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from Chicoine and Hallett.101 The record of the evidentiary
hearing contains evidence that Mr. Kersting participated in and
perhaps orchestrated efforts to create disaffection among
Mr. Sticht's clients.
It is also ironic--if true--that Mr. Kersting did not inform
Mr. Izen of the Thompson and Cravens settlements at or before the
trial of the test cases. If Mr. Kersting had informed Mr. Izen
and Mr. Izen had informed Judge Goffe, the trial might have been
somewhat delayed, but the tax liabilities of the nonsettling
Kersting test case and nontest case petitioners would have been
finally resolved long ago, with attendant avoidance or reduction
101 A lawyer who planned or helped to promote a tax shelter
or is otherwise under the control of a tax shelter promoter has a
conflict of interest in representing participants in the tax
shelter because he will not (or may not) give disinterested
advice regarding settlement offers that may conflict with his
original advice or the interests of the promoter. See Ewing v.
Commissioner, 91 T.C. at 397 n.2; Para Techs. Trust v.
Commissioner, T.C. Memo. 1992-575.
Chicoine and Hallett, in their retainer agreements with the
test case petitioners and by their actions, made clear that
although they were not averse to obtaining additional business,
they had no conflict of interest and that their primary loyalty
was to their clients. Mr. Kersting fired Chicoine and Hallett
when, on the basis of their independent appraisal of the weakness
of the Kersting programs, they tried to obtain the most favorable
settlements available on behalf of as many participants, test
case and nontest case petitioners, as possible. Because of his
potential personal liability for both promoter penalties and
Federal income taxes, and his financial interest in trying to
vindicate himself and his programs, Mr. Kersting scuttled the
settlements, fired Chicoine and Hallett, and found another
attorney to represent the test case petitioners in the trial of
the test cases. Mr. Kersting's lack of sensitivity to the
conflict issue and counsel's obligation to issue disinterested
advice to clients is exemplified by his misplaced emphasis in
mischaracterizing Chicoine and Hallett's actions as primarily
stemming from fear of suit by their clients.
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