- 221 -
to collect on Mr. Thompson's promissory notes.98 Considering
Mr. Thompson's mixed motivations, Mr. Thompson was not fully
representative of the class of Kersting program participants
interested in contesting the Commissioner's determinations
disallowing Kersting interest deductions.
Mr. Thompson's testimony aside, Mr. Thompson's settlement
agreement placed his counsel, Mr. DeCastro, in a conflict of
interest. In particular, Mr. Thompson's settlement agreement was
altered so that Mr. DeCastro's attorney's fees in effect would be
paid out of tax refunds that were guaranteed to be paid to the
Thompsons. In short, with Mr. Thompson serving as a conduit,
Messrs. Sims and McWade arranged for the Government to pay
Mr. DeCastro's attorney's fees to ensure that Mr. Thompson would
ostensibly remain a test case petitioner. As observed by the
Court of Appeals, Mr. DeCastro "was the main beneficiary of the
[Thompson] settlement". DuFresne v. Commissioner, 26 F.3d at
107. Mr. DeCastro's additional legal fee paid from the refunds
generated by the final Thompson settlement--$62,225--was
disproportionately high in relation to the amount remaining in
issue for the Thompsons--$30,000 plus interest.
The record indicates that Mr. DeCastro had concluded before
the trial of the test cases that Kersting program participants
98 Although Judge Goffe was not informed of Mr. Thompson's
settlement, Mr. Thompson's dispute with Mr. Kersting was
disclosed to Judge Goffe through Mr. Thompson's testimony.
Consequently, Judge Goffe was able to weigh Mr. Thompson's
credibility on this point.
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