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also denied that the Thompson settlement was attributable in any
way to the Thompsons' participation in the Bauspar program.
On June 2, 1992, Mr. Bakutes directed Mr. Sims to send him
immediately the files in the Kersting test cases.
Mr. Bakutes assigned Mr. Dombrowski to assist him in
formulating respondent's position with respect to the settlement
arrangement. On June 3, 1992, Mr. Bakutes directed
Mr. Dombrowski to prepare motions to vacate the decisions in the
Thompson cases.
On June 3, 1992, Mr. Li prepared a memorandum summarizing
his earlier conversations with Mr. Sims, stating in pertinent
part as follows:
Per Bill Sims, the main reason for the lower deficiency
to be assessed was that the Thompsons wanted to settle
their case, based upon the then outstanding settlement
offer prior to the trial of the test cases. Sims
stated that because of the stipulations of settlement
of tax shelter issues filed in the remaining non-test
cases, Honolulu District Counsel felt settlement with
the petitioners, as test cases, without trial was
inappropriate.
Bill then stated to me that also Mr. Thompson was taken
by Mr. Kersting and that Mr. Thompson was considered a
traitor by all of the other Kersting's investors.
Mr. Thompson helped the government's case against
Mr. Kersting promotion with his testimony about the
Kersting promotion. Mr. Thompson was cooperative with
District Counsel and therefore District Counsel will
reduce the tax deficiency for all three years.
On June 4, 1992, Mr. Sims informed Mr. Bakutes that "Except
for the Thompson and Cravens cases, neither Ken nor I entered
into any 'best of both worlds' settlements, agreements, or
understandings, oral or written, formal or informal, with any
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