speaker 03:
the court could rely on the original action.

[00:25:45] Speaker 03:
Because what your client did was provide information that did result in a proceeding against Godola and all those other people.

[00:25:54] Speaker 03:
And the claim here is that the OVDI proceedings are a related action to that.

[00:26:00] Speaker 03:
So I think that original action part of it provides jurisdiction.

[00:26:05] Speaker 03:
But the related action part of it, the definition of it,

[00:26:09] Speaker 03:
would mean you to prevail on the merits, you would have to show it's an action, which for the reasons we've been discussing, I don't think it is.

[00:26:19] Speaker 03:
So I'm not sure I understand your question.

[00:26:20] Speaker 03:
I don't think it would.

[00:26:23] Speaker 03:
Maybe I can clarify for you.

[00:26:26] Speaker 03:
The tax court found that there was no related action.

[00:26:29] Speaker 03:
And it said that that's a jurisdictional bar.

[00:26:31] Speaker 03:
Because there was no action.

[00:26:33] Speaker 03:
Because there was no action.

[00:26:36] Speaker 03:
Even if we think that there was jurisdiction based on the original action, it would still on the merits, not be an action.

[00:26:43] Speaker 03:
And you would lose on the merits for the same reason.

[00:26:46] Speaker 03:
It's like, what bucket is that?

[00:26:47] Speaker 03:
Is it jurisdictional or is it merits based?

[00:26:49] Speaker 02:
But it would make no sense to conclude that what happened

[00:26:55] Speaker 02:
is administrative action for purposes of jurisdiction, but not administrative action for purposes of the merits.

[00:27:02] Speaker 03:
You're mixing up the two though, that for purposes of jurisdiction, we're talking about the original action.

[00:27:07] Speaker 03:
But on the merits, you have to prove that this is the OBDI proceedings are related action in order to recover for it, but they're not an action.

[00:27:14] Speaker 03:
So you lose on the merits.

[00:27:17] Speaker 02:
I don't think that's right.

[00:27:19] Speaker 02:
I don't mean to disagree with you, but I don't think that there is a separate analysis for whether or not there has been an action, an administrative action against a taxpayer for purposes of jurisdiction.

[00:27:32] Speaker 02:
Do you think a related action has to be an action?

[00:27:35] Speaker 02:
I don't.

[00:27:35] Speaker 02:
I think the action that the related action

[00:27:40] Speaker 02:
language refers to is the original action.

[00:27:45] Speaker 03:
There are two actions.

[00:27:45] Speaker 03:
There's the original one and then whatever is related to it.

[00:27:48] Speaker 02:
But it is relatedness that is just all part and parcel of the original action.

[00:27:57] Speaker 02:
It's not that they said, OK, well, all of a sudden, stop on Godola.

[00:28:02] Speaker 02:
And now we're going to start on something completely.

[00:28:04] Speaker 02:
But on the merits, what are you recovering for then?

[00:28:06] Speaker 03:
There has to be a second action that's related that you want to recover for.

[00:28:10] Speaker 03:
And that has to be an action.

[00:28:14] Speaker 02:
But it is.

[00:28:15] Speaker 02:
It's the OVDI proceeding is the action.

[00:28:19] Speaker 03:
But if we don't think it's an action because it's not against a taxpayer and it's brought, initiated by

[00:28:26] Speaker 03:
the IRS than you lose on the merits, but not on jurisdiction.

[00:28:31] Speaker 02:
I think that would be a very awkward conclusion to say that we think that under the related action analysis, the original action is enough of administrative action related to the client taxpayer.

[00:28:46] Speaker 03:
No, no, it's enough of an original action to provide jurisdiction.

[00:28:49] Speaker 03:
But then when you try to decide whether you should recover, because there's this other thing that's related action, that second thing has to be an action.

[00:28:56] Speaker 03:
And the tax court found that it was not.

[00:28:59] Speaker 02:
But it seemed to be a very strange state of affairs where the taxpayer could rely on the overarching action to get into court, but then say no action was taken with respect to me for purposes of the merits.

[00:29:15] Speaker 02:
I mean, that doesn't seem to make any sense to me.

[00:29:17] Speaker 03:
That's not exactly what they have to do in order to evaluate a related action claim.

[00:29:21] Speaker 03:
They have to decide whether there was an action, whether there was a related action.

[00:29:26] Speaker 02:
Right.

[00:29:26] Speaker 02:
And that determines whether they relied on the same facts, whether they... And you think that goes to jurisdiction, correct or not correct?

[00:29:40] Speaker 01:
I do not think it goes to jurisdiction.

[00:29:41] Speaker 01:
That's what Judge Pan's point is.

[00:29:45] Speaker 01:
But I think that's... I don't want to speak for Judge Pan.

[00:29:48] Speaker 03:
But you're correct.

[00:29:49] Speaker 03:
Thank you.

[00:29:50] Speaker 03:
Saying it better than I could.

[00:29:51] Speaker 02:
Thank you.

[00:29:54] Speaker 02:
But I don't think that goes to whether or not there was an action.

[00:29:58] Speaker 02:
I just think it goes to the merits of the claim.

[00:30:03] Speaker 02:
In the same way that I say that whether or not they used the information is a causal analysis as opposed to a jurisdictional one.

[00:30:14] Speaker 02:
So whether or not they used the same facts to recover the proceeds, I think is a causal analysis, not a jurisdictional one.

[00:30:22] Speaker 02:
And so I don't think it requires

[00:30:24] Speaker 02:
that's not sort of the proof.

[00:30:27] Speaker 02:
It's, you know, is it related enough to say that the information that you provided was a substantial cause, but it is not necessarily saying that it establishes the existence of an action.

[00:30:45] Speaker 03:
So the regulatory definition

[00:30:47] Speaker 03:
of the term related action is that it's an action against a person other than the person's identified in the information provided and subject to the original action.

[00:30:57] Speaker 03:
So we have two actions here.

[00:31:00] Speaker 03:
So if the original one provides the basis for jurisdiction, you still have to prove recovery under the related action, the second action.

[00:31:09] Speaker 03:
And if that is not an action at all, related or not, then you would lose on the merits, correct?

[00:31:17] Speaker 02:
Although I'm not sure that the jurisdictional section or Lee would support sort of splitting actions into one for jurisdiction and one for merits.

[00:31:30] Speaker 00:
I mean, it's a little bit like in civil procedure, you have a federal claim and then do you have pen and jurisdiction over a state law claim and.

[00:31:39] Speaker 00:
The pending jurisdiction analysis is what's the relationship between them.

[00:31:44] Speaker 00:
And you don't have to separately have state court jurisdiction over the thing that comes in.

[00:31:49] Speaker 00:
So I guess my question for you is if the administrative proceeding with respect to the top line taxpayers suffices to provide jurisdiction,

[00:32:06] Speaker 00:
for the claims against the OVDI participants or the money recovered from them.

[00:32:14] Speaker 00:
Then one would look at whether those recoveries were based on or related to the original, the information originally provided.

[00:32:27] Speaker 00:
Is that the framework you're using?

[00:32:30] Speaker 00:
I think that's right.

[00:32:32] Speaker 01:
Can I give you a hypothetical?

[00:32:34] Speaker 01:
So in a couple of weeks, I'll file my tax returns.

[00:32:40] Speaker 01:
And obviously, there was an original action here for Mr. Shantz.

[00:32:45] Speaker 01:
Imagine he goes to the IRS a few months from now and says that Justin Walker's tax returns, I'm entitled to 30% or whatever of those returns.

[00:32:58] Speaker 01:
And his filing of those returns is a related action to my original action.

[00:33:04] Speaker 01:
And the tax court thinks, well, I know that's not a related action.

[00:33:10] Speaker 01:
Does the tax court have jurisdiction to consider the merits?

[00:33:16] Speaker 01:
Or does the tax court not have jurisdiction over his claim that he's entitled to 30% of Justin Walker's taxes?

[00:33:29] Speaker 02:
Well, I think you're going to have to tell me something else that has happened.

[00:33:33] Speaker 01:
Well, there's no relation between us.

[00:33:35] Speaker 01:
I'm trying to bake in that my filing of my tax returns is actually not at all related to anything Mr. Shands has ever done.

[00:33:45] Speaker 01:
But he says it is.

[00:33:47] Speaker 01:
And he goes to the tax court and he says, I have a related action.

[00:33:50] Speaker 01:
And you have jurisdiction to consider whether I'm entitled to 30%

[00:33:55] Speaker 01:
of Justin Walker's tax returns.

[00:33:56] Speaker 01:
Because a long time ago, you had jurisdiction over my original action.

[00:34:00] Speaker 02:
Right.

[00:34:01] Speaker 01:
Do you think the tax court has jurisdiction over this new claim?

[00:34:04] Speaker 02:
I do.

[00:34:05] Speaker 02:
And I think on the merits, it just has to say there's no relationship between the two.

[00:34:09] Speaker 01:
And that's okay.

[00:34:13] Speaker 03:
Thank you.

[00:34:13] Speaker 03:
That's helpful.

[00:34:15] Speaker 05:
Thank you.

[00:34:28] Speaker 04:
I'd like first to speak to Judge Pan's analysis of how positing that the original claim that resulted in the $8.5 million award would give rise to related action jurisdiction.

