- 46 -
investment in Bauspar.20 To see whether Bauspar figured in the
Thompson settlement, Dombrowski sought the Thompsons’ post-1981
tax returns. By July 13, 1992, he had received the Thompsons’
1983-89 returns and a memo that the Thompsons’ 1982 tax return
and administrative file had been destroyed. Dombrowski analyzed
the returns to see if they shed light on the Bauspar question
raised by McWade’s and Sims’s contentions. Although the 1982 tax
return was not available, Dombrowski believed it likely that
Kersting deductions had been claimed on that return because of
the disparity between adjusted gross income and taxable income,
and because Kersting deductions were claimed on the Thompsons’
1983 and 1984 returns. Dombrowski’s “Analysis of Subsequent Year
Returns” noted the mortgage interest deductions claimed on the
Thompsons’ 1983-85 returns and further noted “(Bauspar?).” He
also noted that entries that may have reflected the Bauspar
deductions had not been audited. Dombrowski’s reason for putting
a question mark after Bauspar was that he could not tell from the
entries on the returns whether they actually related to Bauspar.
20In a memorandum dated Sept. 11, 1992, Kane had written:
“Sims claimed that McWade had initiated the recommendation to
allow Bauspar losses so that both Thompson and DeCastro would
remain in the case. * * * Thus, Sims told McWade to work with
the Bauspar numbers in order to give Thompson relief and keep him
as a test case.” (Fn. ref. omitted.) Additionally, in 1992,
McWade testified that he reduced the Thompsons’ deficiencies on
his own to make up for the Thompsons’ $80,000 “loss” in the
Bauspar program. We found this testimony not credible.
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