- 23 -
later decided to proceed without counsel and to settle their
cases.13
Seery also selected the Hongsermeiers as test case
petitioners because he mistakenly believed that they had used
their own funds, rather than “nontaxable distributions” from
Kersting corporations, to repay loans to other Kersting
corporations. The Hongsermeiers’ 1978-1980 taxable years were
before the Court; respondent had failed to audit their 1981 and
1982 taxable years.
There is no clear indication whether it was Seery or McWade
who originally proposed the participation of the Thompsons. As
noted, the Thompsons’ 1979-1981 taxable years were before the
Court. Respondent had failed to audit their 1982 taxable year.
B. Deterioration of the Thompson-Kersting
Relationship
Around the time Seery and McWade selected the test cases,
the relationship between the Thompsons and Kersting deteriorated.
Earlier in 1986, the Thompsons’ personal counsel, Huestis, had
asked Kersting for an accounting of the Thompsons’ participation
in the Kersting programs. Huestis’s request led to a dispute
between the Thompsons and Kersting. On June 23, 1986, the
Thompsons retained John Chanin, a Honolulu attorney, to help them
in their dispute with Kersting. In a letter dated August 23,
13See infra note 23.
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