[00:34:49] Speaker 04:
And the answer to that question is apparent in the timing here, because this claim

[00:34:54] Speaker 04:
with respect to the OVDI, which by the way was not directed to any particular clients or members of client lists.

[00:35:02] Speaker 04:
As the court has observed, the claim presented to the whistleblower office and originally to the tax court involved the increase in participation in the program attributable to publicity, which in turn was attributable to the success of the prosecution that Shands enabled.

[00:35:20] Speaker 04:
He wanted 30% of the entire proceeds collected.

[00:35:23] Speaker 04:
That was the claim that was denied by the whistleblower office and subject of the Tax Court petition in 2016.

[00:35:31] Speaker 04:
He received the $8.5 million award in 2020 in a separate determination, which he did not appeal.

[00:35:40] Speaker 04:
So if that is the predicate for jurisdiction, it can't relate back to the filing of the petition in this case four years early.

[00:35:49] Speaker 04:
jurisdiction has to be inherent at the time of the fight.

[00:35:52] Speaker 03:
Why hand it though, if it, if the claim is that it's related to the other jurisdiction, it's kind of the way I'm thinking about it is it's really the original fame and then saying, and this is also related to it.

[00:36:06] Speaker 03:
Because this claim came first.

[00:36:08] Speaker 03:
This claim was decided before the Godola et cetera claim.

[00:36:12] Speaker 04:
It certainly came in terms of the finality of the award.

[00:36:16] Speaker 04:
Arguably there were dominoes and it's unclear in what order the dominoes did descend because they were sort of bifurcated dominoes.

[00:36:22] Speaker 04:
There were the initial bankers that Shands actually participated in the investigation.

[00:36:28] Speaker 04:
He did wear a wire.

[00:36:29] Speaker 04:
Then there were other bankers who were revealed by the bankers who were caught

[00:36:35] Speaker 04:
there was a bank that entered into a non-prosecution agreement.

[00:36:37] Speaker 04:
And there were two actual US taxpayers who were clients.

[00:36:40] Speaker 03:
Are you asking for a temporal test?

[00:36:42] Speaker 03:
Beg your pardon?

[00:36:43] Speaker 04:
Are you asking for a temporal test that has to come after?

[00:36:46] Speaker 04:
No.

[00:36:46] Speaker 04:
But what we're saying is that if the action is related, then it has to be related to an outcome, not simply, I claim everything.

[00:36:57] Speaker 04:
I claim Justin Walker's taxes.

[00:36:59] Speaker 04:
I claim Julia Veta's taxes.

[00:37:02] Speaker 04:
I claim Abner Mikva's taxes, et cetera, et cetera, et cetera.

[00:37:05] Speaker 04:
And then if one of those should succeed, eventually that relates back to the tax court petition that I've been litigating for five years now.

[00:37:13] Speaker 00:
This is not an argument I saw in your briefing.

[00:37:16] Speaker 04:
No, because I'm addressing something that's come up now.

[00:37:18] Speaker 04:
And we did not take the position that there was no jurisdiction ex ante here because it was contingent on an outcome in the claims regarding the bankers.

[00:37:28] Speaker 04:
Those were judicial proceedings.

[00:37:30] Speaker 04:
They were criminal proceedings.

[00:37:31] Speaker 04:
They were ongoing.

[00:37:32] Speaker 04:
And I'd like to go to your point, Judge Pollard.

[00:37:34] Speaker 00:
Let me just make sure that I'm catching what you have put before us.

[00:37:37] Speaker 00:
You said that there is a temporal problem because although the information provided that did substantially contribute to some recovery by the service went to these top line folks, that was provided to the service before the OVDI taxpayer

[00:37:58] Speaker 00:
monies were received by the service, but.

[00:38:02] Speaker 04:
May I?

[00:38:02] Speaker 04:
That's not necessarily the case either.

[00:38:05] Speaker 04:
The Form 211 was filed in November of 2010.

[00:38:08] Speaker 04:
I don't have precise dates for when all of these different bankers were indicted, but it was over a prolonged period of time after OVDI concluded.

[00:38:18] Speaker 04:
There was no way to foresee that the outcome of the OVDI claim would be contingent on any subsequent outcomes with respect to this.

[00:38:25] Speaker 00:
That's not consistent with what I was saying, actually.

[00:38:27] Speaker 00:
So there was a Form 211 filed.

[00:38:30] Speaker 00:
The IRS started proceedings, both administrative and eventually judicial, against the top line.

[00:38:39] Speaker 00:
taxpayers.

[00:38:41] Speaker 00:
And then it got the OVDI up and running and started to get recoveries from OVDI folks.

[00:38:50] Speaker 00:
The order is different.

[00:38:51] Speaker 00:
And then ultimately resolved with the big fish.

[00:38:57] Speaker 04:
The claim came in in 2010.

[00:39:00] Speaker 04:
So everything, the excitement all happened in November of 2010.

[00:39:04] Speaker 04:
Shands wore the wire.

[00:39:05] Speaker 04:
Godola got arrested.

[00:39:07] Speaker 04:
Godola got indicted.

[00:39:08] Speaker 04:
Shands filed a Form 211.

[00:39:11] Speaker 04:
OVDI began in February of 2011, three months later.

[00:39:15] Speaker 04:
It continued through September of 2011.

[00:39:18] Speaker 04:
Shands did not submit the claim requesting 30% of the OVDI proceeds until June of 2012.

[00:39:23] Speaker 04:
The criminal proceedings were ongoing and new criminal proceedings continued.

[00:39:30] Speaker 04:
continue to arise against various bankers.

[00:39:33] Speaker 04:
Shans then would go back to the whistleblower office and say, please assign a claim to this banker.

[00:39:38] Speaker 04:
This is a related action to my participation in the investigation in 2010.

[00:39:42] Speaker 04:
They did so.

[00:39:43] Speaker 04:
These claims in the aggregate were rolled up into the eight and a half million dollar determination.

[00:39:49] Speaker 00:
Those are all the related actions.

[00:39:51] Speaker 00:
I think all of that is more than but consistent with what I said.

[00:39:55] Speaker 00:
So it would help me because you've reacted strongly against

[00:39:58] Speaker 00:
my characterization, and so I'm clearly missing something.

[00:40:02] Speaker 03:
And also the definition of related action goes to the facts described and documented in the information provided, not based on the outcome of what happened with that.

[00:40:12] Speaker 04:
Not based on the correct, correct.

[00:40:15] Speaker 04:
And we're not suggesting that this is inconsistent with that reading of the reg.

[00:40:19] Speaker 04:
But what you don't know when you submit the OVDI claim is how many

[00:40:24] Speaker 04:
or the form 211 in the record is very clear and very broad.

[00:40:32] Speaker 04:
The form 211 says bankers, banks and US taxpayers, which is why the OVDI claim could be plausibly stated.

[00:40:42] Speaker 04:
He's saying in the aggregate, I had an effect on many, many, many, many people who I can't precisely pinpoint.

[00:40:50] Speaker 04:
As the court has observed, once that eight and a half million dollar award came down, and once it became clear, too, that there was not going to be any recovery through the OVI participation, he tried to change horses mid-race and say, well, actually my claim is only with respect to people whom you later learned of through client lists.

[00:41:08] Speaker 04:
And that's the important factual circumstance here.

[00:41:12] Speaker 04:
You didn't have those client lists when he stated the claim.

[00:41:15] Speaker 04:
You're not proceeding based on his information

[00:41:18] Speaker 04:
with respect to the client list, at any point during OVDI, which is complete at that point, this all comes later.

[00:41:27] Speaker 04:
Any related action that's a result of information that you learn from investigating people long after OVDI is completed is not information that you proceeded based on in the context of OVDI.

[00:41:40] Speaker 00:
The client list is a little bit tricky because there seems to be a tension between the regulation defining related action

[00:41:48] Speaker 00:
which says that the people have to be identified by the taxpayer.

[00:41:52] Speaker 00:
And the example one, which suggests that client lists of people the taxpayer identified might make a difference.

[00:42:01] Speaker 00:
I guess one thing that I'm sensitive to is when and whether a whistleblower might be entitled to information from the service as to how or whether the service has relied on.

[00:42:14] Speaker 04:
Well, two points in regard to that.

[00:42:15] Speaker 04:
The first is that because the OVDI claim from the beginning was not with respect to individuals, the record is clear.

[00:42:24] Speaker 04:
All of the FOIA requests and discovery that Shands attempted to take during the administrative proceeding was not taxpayer

[00:42:31] Speaker 04:
and he expressly disavowed any interest in individual taxpayer information.

[00:42:36] Speaker 04:
You can see at Joint Appendix 239, 251 in his petition, he says, we're specifically excluding any taxpayer information.

[00:42:44] Speaker 04:
He did not seek discovery to correlate pursuit of individuals with clients of the bankers whose prosecution he assisted in.

[00:42:53] Speaker 04:
That was not part of the claim.

[00:42:55] Speaker 04:
That was not the claim that was decided by the whistleblower office, nor the one presented to the tax court.

[00:42:59] Speaker 04:
That's point number one.

[00:43:01] Speaker 04:
Point number two, with respect to the regulation, is that identification can be read multiple ways.

[00:43:07] Speaker 04:
He doesn't need to say Judge Walker, Judge Pillard, and Judge Penn.

[00:43:10] Speaker 04:
He can say, judges of the DC Circuit, or the panel that sat on April 2nd.

