Progress Report from Don Willner

and

A Message from the Lead Plaintiffs

Another Judge of the United States Court of Federal Claims has recently decided the Home Savings case which holds that additional taxes which are caused by wrongful seizure of a savings and loan should be added to the restitution damages of the savings and loan.

In our case, we are arguing that the tax IRS assessed against the Benj. Franklin receiver for the loan of Federal Financial Assistance money should not be paid. In the Claims Court, we argued that since there would have been no Federal Financial Assistance  money if Benj. Franklin had not been wrongfully seized that no tax should be owed. In the current tax negotiations, we are arguing that Federal Financial Assistance was a loan which was fully repaid with interest and therefore could not possibly be taxed as income.

The Home Savings case will undoubtedly be appealed so its final precedent value is not yet known, but it is certainly helpful.

The Claims Court  case  has been stayed by Judge Smith pending the results of the tax negotiations.

 Therefore, the action is in the tax negotiation. The IRS has now completed a full audit of the many years of tax returns submitted by the Benj. Franklin receiver, and the West Coast area counsel of IRS has recently submitted a report on the matter. This material is now being considered at a high level in IRS and we are told that they will soon have determined their position on the tax and then there will be a meeting between the Department of Justice representing IRS, the Federal Deposit Insurance Corporation (the receiver of Benj. Franklin), and us. Although numbers remain confidential, everyone continues to talk about working towards a settlement. The only possible settlement for us would have to be a small tax so that most of the $90 million in the receivership is distributed to the shareholders. If that does not occur, we will reactivate our motion to intervene in the tax case and motion to transfer it to the Federal Court in Oregon. This money is in addition to the approximately $35 million money judgment in the Claims Court which has been stayed pending the results of the tax negotiation.

There is much work ahead for your attorneys, but now I believe there is light at the end of the tunnel.

 A Message from the Lead Plaintiffs

The BENJI Shareholders Litigation Fund is entering its fourteenth year. It is a bitter reminder of the difficulties inherent in seeking justice against governmental bureaucracies. We share the frustration felt by all the BENJI shareholders and are doing everything in our power to bring this case to a close.

Posted: 4/26/03

Progress Report

Our attorney, Don Willner, and his tax team, have been engaged in confidential compromise and settlement tax discussions with the Department of Justice representing the IRS and the receiver of Benj. Franklin, the Federal Deposit Insurance Corporation. The confidential nature of these discussions has limited the information which could be put on this website. Now a progress report has been made to the District of Columbia Federal Court which is public and is now reproduced here. There is also a similar report to the Oregon Federal Court. Over $90 million is now in the receivership with all bills paid. If the tax matter is successfully resolved, there will be money for the shareholders in addition to money received from the Claims Court suit. 

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA                              )

                                                                                    )

                        Plaintiff,                                                )

                                                                                Civil Action No. 02-1427

v.                                                                                                                                                                                                                                                                                                                   )

                                                                                    )

FEDERAL DEPOSIT INSURANCE                           )

CORPORATION; and FEDERAL DEPOSIT             )

INSURANCE CORPORATION, in its capacity          )

As receiver for the BENJAMIN FRANKLIN              )

FEDERAL SAVINGS & LOAN                                 )

ASSOCIATION, and as successor receiver for            )

The RESOLUTION TRUST CORPORATION           )

JOINT UNOPPOSED MOTION BY PLAINTIFF UNITED STATES

AND DEFENDANT FDIC FOR A STAY OF ALL PROCEEDINGS IN ACTION

PENDING RESOLUTION OF INCOME TAX EXAMINATION BY THE INTERNAL

REVENUE SERVICE AND SETTLEMENT NEGOTIATIONS BY THE PARTIES

a)      Introduction.

This action involves the determination of the federal income tax liabilities of

Since this action was filed, the FDIC has advised the IRS that it believes the tax

Although the IRS has almost completed its review of the requested interest

Accordingly, rather than request another extension, the parties believe it is more

b)         The Court should stay this matter in order to provide the parties

additional time to examine the disputed tax issues and to process any

settlement proposals.

On July 17, 2002, the United States commenced this action for a judicial

Sometime before the end of 1995, the RTC ceased operation and was replaced by the FDIC, as receiver of Benj. Franklin.

