Johann Keil and Catherine Keil - Page 5

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          Petitioners’ S corporation, Continuum Health, Inc. (Continuum),             
          exercised daily management functions and operated the business.             
          Petitioners’ wholly owned C corporation, Continue Care                      
          Corporation (CCC), processed the business’s payroll.  Petitioner            
          Catherine Keil (Ms. Keil), a licensed physical therapist, handled           
          the business’s daily operation and finances.  Ms. Keil also dealt           
          with the business’s accountants and lawyers.  Petitioner Johann             
          Keil (Mr. Keil) handled the business’s development and public               
          relations.  Mr. Keil had no involvement in the business’s daily             
          operation.                                                                  
               In or around 1999, respondent audited petitioners’ personal            
          1993 and 1994 Federal income tax returns and the related returns            
          of Continuum and CCC.  Through a referral, Ms. Keil met                     
          Montgomery in the summer of 2000, and petitioners and CCC                   
          retained him to handle the audits.  Ms. Keil was Montgomery’s               
          contact person for petitioners as to this representation, and she           
          informed him at the time of his retention that he could not                 
          accept any settlement as to the case without her consideration              
          and approval of it.  Until December 15, 2004, Montgomery dealt              
          exclusively with Ms. Keil as to the subject matter of the audits.           
          His only interaction with Mr. Keil before December 15, 2004, was            
          that they spoke with each other on several occasions in October             
          2004 about an unrelated matter concerning a nonprofit foundation.           







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