[00:43:15] Speaker 04:
There are ways you can point to someone without a precise identification that would be sufficient under the regulation.

[00:43:21] Speaker 04:
He did not seek to establish that here.

[00:43:23] Speaker 04:
And he does not allege that he did.

[00:43:29] Speaker 01:
I want to ask about his original related action.

[00:43:36] Speaker 01:
How much money would he have gained if he had succeeded on the original related action?

[00:43:41] Speaker 04:
The OVDI claim.

[00:43:42] Speaker 04:
30% of the aggregate collection of proceeds in the offshore initiative from 2011, which was in the billions.

[00:43:50] Speaker 04:
So many, many, many, many millions of dollars.

[00:43:53] Speaker 04:
How many billion?

[00:43:55] Speaker 04:
There are two places in the record.

[00:43:57] Speaker 04:
At one point, they said that the

[00:44:00] Speaker 04:
There was some category of claims in OVDI where we collected a billion dollars in proceeds and then in a different category there were two billion.

[00:44:07] Speaker 04:
So if you say there were three billion dollars, a third of that is a billion.

[00:44:11] Speaker 04:
And these are absolute ballpark numbers.

[00:44:13] Speaker 04:
There are more precise numbers in the record, but he didn't have that information at the time and frankly neither did the IRS.

[00:44:18] Speaker 04:
That was what the FOIA requests were about.

[00:44:21] Speaker 04:
We actually had to put that information together in response to the discovery he sought to take at the administrative level.

[00:44:26] Speaker 04:
which did not, I reiterate, at any point, adhere to the identity of participants in the program, nor to their relation with his parents.

[00:44:37] Speaker 04:
He wouldn't have been able to obtain that.

[00:44:40] Speaker 04:
Well, under a different procedure he could have.

[00:44:42] Speaker 04:
I think the reason why he structured, and I'm speculating, the reason why he structured his FOIA request, as he did, was to avoid the prohibitions in the Internal Revenue Code on disclosure of individual taxpayer information, section 6103.

[00:44:54] Speaker 04:
He didn't want to implicate that.

[00:44:56] Speaker 04:
because it wasn't relevant to his claim.

[00:44:58] Speaker 04:
It didn't matter what their names were.

[00:45:00] Speaker 04:
He wanted 30% of everybody because his theory was not, this is related to me helping Swiss bankers, it's their clients.

[00:45:07] Speaker 04:
His theory was, as he stated, I increased participation in the aggregate in this program because I helped so much and I did so much good that this publicity.

[00:45:19] Speaker 01:
Out of curiosity.

[00:45:20] Speaker 04:
Do you think he did?

[00:45:21] Speaker 01:
Do you think he did what you just said he claims to do?

[00:45:24] Speaker 04:
He wore a wire to a meeting with a Swiss banker who got another Swiss banker on the telephone, and they were able to establish elements of the conspiracy right then.

[00:45:35] Speaker 04:
That's what he did.

[00:45:36] Speaker 01:
Well, and his argument is, if you go six degrees of separation out from that, there's some connection.

[00:45:44] Speaker 01:
He was somewhat helpful in making OVDI a success.

[00:45:48] Speaker 01:
And I'm just wondering if you think that's correct.

[00:45:51] Speaker 04:
The whistleblower office memo goes into detail on all the reasons why his participation in the investigation had nothing to do with OVDI.

[00:46:01] Speaker 00:
It was the second iteration.

[00:46:02] Speaker 00:
Well, it doesn't substantially contribute, but I mean, if one were to, for example, look at but for cause.

[00:46:07] Speaker 04:
He was not a but for cause at the OVDI.

[00:46:09] Speaker 04:
Another one had already existed.

[00:46:10] Speaker 04:
This was a second generation OVDI.

[00:46:12] Speaker 01:
Well, was he a but for cause of the second generation of the OVDI?

[00:46:15] Speaker 04:
He was not.

[00:46:16] Speaker 04:
He was not.

[00:46:17] Speaker 04:
The IRS had already planned to do it, and then there were two more after

[00:46:20] Speaker 04:
So this is number two.

[00:46:21] Speaker 00:
Wouldn't we need to have a factual record to rely on that?

[00:46:26] Speaker 00:
I guess to say that there was no relationship.

[00:46:29] Speaker 00:
I mean, that's not apparent from.

[00:46:31] Speaker 04:
What you have in the record here in the memorandum from the whistleblower office is we tested his claim.

[00:46:38] Speaker 04:
The claim he actually made is the claim that they tested.

[00:46:41] Speaker 04:
They said, we looked at statistics.

[00:46:43] Speaker 04:
And we said, we do not see any appreciable increase in OVDI participation

[00:46:50] Speaker 04:
that is in any way correlated to publicity, which we can see in time, of the arrests, prosecution, and cooperations of bankers who are the related actions to Shan's claim.

[00:47:02] Speaker 00:
Page number there.

[00:47:03] Speaker 04:
Ooh, that's a good question.

[00:47:07] Speaker 04:
It is, starts at page 320.

[00:47:18] Speaker 04:
He says,

[00:47:22] Speaker 04:
his theory is that the publicity from Godola's prosecution and the threat of him providing information on other Swiss bank account holders induced many OVDI participants to come forward and volunteer.

[00:47:34] Speaker 00:
Just a page number is fine.

[00:47:35] Speaker 04:
Yes, 320 and 321.

[00:47:36] Speaker 04:
Great.

[00:47:38] Speaker 00:
and 3.2.

[00:47:39] Speaker 00:
I take that you do concede that the IRS took administrative action at some of the participants in the OVDI, but the point is it's completely independent in your view.

[00:47:49] Speaker 04:
We can't concede or not concede.

[00:47:51] Speaker 04:
What we can say is it's not categorically impossible that someone who participated in OVDI ever got audited.

[00:47:58] Speaker 04:
I mean, it could happen.

[00:48:00] Speaker 04:
We take issue with the framing of OVDI proceedings.

[00:48:03] Speaker 04:
There are not particular OVDI proceedings, as you've observed.

[00:48:07] Speaker 04:
It is an opportunity to taxpayers to come forward, cure filing deficiencies, report information that was required to be reported, and step into an agreed penalty structure.

[00:48:18] Speaker 04:
At pages four and five of our brief, we discuss how that works.

[00:48:21] Speaker 00:
So you say step into an agreed penalty structure.

[00:48:24] Speaker 00:
Maybe you could pick up where Ms.

[00:48:26] Speaker 00:
Blank left off in terms of explaining how typical and then maybe a complex OVDI situation unfolds.

[00:48:39] Speaker 04:
So there's a uniform penalty structure, and there's a non-prosecutionary.

[00:48:45] Speaker 04:
You come in and you pay your back taxes, you pay interest, and you pay penalties, including 20% of your account's peak value.

[00:48:54] Speaker 04:
And you can be settled up then.

[00:48:58] Speaker 04:
That may be enough.

[00:48:59] Speaker 04:
But you are providing information to the IRS, which it then does review and analyze.

[00:49:04] Speaker 04:
And we know, in contrast to what was suggested before,

[00:49:07] Speaker 04:
That does not rise to the level of an administrative action under the regulation.

[00:49:11] Speaker 00:
You can be settled up, meaning?

[00:49:13] Speaker 04:
Meaning that you are no longer in any dereliction of your filing duties.

[00:49:19] Speaker 04:
You no longer owe any taxes.

[00:49:21] Speaker 04:
You comply with the terms of the program.

[00:49:23] Speaker 00:
And you get something.

[00:49:24] Speaker 00:
You get a non-prosecution agreement.

[00:49:26] Speaker 04:
Yes, you get relief from prosecution.

[00:49:27] Speaker 04:
And you get relief from further penalties, which can accrue if you don't cure these deficiencies.

[00:49:33] Speaker 00:
And that is presumably a document signed off by both parties.

[00:49:38] Speaker 00:
I believe that's correct.

[00:49:42] Speaker 04:
And in some cases, when the IRS is reviewing and analyzing the information provided, or possibly even investigating matters that are raised by the information provided, that's still not necessarily an administrative action.

[00:49:59] Speaker 04:
It is administrative proceeding at that point.

[00:50:03] Speaker 04:
But an action is specifically defined in the regulation as

[00:50:09] Speaker 04:
All of a portion of a civil or criminal proceeding against any person may result in collected proceeds, for example, an examination, an audit, a collection proceeding, status determination, or criminal investigation.

[00:50:20] Speaker 04:
Could those things have happened to one or more OVDI participants as a result of information learned in their voluntary disclosures?

[00:50:27] Speaker 04:
Of course, we can't categorically say it couldn't have.

[00:50:30] Speaker 00:
That's not a concession.

[00:50:31] Speaker 00:
It doesn't result in collection because it ensues after the collection has been fully made.

[00:50:38] Speaker 04:
No, it could result in collection if there were a subsequent proceeding.

[00:50:44] Speaker 00:
So you're saying it's not a proceeding?

[00:50:46] Speaker 00:
Until it is.

[00:50:47] Speaker 00:
When you were reading the definition, I thought you were saying it's not a proceeding because it doesn't result in collection.

[00:50:51] Speaker 00:
You were saying it's not a proceeding because?

[00:50:53] Speaker 04:
I'm saying it's not an action within the meaning of the regulation until the IRS pursues an avenue to lead to additional proceeds outside of the amnesty provisions, which are kind of default conditions that you

[00:51:08] Speaker 04:
you could achieve through compliance.

