One of government’s least-loved agencies has been held in contempt of court by a federal bankruptcy judge and ordered to pay the legal fees of a Joliet couple who have been repeatedly and illegally dunned for a tax debt that should have been erased in 1986.
The strongly worded ruling last month from Bankruptcy Judge Robert E. Ginsberg is the latest chapter in what at times has seemed to be a never-ending effort by a Chicago lawyer to convince the Internal Revenue Service that the couple no longer owe income taxes for 1979-82.
“The IRS’ overall conduct in this case can only be characterized as outrageous,” Ginsberg ruled. “Its computers have contemptuously tried, without any justification whatsoever, to ignore the debtors’ bankruptcy discharge and to proceed as if this bankruptcy case never happened.”
The IRS normally is more persistent in pursuit of taxpayers than were the Pinkertons in pursuit of Butch Cassidy and the Sundance Kid. But a bankruptcy proceeding can erase an individual’s income-tax liability if the debt is more than three years old, said tax lawyer Robert E. McKenzie.
McKenzie represents William R. Abernathy, a pipe fitter who doesn’t work much these days because of illness, and his wife, Peggy, a nurse’s aide. They owed about $30,000 in unpaid taxes, penalties and interest when they filed for bankruptcy in 1986.
Bankruptcy should have ended the matter. Since then, though, the IRS repeatedly has attached their current refunds and threatened to garnish Peggy Abernathy’s wages. Each time, the IRS backed off when McKenzie went to court and pointed out the tax liability had been erased.
The IRS was held in contempt in June 1989, but that didn’t seem to make a difference.
“Incredibly, the IRS’ attempts to collect the discharged taxes continue virtually to this day,” Ginsberg noted. “In January 1993, while this motion was pending before this court for a decision on the sanctions question, the IRS indicated its intent to apply the debtors’ 1992 tax refund to the 1980 taxes by denying the debtors’ request for that refund.”
The IRS argues that federal law doesn’t allow the couple to recover legal fees. A spokesman also said that “whenever a computer-generated problem was brought to the attention of the local IRS office, an immediate resolution was implemented.”
McKenzie is supposed to file his request for fees and costs next week. A hearing is scheduled for April 6.
`Shadow attorney’
Former Chicago defense attorney William Swano, whose license to practice law was suspended nearly a year ago, may have acted as “a shadow attorney” for a drug dealer on trial last fall in Michigan, according to a federal judge.
But U.S. District Judge Robert Holmes Bell in Grand Rapids concluded that Swano’s actions didn’t prejudice Juan Garcia, a former Chicago resident convicted of supplying cocaine to drug peddlers in Michigan.
Bell turned down the request for a new trial filed on Garcia’s behalf by his new lawyer, Elliott Price, also of Chicago.
Price contended that Garcia, in effect, was represented before, during, and after his trial not only by Oak Park attorney Michael Goggin, Garcia’s counsel of record, but also by Swano.
Swano, who was suspended from practicing law after pleading guilty to charges of bribing a former Cook County judge, testified at an earlier hearing before Bell that he received $14,500 in referral fees from Goggin in the case. Swano is expected to be a prosecution witness at the federal trial of former Judge Thomas Maloney, which is scheduled to begin this week in Chicago.
Garcia had contended he never knew that Swano had pleaded guilty, that Swano had agreed to testify against Maloney or that his law license was suspended.
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After hearing Goggin’s testimony last week, Bell concluded that in the main, the conversations with Swano amounted to “shop talk.” On Friday the judge sentenced Garcia to 10 years in prison. Price said he will appeal.
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