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his supervisor, Honolulu District Counsel William A. Sims
(Sims)), entered into secret settlements with Luis DeCastro
(DeCastro), counsel for test case petitioners John R. and Maydee
Thompson (the Thompsons). The financial terms of the final
settlement were much more advantageous to the Thompsons than the
settlements generally made available to other petitioner
participants in the Kersting project.7 The final settlement with
the Thompsons was intended to provide refunds of tax and interest
paid by the Thompsons under a prior settlement, plus interest
thereon, that were to be used--and the bulk of the refunds was
used--to pay DeCastro’s fees for providing the appearance of his
independent representation of the Thompsons at the trial of the
test cases. After this Court upheld respondent’s determinations
and entered decisions in favor of respondent in all the test
cases, see Dixon v. Commissioner, T.C. Memo. 1991-614 (Dixon II),
respondent’s senior management discovered the settlements, moved
this Court to vacate the decisions (including the decisions in
the Thompsons’ cases) that had not already been appealed to the
7One nontest case petitioner, Denis Alexander, in exchange
for his acting as a witness and serving as an undeclared
consultant to McWade during the original trial of the test cases,
as described in Dixon III at Findings of Fact V.B. and VI.F.,
received a settlement even more favorable than that afforded the
Thompsons. Although the Court of Appeals in Dixon V noted
Alexander’s settlement, the Court of Appeals did not rely on or
refer to that settlement in formulating the sanction to be
imposed by its mandates.
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