[00:51:10] Speaker 00:
Because that's the amnesty.

[00:51:12] Speaker 00:
They're basically saying, holding over someone's head, we could bring a case against you.

[00:51:19] Speaker 00:
You do a bunch.

[00:51:19] Speaker 00:
We could.

[00:51:21] Speaker 00:
I mean, implicitly.

[00:51:22] Speaker 04:
That's not the position we're taking.

[00:51:24] Speaker 04:
And I would refer the court to the factual situation in the LSAC case, where we had an undisputed action, an audit, initiated based on a whistleblower complaint.

[00:51:35] Speaker 04:
And during the course of that audit,

[00:51:37] Speaker 04:
The issue identified by the whistleblower was investigated and found to be correct.

[00:51:43] Speaker 04:
The taxpayer had not made the errors that the whistleblowers had alleged.

[00:51:48] Speaker 04:
But then the IRS saw in a different tax year, an unrelated issue and proceeded with that.

[00:51:55] Speaker 04:
Investigated that issue, recovered enormous proceeds.

[00:51:58] Speaker 04:
And the whistleblower in LISAC said, that's still proceeding based on my information because you wouldn't have done this audit except for me.

[00:52:06] Speaker 04:
And this court held that that was not sufficient for recovery.

[00:52:09] Speaker 00:
And it's the same, it's similar.

[00:52:11] Speaker 00:
We held that there was jurisdiction.

[00:52:13] Speaker 00:
OK, so we can speak about jurisdiction.

[00:52:16] Speaker 00:
So that's one of my questions.

[00:52:19] Speaker 00:
The notion that there's, I mean, I find the tax court odd, the decision odd in saying,

[00:52:31] Speaker 00:
resting on the lack of a administrative proceeding, because administrative proceeding is basically very broadly defined.

[00:52:42] Speaker 00:
But you firmly subscribe to that reasoning.

[00:52:45] Speaker 04:
We see no error in it.

[00:52:49] Speaker 04:
But you have to keep in mind also that the tax court is looking at the claim that was before it, the claim that was in the petition.

[00:52:57] Speaker 04:
It wasn't saying, could US clients

[00:53:00] Speaker 04:
identifiable based on client lists later received in criminal investigations that are marginally related here.

[00:53:07] Speaker 04:
I mean, that was not the record.

[00:53:08] Speaker 04:
That was not the question before the tax court at all.

[00:53:11] Speaker 04:
The question was, did Shands's information cause OVDI or cause an increase in participation in OVDI to such an extent that he added that value in a compensable way?

[00:53:26] Speaker 04:
Could he get a whistleblower?

[00:53:27] Speaker 03:
The tax court seemed to imply categorically

[00:53:30] Speaker 03:
that an OVDI process is not a proceeding.

[00:53:36] Speaker 03:
And I think the real answer is, which you've conceded, sometimes it can become one.

[00:53:41] Speaker 03:
But I think that what's important for our purposes is it's not categorically one way or the other.

[00:53:47] Speaker 03:
It's sometimes.

[00:53:48] Speaker 03:
And isn't it correct that because the appellants have the burden for jurisdiction, they have to show that it was one in this case?

[00:53:58] Speaker 04:
First of all, absolutely, yes.

[00:53:59] Speaker 04:
But secondly, I would go back to your framing before of how each stage has to suffice.

[00:54:06] Speaker 04:
So the fact that administrative proceedings are conducted that may at some point in certain contexts have risen to the level of regulatory definition of an action

[00:54:19] Speaker 04:
is not enough.

[00:54:21] Speaker 04:
And the tax court did not take the position that that never happens in OVDI.

[00:54:26] Speaker 04:
What he said was no one is joining OVDI as an action against himself.

[00:54:32] Speaker 04:
That's not the IRS taking an action against you when you join.

[00:54:36] Speaker 04:
And that is absolutely correct.

[00:54:38] Speaker 04:
It's voluntary.

[00:54:39] Speaker 04:
but it can become an action against that person.

[00:54:42] Speaker 04:
An action can arise in the conduct of that person's dealings with OVDA, just as when you file your taxes, you can get audit.

[00:54:51] Speaker 04:
I promise nothing.

[00:54:53] Speaker 04:
But you can, any of us who, who, who file a tax return, get put in the audit lottery.

[00:54:59] Speaker 04:
It happens.

[00:55:00] Speaker 04:
And there are some taxpayers who are under continuous audit and are known to be under audit.

[00:55:05] Speaker 04:
And these, these are,

[00:55:06] Speaker 04:
proceedings that can be an action within the meaning of the regulation without establishing tax court jurisdiction.

[00:55:14] Speaker 04:
I'm going to go to the point that Judge Walker made before, which is that when you, it cannot be, the statute cannot reasonably be read.

[00:55:23] Speaker 04:
And I think the LISAC decision cannot reasonably be read to create presumptive jurisdiction over any whistleblower claim where a taxpayer is known to have been under audit.

[00:55:33] Speaker 04:
It simply cannot.

[00:55:33] Speaker 03:
So what's your position then on

[00:55:37] Speaker 03:
My question about jurisdiction is the finding of whether there's a related action or not.

[00:55:42] Speaker 03:
Is that jurisdictional or is that on the merits?

[00:55:48] Speaker 04:
We would refer the court back to the language of the statute, which is where we have to find our jurisdictional provisions and related actions are defined in the regulation.

[00:55:56] Speaker 04:
So it doesn't help us to look at the statute and say,

[00:56:00] Speaker 04:
jurisdictionally, what do you need here to have jurisdiction over a related action?

[00:56:04] Speaker 01:
I think it was a yes or no question.

[00:56:05] Speaker 04:
It is a yes or no question.

[00:56:06] Speaker 01:
Is your answer yes or no?

[00:56:07] Speaker 04:
Sadly, well, no.

[00:56:09] Speaker 04:
We do not believe that there's jurisdiction over a related action where there is not jurisdiction over an initial action.

[00:56:14] Speaker 03:
OK, but if there is, like in this case, then there is jurisdiction in this case, and it's a merits question whether it's related.

[00:56:20] Speaker 03:
Let me explain.

[00:56:21] Speaker 04:
There is jurisdiction over a determination regarding an award.

[00:56:25] Speaker 04:
Did you get a determination regarding an award in your related action?

[00:56:29] Speaker 04:
Well, a determination regarding an award requires that the secretary have proceeded with any administrative or judicial action based on your information.

[00:56:37] Speaker 04:
Those are the jurisdictional prerequisites after Lee Sack and after Lee.

[00:56:41] Speaker 04:
Did that happen in a related action?

[00:56:43] Speaker 04:
And related actions are discussed in the statute, so we can read that as a jurisdictional qualification.

[00:56:48] Speaker 04:
We don't have to resort to the reg.

[00:56:50] Speaker 04:
Now you're in the world where what is the prerequisite showing here?

[00:56:54] Speaker 04:
If there isn't an initial action, what can there be related to?

[00:56:57] Speaker 04:
Am I stopped there?

[00:56:58] Speaker 04:
And I think you have to be, so the answer then is no.

[00:57:01] Speaker 03:
But why isn't it correct that the original action is the original, I guess what Judge Pillard's been calling the top line people.

[00:57:08] Speaker 03:
Top line people.

[00:57:08] Speaker 03:
And then the question here is just whether this OBDI stuff is related, which is a merits question.

[00:57:14] Speaker 03:
Because the way the statute is read, it implies that related action

[00:57:18] Speaker 03:
is along with other things.

[00:57:19] Speaker 03:
It's a parenthetical.

[00:57:21] Speaker 03:
It's based on information brought to the secretary's attention, including any related actions.

[00:57:28] Speaker 03:
It all seems to be one determination.

[00:57:30] Speaker 03:
So once there's jurisdiction, which everybody agrees there is with respect to the original action, then the question is just, is the second part related or not?

[00:57:39] Speaker 03:
And that's a merits question.

[00:57:40] Speaker 04:
Is it a second determination or is it the same one?

[00:57:44] Speaker 04:
Now we have several related actions in this actual award determination where he got the money.

[00:57:50] Speaker 04:
There are a number of bankers and there's a bank.

[00:57:52] Speaker 04:
Those are related actions.

[00:57:53] Speaker 04:
We don't dispute that.

[00:57:55] Speaker 04:
And a claim that was properly formulated on which the IRS proceeded based on that same information, if it was in that sequence of dominoes, it would be under the same grant of jurisdiction.

[00:58:06] Speaker 04:
So the answer in that circumstance is yes.

[00:58:08] Speaker 00:
I understand that.

[00:58:10] Speaker 03:
I'm in trouble with that, too.

[00:58:11] Speaker 03:
I don't understand why this is distinguishable in its chain of dominoes from the other related actions.

[00:58:17] Speaker 00:
So I came in thinking that what's jurisdictional is proceeded with action and recovered money.

[00:58:27] Speaker 00:
And what's merits was the money that the whistleblower is seeking based on the information the whistleblower provided and or

[00:58:38] Speaker 00:
related to information in some further investigation related to the information provided.

[00:58:47] Speaker 00:
And I don't really have a clear sense from you, and I thought that was what Judge Pan was asking, whether we can think about related to as a merits question.

[00:58:58] Speaker 00:
You may still win.