The Internal Revenue Service has made corporate income tax assessments

Although the United States and the FDIC are, and have been, attempting to settle

The amounts of the subject income tax assessments and the amounts reflected on

 After the filing of this action, the FDIC sought to determine whether the income

As a result of the request by the FDIC that Benj. Franklin's tax liability be

In order to adequately complete her examination process, Revenue Agent Weiss

The parties do not believe that they can adequately identify all the issues in

Following the commencement of this suit, in September 2002, six shareholders of Robert Suess, et at v. United States (Case No. 90-cv-981).

The six shareholders seek to become party-defendants to this action because they contend that as shareholders, they will be entitled to any funds which remain in the receivership account following the payment of all claims, including the federal tax claim. The proposed intervenor-defendants have asserted that they are concerned that the FDIC will not vigorously oppose the United States in defending this case and may take positions which conflict with those taken by the shareholders. The six shareholders have asked the IRS to consider whether Benj. Franklin should be taxed on Federal Financial Assistance loans which have been repaid with interest and whether Benj. Franklin should be permitted to recharacterize for tax purposes the acquisition of another savings and loan association in 1982 by Benj. Franklin both of which, if allowed, might substantially reduce the amount of the tax liability in this case. The six shareholders have also moved to transfer this case to the District Court for the District of Oregon as a more convenient forum under 28 U.S.C. §1404(a). The responses by the United States and FDIC to both motions are currently due by May 5, 2003. While the

If necessary, the United States intends to oppose the motion to intervene because, Columbia is the appropriate forum for this case. The FDIC is still considering its response to both the motion to intervene and the motion to transfer venue.

In the interest of judicial economy and efficiency I a trial court has broad discretion to stay all proceedings in an action. See generally Landis v. North America Co., 299 U.S. 248,254 (1936). The power to stay a proceeding is incidental to the power inherent in every court to control the disposition of cases on its docket. Air Line Pilots Assn v: Miller, 523 U.S. 866 (1998). Also see National Shopmen Pension Fund v: Folger Adam Security. Inc, 274 B.R. 1 (D. D.C. 2002). When circumstances warrant, a trial court may find it efficient for its own docket and in the interests of the parties to stay an action. Leyva v; Certified Grocers of California, Ltd, 593 F .2d 857 (9th Cir. 1979).

In this case, a stay order is justified because the parties have not had sufficient

 108(m) Statement

 In accordance with LcvR 7.1(m), on April 10, 2003, the attorneys for the FDIC met in

Respectfully submitted,

Dated: Apri1 21, 2003

HENRY C. D ARMST ADTER

CHARLES M. DUFFY

CARL HANKLA

JEREMY N. HENDON

Trial Attorneys, Tax Division

U.S. Department of Justice

Post Office Box 683

Ben Franklin Station

Washington, D.C. 20044

Telephone: (202) 307-6481

            (202) 307-6406

            (202) 307-6448

(202) 353-2466

Dated: April 21, 2003

HUGO ZIA, Attorney for Defendant

Federal Deposit Insurance, as receiver

for Benj. Franklin Savings Association

(202) 736-0385

Posted: 1/22/03

Judge Smith Denies Motion for Reconsideration: 

Final Order Delayed Until Tax Issue Settled

Here is the latest report from our attorney, Don Willner:

Judge Smith has denied our motion for reconsideration but will not enter a final order until the completion of the negotiations over the Internal Revenue Service’s tax claim. This means that we cannot yet appeal. The confidential compromise and settlement negotiations with the Department of Justice and the Federal Deposit Insurance Corporation continues. We are doing additional research and preparing additional briefs in support of our legal position. There remains over $90 million in the Benj. Franklin receivership and this amount is slowly increasing. We hope the ultimate tax will only be a small portion of this amount. The balance, plus the approximately $35 million awarded by Judge Smith, and maybe more awarded by the Court of Appeals, will then belong to the shareholders. There remain no guarantees, but I continue to be optimistic as the negotiations continue with the Department of Justice and the Federal Deposit Insurance Corporation. I am prohibited by the confidentiality agreement from giving you more information at this time.

Sincerely,

Don S. Willner 

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