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Mr. Seery and Mr. McWade provided that the Commissioner would
settle any additions to tax for fraud on a case-by-case basis.
By letter dated September 29, 1986, Mr. Seery informed
Kersting program participants of the terms of the modified 7-
percent settlement offer and suggested that they give serious
consideration to the proposal. Mr. McWade informed Mr. Seery
that, because the trial of the test cases had been set for
February 1987, the modified 7-percent settlement offer would be
withdrawn on December 31, 1986, and that Kersting program
participants interested in accepting the settlement should
contact Mr. McWade by November 10, 1986, in order to allow time
to complete the necessary computations before the withdrawal of
the offer.
On October 10, 1986, Mr. Kersting issued a letter to
Kersting program participants in which he characterized the
modified 7-percent settlement offer as "grossly inadequate."
Messrs. Sims and McWade did not notify the National Office,
Regional Counsel, or the Appeals Office that they had
incorporated the burnout feature in their offer to settle
Kersting project cases.
2. 20-Percent Settlement Offer
Between September and December 1986, Mr. McWade and Mr. Sims
began to offer 20-percent settlements that were based on the same
general approach as their modified 7-percent settlement offer
that included the burnout feature. The 20-percent settlement
approach originated in late 1986 in separate negotiations between
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