[00:58:59] Speaker 00:
I understand very clearly that you think there's no basis here, but what we're trying to do is sort out the grounds.

[00:59:06] Speaker 00:
And one of the things that

[00:59:08] Speaker 00:
our court has struggled with is avoiding treating every issue as a jurisdictional issue, because that's not the way we ordinarily read statutes.

[00:59:22] Speaker 00:
Treating something as jurisdictional, the Supreme Court has told us many times, is disfavored.

[00:59:27] Speaker 00:
We should only treat as jurisdictional things that clearly are.

[00:59:31] Speaker 00:
So what, in your view, must we treat as jurisdictional?

[00:59:36] Speaker 04:
the IRS must proceed with an action based on information brought to the secretary's attention by the whistleblower.

[00:59:45] Speaker 04:
If that happened in the related action, then it is subject to that same jurisdictional.

[00:59:51] Speaker 04:
So that's a yes to Judge Pan's question.

[00:59:53] Speaker 00:
You do think that based on is jurisdictional?

[00:59:55] Speaker 04:
We do.

[00:59:57] Speaker 04:
We do.

[00:59:58] Speaker 04:
But it is merits as well.

[00:59:59] Speaker 04:
And there are two readings of based on.

[01:00:02] Speaker 04:
And this goes to the question you raised before, which is, can we look at this two different ways?

[01:00:06] Speaker 04:
Because based on, in a jurisdictional context, means that there absolutely needs to be an element of causation.

[01:00:14] Speaker 04:
And the regulation does say but for, but that's the regulation.

[01:00:18] Speaker 04:
The statute does not say that.

[01:00:20] Speaker 04:
We would certainly submit there has to be proximate causation.

[01:00:23] Speaker 04:
And in the case of an OVDI participant, his voluntary participation disrupts that.

[01:00:28] Speaker 04:
If they had stated a claim from the beginning that said, US clients of

[01:00:34] Speaker 04:
these bankers.

[01:00:34] Speaker 04:
And in fact, they did to some extent state that claim because two such clients were found and audited and were part of that award.

[01:00:41] Speaker 04:
And there is jurisdiction over those and over any others who then are related actions to those top line investigations.

[01:00:50] Speaker 04:
That's the jurisdictional reading of based on.

[01:00:53] Speaker 04:
Then there's the merits reading of based on, which is how substantial was their contribution?

[01:00:57] Speaker 04:
Was it an abuse of discretion only to give you 15% instead of 20 or 25 or 30% of the proceeds collected?

[01:01:04] Speaker 04:
Those are two equally reasonable readings of the term based on.

[01:01:09] Speaker 04:
But you cannot decouple causation from the jurisdictional determination, or else you're in the universe where anyone can blow the whistle on Judge Walker's taxes and not in a way that is fruitful to anyone and does not entitle anyone to scrutiny into the affairs of another.

[01:01:28] Speaker 01:
Can I get your reaction to this?

[01:01:30] Speaker 01:
I think that everything you just said might be right.

[01:01:34] Speaker 01:
I'd not be right.

[01:01:35] Speaker 01:
I think it's hard.

[01:01:37] Speaker 01:
And I think, and by it, I mean whether the related action question is jurisdictional or merits.

[01:01:48] Speaker 01:
I don't think that the blue brief argued that even if it's not a related action on the merits, there is still jurisdiction.

[01:02:03] Speaker 01:
And because the blue brief didn't argue that, I think that that argument was forfeit.

[01:02:09] Speaker 01:
Thoughts?

[01:02:10] Speaker 04:
Agree.

[01:02:13] Speaker 04:
Agree.

[01:02:14] Speaker 04:
And that's a simple answer to a complex question.

[01:02:18] Speaker 04:
But I have gone well over my time.

[01:02:22] Speaker 04:
I'm happy to respond to further questions that the court has.

[01:02:27] Speaker 00:
I have a question of sort of implications of potential ruling in this case.

[01:02:31] Speaker 00:
Aren't there instances or might there be instances in which a whistleblower works with the government in advance of filing a Form 211?

[01:02:40] Speaker 00:
So the award request doesn't need to be forwarded for examination in order for the IRS to proceed with an administrative action based on the information provided by the whistleblower.

[01:02:51] Speaker 00:
That's what happened in this case.

[01:02:54] Speaker 00:
In other words,

[01:02:57] Speaker 00:
The first from the whistleblower office is not a prerequisite to the IRS proceeding with an action per?

[01:03:05] Speaker 04:
Well, for an administrative action, it can be.

[01:03:07] Speaker 04:
This was a judicial action.

[01:03:08] Speaker 04:
This was a criminal investigation.

[01:03:09] Speaker 04:
Well, they were both, arguably.

[01:03:12] Speaker 04:
And downstream, there can be more.

[01:03:13] Speaker 04:
But in a criminal investigation, you're almost always going to be dealing with IRSCI before you're dealing with the whistleblower office.

[01:03:20] Speaker 04:
And the whistleblower office has a coordination function.

[01:03:23] Speaker 04:
And it does reach out and it looks at the Form 211 and it will contact the relevant places in the IRS where these investigations are taking place and say, is this guy helping you?

[01:03:34] Speaker 04:
Are you getting good information from this whistleblower?

[01:03:36] Speaker 04:
Are we actually proceeding based on his information?

[01:03:38] Speaker 04:
And then they track the collection of proceeds and that happened here.

[01:03:41] Speaker 04:
That's what happened in the criminal proceeding.

[01:03:43] Speaker 04:
The administrative referral is inside the IRS and it's when you're going to an audit, not when you're going to court, not when you're going to an indictment.

[01:03:50] Speaker 04:
And the regulation includes multiple different examples of

[01:03:54] Speaker 04:
actions, some of which, as you observed correctly, won't require an administrative referral from one part of the IRS to another because the part of the IRS that's concerned with the proceeding with that action is already underway and they're already working on it.

[01:04:12] Speaker 04:
The whistleblower's office just will synchronize with them and monitor and make sure that the proceeds are accounted for so the whistleblower gets his fair share.

[01:04:19] Speaker 00:
So I guess one of my concerns with the notion that based on is jurisdictional and that I take your point that related to also is jurisdictional.

[01:04:32] Speaker 04:
In that you cannot have jurisdiction over a related action without a predicate action.

[01:04:37] Speaker 00:
But the predicate action could be the top line action in this case if the facts.

[01:04:41] Speaker 04:
If facts were different, you could state a related another related claim to the top line action in this case.

[01:04:48] Speaker 04:
There are arguments about administrative finality, but yes.

[01:04:52] Speaker 00:
But the based on is it can be quite a fact intensive consideration, which is why my instinct was that the service would not want to claim that that's jurisdictional and that it functionally shouldn't be treated as jurisdictional.

[01:05:13] Speaker 04:
We submit that the statute needs an element of

[01:05:18] Speaker 04:
Causation that's correlative.

[01:05:21] Speaker 04:
And we derive that from the based on language.

[01:05:23] Speaker 00:
So you're treating based on as but for cause for jurisdictional purposes and as substantial.

[01:05:28] Speaker 00:
Approximate cause for jurisdictional purposes.

[01:05:32] Speaker 04:
But causation.

[01:05:33] Speaker 00:
I thought your brief said that, or maybe it was the.

[01:05:36] Speaker 00:
The regulation says but for.

[01:05:36] Speaker 00:
The regulation says that tort concepts of proximal cause have no place in tax law.

[01:05:42] Speaker 04:
OK.

[01:05:44] Speaker 04:
The regulation says but for.

[01:05:45] Speaker 04:
We are most comfortable with that.

[01:05:47] Speaker 04:
that.

[01:05:47] Speaker 04:
But that but we're also not suggesting that jurisdiction provisions come forward.

[01:05:51] Speaker 00:
So my question was, Am I correct that I heard you say that for jurisdictional purposes based on means but for causation and on merits.

[01:05:59] Speaker 00:
It's uh, substantiality of contribution contribution.

[01:06:02] Speaker 00:
Yes.

[01:06:06] Speaker 04:
Is that in your brief?

[01:06:08] Speaker 04:
Certainly not to that degree of granularity, but it is

[01:06:17] Speaker 04:
based on that information, and it's consistent with this court's holding in the sack, which where that was a stipulated fact and consistent with this court's holding in Lee, which said where the IRS clearly has proceeded with no action, there's no jurisdiction.

[01:06:32] Speaker 01:
Has the IRS taken any positions in this case that are in conflict with the positions it's taken in other cases?

[01:06:38] Speaker 04:
Not that I'm aware of.

[01:06:44] Speaker 03:
Is it important whether we label this jurisdictional or merits?

[01:06:47] Speaker 03:
Because it seems like the IRS and the tax court have to do the same work either way to sort through these issues.

[01:06:55] Speaker 03:
And before Lee, you were deciding everything on the merits anyway.

[01:06:59] Speaker 04:
Yeah, it would have been more of a 12b6 situation than a 12b1 situation.

[01:07:04] Speaker 04:
And I think that's the only distinction.

[01:07:05] Speaker 00:
But as a practical matter, speaking for the service, what rides on that?

[01:07:09] Speaker 00:
What's the practical shot of

[01:07:11] Speaker 00:
saying that based on or related.

[01:07:13] Speaker 00:
Sure, sure.

