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6. Culmination of the Audit of the Subject Years
Respondent had placed the Leatherstocking audit in suspense
on July 15, 1991, because a grand jury had been convened in New
York to investigate Steele as to his structuring of funds related
to the planned coup, his receipt of the unreported income from
Marcos, and his failure to file personal Federal income tax
returns. Beforehand, in June 1989, respondent had transferred
the Leatherstocking audit to Harold Kerzner (Kerzner).
Respondent had made that transfer to associate the
Leatherstocking audit with other related audits assigned to
Kerzner. Two of those other related audits involved (1) the 1983
through 1986 personal income tax returns of Steele and his wife
and (2) the 1983 through 1986 taxable years of Roblis.3
Kertzner never audited Leatherstocking. His responsibility
and primary action with respect to the Leatherstocking audit was
to obtain the consents that he secured between June 1989 and
January 1994. Kertzner did not speak to Steele personally to
3 As to Steele’s personal income tax returns, Kertzner
expanded his audit in or about October 1989 to include Steele’s
1986 through 1988 taxable years. By February 1990, Kertzner had
learned that Steele had not filed his 1987 and 1988 returns. By
June 1990, Kertzner began analyzing bank records. These analyses
ultimately led to respondent’s discovery that Steele had failed
to report his receipt of income from Marcos. In December 1990,
Kertzner referred the matter of Steele’s personal income taxes to
the CID for fraud. On Feb. 20, 1991, Kertzner was notified by
the CID that his referral had been accepted for investigation.
Between March and June 1991, Kertzner worked with agents from the
CID on various issues relating to that referral.
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