[01:07:14] Speaker 04:
Well, the practical upshot is that many whistleblowers are looking for access to taxpayer information in an audit.

[01:07:24] Speaker 04:
And what appear to an outside viewer to be barriers to the whistleblower procedures are actually taxpayer protections against that invasive level of scrutiny against me.

[01:07:39] Speaker 04:
filing a whistleblower claim against a taxpayer I know nothing about in order to obtain access to his tax returns.

[01:07:45] Speaker 04:
So such gatekeeping as you see in these whistleblower actions comes from that.

[01:07:50] Speaker 04:
It comes from a place of we don't want strangers getting access to taxpayer information, but we do want people with information we don't have to help us pursue collection from these taxpayers and we want to reward those people.

[01:08:08] Speaker 03:
So in Judge Walker's hypothetical, if somebody just tried to get his tax returns as a related action, if the IRS were able to say, we have no jurisdiction over that, they wouldn't even look at his information.

[01:08:23] Speaker 03:
Whereas if it was a merits claim because it was related to something they did have jurisdiction over, they would have to look at his records.

[01:08:30] Speaker 03:
They might need to.

[01:08:31] Speaker 03:
I see.

[01:08:34] Speaker 01:
I don't like that.

[01:08:36] Speaker 00:
I mean another way of looking at it is that you're making jurisdictional something that is completely unrealistic for the taxpayer to have information about.

[01:08:47] Speaker 00:
I mean the questions about

[01:08:50] Speaker 00:
taxpayer privacy and privileges and what's obtainable are, those can be treated as merits questions.

[01:08:56] Speaker 00:
And the IRS has quite a arsenal of defenses for taxpayer privacy.

[01:09:01] Speaker 04:
They can.

[01:09:02] Speaker 04:
And I also, I want to reset the premise there because the whistleblower proceeding in the tax court is a review of a closed administrative record for abuse of discretion.

[01:09:12] Speaker 04:
It's not a de novo proceeding.

[01:09:14] Speaker 04:
You're not getting a trial.

[01:09:15] Speaker 04:
You're not getting discovery on things you don't already know.

[01:09:17] Speaker 04:
the proceeding below and whistleblowers again have been litigating mightily in attempts to get there and the protections exist so that that can't happen.

[01:09:29] Speaker 00:
Do we, in this case, need to decide the distinct question whether the service took administrative or judicial action against the OVDI taxpayers?

[01:09:42] Speaker 00:
Do we need to decide that question?

[01:09:44] Speaker 04:
You do not, because the fact that they volunteered means that anything that happened or didn't happen subsequent to that is outside of the causal chain of the whistleblower's information.

[01:09:56] Speaker 04:
The IRS is not reading something you said and

[01:10:00] Speaker 04:
taking actual action based on information you gave us we didn't have before.

[01:10:05] Speaker 00:
We are instead proceeding.

[01:10:06] Speaker 00:
You had an answer to the question, not a reason why we don't need to answer it.

[01:10:11] Speaker 00:
I just asked, do we need to decide whether the IRS took administrative or judicial action?

[01:10:16] Speaker 00:
And then you just said, well, they didn't because voluntarily.

[01:10:19] Speaker 00:
So I mean, if there's an administrative or judicial action against the top line,

[01:10:27] Speaker 00:
targets of this whistleblower's information, one theory is related to can piggyback on that.

[01:10:34] Speaker 00:
I hear you to be saying, and responding, I mean, the tax court didn't decide that way.

[01:10:38] Speaker 00:
The tax court said we're looking at whether there was separate administrative or judicial action against the OBDI participants.

[01:10:45] Speaker 00:
And I guess partly I'm asking you whether it is tenable for us to go with a theory that was not the tax court's theory.

[01:10:54] Speaker 00:
that there might have been jurisdiction based on?

[01:10:58] Speaker 04:
Well, this court can affirm on the facts here without having to reach the legal question of whether a hypothetical administrative action might have bestowed jurisdiction.

[01:11:10] Speaker 04:
Because what you're saying is, why do we need to open that can of worms?

[01:11:15] Speaker 04:
Why do we need to make a legal determination here?

[01:11:18] Speaker 04:
And the answer is, on the facts, you don't.

[01:11:20] Speaker 04:
The low-hanging fruit is because we know

[01:11:24] Speaker 04:
that it wasn't alleged that this happened at either the administrative or the tax court petition phase.

[01:11:32] Speaker 04:
Those are the questions that the tax courts anyway was answering.

[01:11:34] Speaker 00:
But you're saying that we do need to decide that at least that Mr. Shands did not allege that the IRS took administrative or judicial action.

[01:11:43] Speaker 04:
He did not point to any particular instance of an administrative or judicial action that was attributable to anything he

[01:11:53] Speaker 04:
Advise the IRS that they didn't already know that they didn't otherwise learn.

[01:11:58] Speaker 03:
So you're saying that even assuming that there was some kind of administrative action later in the chain, it doesn't matter because whatever that was was not based on.

[01:12:09] Speaker 03:
That's right.

[01:12:09] Speaker 04:
And I think that's that's the that's the position we took on that whatever may have happened and we can't categorically take a position that

[01:12:17] Speaker 04:
Like I said before, no one ever got audited.

[01:12:19] Speaker 04:
Someone may have gotten indicted.

[01:12:22] Speaker 04:
It was a large program.

[01:12:23] Speaker 04:
There were billions of dollars involved.

[01:12:25] Speaker 04:
All sorts of things can happen, and that's individual taxpayer information.

[01:12:28] Speaker 04:
Without needing to look at that, you know that none of that had to do with Thomas Shands wearing a wire to... Because it was based on the voluntary... Exactly.

[01:12:39] Speaker 03:
...provision of information by the taxpayers, and that breaks the causal chain from... Yes, precisely.

[01:12:45] Speaker 03:
Okay.

[01:12:46] Speaker 00:
So when you say we can affirm on the facts, the facts treated as jurisdictional impact.

[01:12:51] Speaker 00:
Treated as jurisdictional.

[01:12:58] Speaker 05:
Thank you.

[01:13:08] Speaker 00:
Did Ms.

[01:13:09] Speaker 00:
Blank, okay.

[01:13:09] Speaker 00:
She reserved two minutes.

[01:13:11] Speaker 00:
Thank you.

[01:13:12] Speaker 00:
Very quickly.

[01:13:18] Speaker 02:
In response to Judge Walker's question, we're in the brief.

[01:13:23] Speaker 02:
We included the argument on page 39 of the initial brief.

[01:13:30] Speaker 02:
We say the IRS's determination that the OBDI proceedings are not related actions is a determination regarding an award under section 7623 before sufficient to best jurisdiction in the tax court.

[01:13:45] Speaker 01:
That's at the bottom of page 39.

[01:13:47] Speaker 02:
set about the middle, page 39.

[01:13:50] Speaker 01:
The IRS's determination that the OVDI proceedings are not related actions, termination regarding an award under B4, sufficient to pass jurisdiction.

[01:14:01] Speaker 01:
As a result, the course should reverse.

[01:14:03] Speaker 01:
What if we disagree with you that it is a determination regarding an award?

[01:14:12] Speaker 01:
Oh, sorry.

[01:14:13] Speaker 01:
I see.

[01:14:14] Speaker 01:
All right, I'll think about that.

[01:14:16] Speaker 02:
OK.

[01:14:17] Speaker 02:
I think to answer the question that you are almost going to ask me, it depends on why you think that.

[01:14:22] Speaker 02:
If you think it's because it's not in action, or if you think it because you've gone to the merits, in my view.

[01:14:28] Speaker 01:
If you think it because it's not an action, then this is not an argument that we should not, the tax court should have denied on the merits rather than denied on jurisdiction.

[01:14:46] Speaker 02:
I don't think the tax court did reach the merits of that decision.

[01:14:51] Speaker 02:
I think he just said it's not, I don't have jurisdiction because a related action has to be in action and OVDI can never be in action and so there's no jurisdiction over anything.

[01:15:04] Speaker 01:
I think I'll look at it closely.

[01:15:06] Speaker 01:
Thank you.

[01:15:06] Speaker 01:
I appreciate the follow-up.

[01:15:07] Speaker 02:
Sure.

[01:15:09] Speaker 02:
I wanted to, if I can, just a moment address the suggestion that Mr. Shands did not ask for any taxpayer information.

[01:15:19] Speaker 02:
In fact, he did.

[01:15:20] Speaker 02:
He asked for the number of taxpayers who disclosed account for each of the top line individuals and banks.

[01:15:32] Speaker 02:
including the amount of tax penalties interest.

[01:15:36] Speaker 02:
He asked the IRS to identify all foreign account related voluntary disclosure submissions received by the IRS related to the bankers or BKB.

[01:15:47] Speaker 02:
And so in fact, he did specifically ask for taxpayer U.S.

[01:15:53] Speaker 02:
client taxpayer information.

[01:15:55] Speaker 03:
What's your response to opposing counsel's position that even if

[01:16:02] Speaker 03:
He did ask for the information, you know, even if, regardless of whether or not there was an administrative action, we can decide this case just based on the fact that there's no, I guess, based on or causation because the fact that the OVDI program requires taxpayers to volunteer their information, that kind of broke the chain.

[01:16:29] Speaker 03:
That's what they were relying on.

[01:16:31] Speaker 03:
And so I guess the suggestion is we could just resolve this case saying, even assuming all that were true, we wouldn't have jurisdiction because it's not based on.

[01:16:44] Speaker 02:
But I don't think there is any authority for the position that a voluntary disclosure breaks the causal chain.

[01:16:52] Speaker 02:
And in fact, the cases we've cited in our brief confirm that that's not true.

[01:16:57] Speaker 03:
But why is it based on?

[01:17:00] Speaker 03:
Mr. Shands is information if instead it's based on the voluntary provision of information.

[01:17:06] Speaker 02:
So I think there are two reasons for that.

[01:17:07] Speaker 02:
One, there's the statement of the federal prosecutors who said specifically to the federal district court that Shands disclosure spurred these taxpayers to enter the OVDI.

[01:17:20] Speaker 02:
And then if you look at the Awad case and

[01:17:25] Speaker 02:
whistleblower 14376, you'll look and the court says there are two things we have to consider.

[01:17:32] Speaker 02:
One is, did the whistleblower's information cause the taxpayer's entry into the voluntary disclosure program?

[01:17:43] Speaker 02:
And two, was the whistleblower's information used in the examination of the taxpayer's voluntary disclosure?

[01:17:51] Speaker 02:
That suggests that it's absolutely incorrect to say that once there's been a voluntary submission to OVDI or OVDP, whichever one it is, that all bets are off.

[01:18:04] Speaker 02:
Because the court here is telling us, here are the factors that you look at post submission to a voluntary proceeding to see if the IRS used the information.

[01:18:15] Speaker 02:
Did it spur the entry into the voluntary disclosure program?

[01:18:19] Speaker 02:
And did the IRS use the information to test the disclosures that were made or to, you know, fill them out?

[01:18:25] Speaker 03:
That even under that scenario, it's not based on the taxpayers information.

[01:18:29] Speaker 03:
It's still based on the voluntary information that was provided.

[01:18:33] Speaker 02:
Well, I think it depends on what the answers to the questions are.

[01:18:36] Speaker 02:
Right.

[01:18:36] Speaker 02:
You know, it may well be that, you know, that the court would conclude that it didn't.

[01:18:43] Speaker 03:
Spurring cannot be based on.

[01:18:45] Speaker 03:
Spurring is not based on the information.

[01:18:47] Speaker 03:
Well, get the actual proceeding cannot be big.

[01:18:50] Speaker 03:
It might be a but for causation, but it's not based on Mr. Shands is information if it's actually based on what the taxpayers gave.

[01:18:58] Speaker 02:
Well, I'm during doesn't change that.

[01:19:00] Speaker 02:
I understand that, but that's inconsistent with what the tax court has said in a wide and in whistleblower 14376.

[01:19:06] Speaker 02:
It disagrees with your conclusion that spurring is not enough.

[01:19:12] Speaker 02:
In fact, it refused to grant summary judgment in favor of the IRS.

[01:19:17] Speaker 02:
in taxpayer 14376 just because it couldn't make that determination on the record that was before it.

[01:19:23] Speaker 02:
And in fact it said we have to remand and we have to make a determination about whether in fact these people were spurred to enter the program.

[01:19:30] Speaker 02:
But of course we don't need that fact finding here because we have the federal prosecutor statement that says it.

[01:19:35] Speaker 00:
Ms.

[01:19:35] Speaker 00:
Blank do you disagree with Ms.

[01:19:37] Speaker 00:
Aveda's point that or her position that based on there has to be at least some

[01:19:44] Speaker 00:
based on nexus, but for causation for the jurisdictional inquiry?

[01:19:51] Speaker 02:
No.

[01:19:52] Speaker 00:
And what's your support for that?

[01:19:54] Speaker 02:
I would point the court to LSAC.

[01:19:57] Speaker 02:
In that case, essentially the court said, all right, there was action here, but whether or not that action was based on the taxpayer's information is not jurisdictional.

[01:20:09] Speaker 02:
In fact, it is just the mayor's determination.

[01:20:13] Speaker 02:
And likewise, you look at the same cases, you look at the Awad case, you look at Quistal Blower 14376, and both of those cases say, we have to look, yeah, we have jurisdiction.

[01:20:29] Speaker 02:
And it's interesting, if you'll bear with me for a quick detour, in 14376, the tax court, in its description of the background, very similar situation.

[01:20:43] Speaker 02:
whistleblower files his claim taxpayers enter into a voluntary disclosure program the revenue agent says wait a minute they're not qualified for the voluntary disclosure program because we already have whistleblower information but we'll go ahead and let it let them do it and then the tax court said very interestingly

[01:21:07] Speaker 02:
that the revenue agent conducted his examination for taxpayers 1, 2, and 3 as voluntary disclosures.

[01:21:15] Speaker 02:
So it is quite clear that- As voluntary?

[01:21:19] Speaker 02:
As voluntary disclosures.

[01:21:22] Speaker 00:
Well, and then used further information to fraud and pull more information out of the tax, but used the whistleblower information- Correct.

[01:21:29] Speaker 00:
To get more than what was voluntarily proffered.

[01:21:32] Speaker 00:
That's right.

[01:21:33] Speaker 02:
That's right.

[01:21:33] Speaker 02:
Or at least that was the argument.

[01:21:35] Speaker 02:
That was the reason for no summary judgment, because there was disputed facts about that.

[01:21:39] Speaker 00:
If you don't think there's a nexus requirement, a but for causation requirement, that the administrative action had to be caused by the whistleblower's information, then what about Judge Walker's hypothetical that if he files an action, then

[01:21:57] Speaker 00:
or there's a, what was your hypothetical, an action against you and then it can collect all the OBDI people or part of Mr. Chan's proceeds.

[01:22:06] Speaker 00:
I mean, there has to be.

[01:22:08] Speaker 02:
Sure.

[01:22:08] Speaker 02:
I mean, I think that's easily disposed of.

[01:22:10] Speaker 02:
I mean, the court has jurisdiction to summarily deny it because it's not related or it didn't, you know, they didn't rely on the information.

[01:22:17] Speaker 02:
It was, you know, something completely, you know, in the stratosphere and not related to things.

[01:22:22] Speaker 01:
It's like a fountain of youth for jurisdiction.

[01:22:25] Speaker 01:
Once you're in,

[01:22:26] Speaker 01:
You can always bring any claims you want, call them related.

[01:22:31] Speaker 01:
And you're saying the tax court will forever have jurisdiction, no limiting principle.

[01:22:39] Speaker 02:
Well, of course, you know, I mean, they're just going to, you know, affirm the claim because it's, you know, it has no basis, but that doesn't mean that there's no jurisdiction.

[01:22:49] Speaker 02:
I mean, if it is a determination regarding an award,

[01:22:53] Speaker 02:
Yeah, then the court has jurisdiction.

[01:22:56] Speaker 01:
What's an example of something that would have broken the causal chain here?

[01:23:08] Speaker 02:
So I think one thing that would have broken the causal chain here is my colleague suggests that Mr. Shands was attempting to collect proceeds

[01:23:22] Speaker 02:
from every participant in the 2011 OVDI.

[01:23:27] Speaker 02:
But let's assume that there was a participant in the OVDI that had offshore accounts not related to any of these Swiss bankers or banks, but instead the account was in Costa Rica and it was part of an entirely different tax scheme.

[01:23:46] Speaker 02:
I think the causal connection in that case would have been broken.

[01:23:50] Speaker 01:
Why wouldn't that person have been spurred

[01:23:53] Speaker 02:
Well, I guess it's possible he could have been spurred if he read the publicity and thought, oh, my gosh, I'm in the same situation.

[01:24:01] Speaker 02:
But if that person had not been tracking anything that was going on with Swiss bank accounts and just entirely unrelated because his accountant or other financial advisor told him, you know what?

[01:24:14] Speaker 02:
you need to get out of trouble.

[01:24:15] Speaker 02:
Let's do this.

[01:24:16] Speaker 02:
This program has been initiated.

[01:24:19] Speaker 02:
Then I think that would be something that would be entirely, I keep using related, but I don't mean it in that sense.

[01:24:25] Speaker 02:
It would not be causally related to the information that Shands provided.

[01:24:32] Speaker 02:
And so I think it would break the causal connection there because the federal prosecutor's statement would at least create a question.

[01:24:41] Speaker 02:
And then I think it would be possible for the government to say,

[01:24:44] Speaker 02:
you know, there's no indication that this person had any, you know, role in the same tax scheme, wasn't on a client list, you know, had no involvement with any of the top line folks or the top line bank.

[01:24:57] Speaker 00:
What is the specific discovery that you requested that you were denied that you think would make a critical difference?

[01:25:08] Speaker 02:
So we asked, and this is in a motion to compel responses to the second request for production.

[01:25:14] Speaker 02:
That supplemental appendix SA 93 and 99.

[01:25:22] Speaker 02:
I'm going to give you another site, supplemental appendix 15 and 16.

[01:25:28] Speaker 02:
And you were saying, I'm sorry, you were describing it.

[01:25:35] Speaker 02:
Ask them to include in the record the documents and transcripts reflecting Shans extensive cooperation with the IRS.

[01:25:43] Speaker 02:
So the information that he did provide, not in the administrative record.

[01:25:48] Speaker 02:
Identify all foreign account related voluntary disclosure submissions received by the IRS during the relevant time period, including the names of banks, bankers, and or financial advisors disclosed by each.

[01:26:03] Speaker 02:
intended to ensure that we're only dealing with the U.S.

[01:26:06] Speaker 02:
customers or U.S.

[01:26:08] Speaker 02:
clients of the top line bankers.

[01:26:11] Speaker 02:
So this is a culling process of saying, okay, these are the people that we're only interested in in the U.S.

[01:26:18] Speaker 02:
clients.

[01:26:20] Speaker 02:
Provide the number of taxpayers disclosing accounts from each bank and banker, the top line,

[01:26:28] Speaker 02:
with the total amounts of taxes, penalties, interest, and miscellaneous penalties collected.

[01:26:33] Speaker 02:
And there was other stuff too, but those are the ones that I think are the most pertinent in terms of trying to identify which of the overall pool of OVDI participants were the U.S.

[01:26:43] Speaker 02:
clients of these folks.

[01:26:46] Speaker 03:
And so, you know- What would you have done with that?

[01:26:48] Speaker 03:
Would you have deposed them to see if they were spurred to report based on the publicity?

[01:26:53] Speaker 02:
Well, first thing we would have done is look at their OVDI file and see what happened.

[01:26:58] Speaker 02:
You know, where they have to prove that they were spurred, wouldn't you?

[01:27:02] Speaker 02:
Well, we could prove that they were spurred or we could prove that the IRS you shins information.

[01:27:08] Speaker 02:
So there are two ways to approach it.

[01:27:12] Speaker 02:
And so if we see in the OVDI file that the IRS used Shan's information to send a flurry of document requests and to talk to a bunch of witnesses and said, you know, we don't believe your disclosures are full.

[01:27:25] Speaker 02:
You mean after they voluntarily disclose?

[01:27:27] Speaker 02:
Correct.

[01:27:27] Speaker 03:
If they then used.

[01:27:29] Speaker 02:
Correct.

[01:27:31] Speaker 02:
then I think we would have said, okay, well, clearly they relied on this information in taking further action against, you know, after the voluntary disclosure happened.

[01:27:41] Speaker 02:
And that's exactly what the case in whistleblower 1376.

[01:27:44] Speaker 03:
So there would have to be an examination or some further proceeding, and they would have had to have used information provided by chance.

[01:27:52] Speaker 02:
Well, I don't, so the first is the jurisdictional issue, right?

[01:27:55] Speaker 02:
Is there something that constitutes

[01:27:59] Speaker 02:
administrative actions, something that's sufficient to be administrative action.

[01:28:04] Speaker 02:
And then the second is, was the- It has to be based on, doesn't it?

[01:28:08] Speaker 03:
So the actual examination would have to be based on Shands's information, which that's not your theory.

[01:28:15] Speaker 03:
Your theory is after they start the examination based on the voluntary provision of information, then they used- It could be either.

[01:28:23] Speaker 02:
According to 14376,

[01:28:26] Speaker 02:
It's either they were spurred to enter the voluntary by the threat or the compulsion that, you know, came into existence as a result of Shands information, or once they already entered the program, did the government use the Shands information to test the submissions for accuracy or did they press?

[01:28:47] Speaker 00:
But he didn't provide any information about those taxpayers.

[01:28:50] Speaker 00:
So how could he, how could the IRS be using Shands's information to test

[01:28:55] Speaker 00:
OBDI participants except in a very generic sense of he identified a type of of tax evasion.

[01:29:05] Speaker 02:
So essentially I think what the federal prosecutor said is that as a result of the Sheehan's information, Godola provided

[01:29:16] Speaker 02:
an extensive explanation for how the tax evasion schemes worked that allowed the government to understand that not only from the bank's perspective, but also from the taxpayer's perspective, the client's perspective.

[01:29:32] Speaker 02:
The prosecutor didn't talk about chance.

[01:29:34] Speaker 03:
The prosecutor just said it can't be doubted that Godola's guilty plea and the public nature of his cooperation.

[01:29:40] Speaker 03:
and the prosecutions were a benefit.

[01:29:41] Speaker 02:
But of course, the US would not have, they got that information because of Shands, because Shands wore the wire when he met with Godola and Godola said during the wired conversations, here's how we run this, here's what we do, here's how the scheme works.

[01:29:56] Speaker 03:
But for causation again though, because nobody's using the information from Shands or even the information derived from Shands

[01:30:06] Speaker 03:
in any of these examinations of OVDI proceedings.

[01:30:11] Speaker 03:
It's really far afield, I guess.

[01:30:13] Speaker 02:
But we don't know, because we don't know, for example, what happened in those examinations.

[01:30:20] Speaker 03:
It's inconceivable, though, that a taxpayer voluntarily gave information, the IRS decides to do an audit, let's say, and then in that

[01:30:31] Speaker 03:
audit, they say in Shands wore a wire with Godola and therefore how would that be relevant to some third party taxpayer that had nothing to do with that call?

[01:30:43] Speaker 02:
So let's say that I enter into the voluntary disclosure program and I disclose 10 accounts, but I've got 12.

[01:30:51] Speaker 02:
And the client lists that the government got as a result of the Shands information shows that I've got 12.

[01:30:59] Speaker 01:
There you go.

[01:31:01] Speaker 02:
Go ahead.

[01:31:02] Speaker 01:
Isn't the pleading standard higher than that?

[01:31:06] Speaker 01:
Doesn't it require something less speculative than that?

[01:31:10] Speaker 02:
Well, I mean, to go back to Judge Pollard's point, I mean, the whistleblower then is in a real tough spot.

[01:31:17] Speaker 02:
I mean, essentially what you're going to say, I guess, if that is the outcome, is that the IRS can effectively insulate its decisions from any review.

[01:31:31] Speaker 02:
because it prepares the administrative record and has the discretion to put in it what it wants to put in it.

[01:31:39] Speaker 02:
It relies on taxpayer privacy to say, we're not telling you who participated in OVDI, what happened, what we collected, nothing.

[01:31:49] Speaker 02:
And so if I am a whistleblower and I say, I am providing information on Godola,

[01:32:00] Speaker 02:
And that's gonna generate proceeds, not only from Godola, but from Godola's US taxpayer clients.

[01:32:07] Speaker 02:
I can never collect from the taxpayer clients because I don't have any access into the IRS process to know what the IRS did with that information.

[01:32:20] Speaker 01:
It seems like it's not an insurmountable standard because he already got $8 million.

[01:32:26] Speaker 02:
Well, yeah, from different people.

[01:32:29] Speaker 02:
I mean, it's just going to say that, OK, this is really effectively no different than saying that we are never going to recognize the payment of a whistleblower award in an OVDI because you can't get there from here.

[01:32:46] Speaker 02:
You can't get the information, and we're not going to let you have it, even though we know it's spurred all of these people to enter into.

[01:32:53] Speaker 01:
Maybe, I don't know if this is a fair question or not, but then there's something to be said for just

[01:32:59] Speaker 01:
sharing what's on my mind, giving you a chance to tell me why I'm on.

[01:33:03] Speaker 01:
I keep thinking of that line, for want of a nail, the shoe was lost.

[01:33:08] Speaker 01:
You know this?

[01:33:09] Speaker 00:
No.

[01:33:09] Speaker 01:
For want of a shoe, the horse was lost.

[01:33:12] Speaker 01:
For want of a horse, the messenger was lost.

[01:33:15] Speaker 01:
For want of a messenger, the battle was lost.

[01:33:16] Speaker 01:
For want of a battle, the kingdom was lost.

[01:33:18] Speaker 01:
All because of the want of a horseshoe nail.

[01:33:22] Speaker 01:
Got to go, yes, there was a but-for relationship between no horseshoe nail and the king losing the kingdom.

[01:33:30] Speaker 01:
But there's a lot of steps in between.

[01:33:34] Speaker 02:
Well, I know, but fair's fair.

[01:33:36] Speaker 02:
This is a non-discretionary award.

[01:33:40] Speaker 02:
Congress decided this is how this is going to work.

[01:33:43] Speaker 02:
If it was caused.

[01:33:44] Speaker 02:
Yeah.

[01:33:46] Speaker 02:
Yeah.

[01:33:46] Speaker 02:
And we have a federal prosecutor representing to the federal district court that this spurred.

[01:33:57] Speaker 02:
And look, there are 12 US customers

[01:34:01] Speaker 02:
discussed in the Godola indictment where the IRS said, these 12 clients entered into OVDI because of this information.

[01:34:11] Speaker 02:
So this is not just speculation.

[01:34:13] Speaker 02:
I mean, when it serves the government's purposes, it's acknowledging the import and the helpfulness of the information, but then it doesn't want to pay for using it.

[01:34:26] Speaker 02:
or even tell us anything about it.

[01:34:29] Speaker 02:
If the government had said, okay, here's some information.

[01:34:32] Speaker 02:
Here are these, let's start with these 12 files.

[01:34:35] Speaker 02:
Here's what happened, nothing.

[01:34:40] Speaker 02:
I mean, I think they did pay.

[01:34:42] Speaker 02:
Well, not for this information.

[01:34:45] Speaker 02:
They paid for the top line money they collected, but not for all of the many, many, many millions of dollars on which they have not paid.

[01:34:54] Speaker 02:
Right.

[01:34:54] Speaker 00:
Okay.

[01:34:55] Speaker 00:
Thank you.

[01:34:56] Speaker 00:
The case is submitted.