Dissatisfied clients of 510-lawyer Dallas firm Jenkens & Gilchrist are alleging in a US$1.4bn lawsuit filed last December that the firm gave them faulty tax advice in 1999. Now, according to www.law.com, the firm is seeking to have the claims settled by arbitration.
In the suit, which is pending before US District Judge Barbara Jones of the Southern District of New York, the plaintiffs say that the IRS has announced that claimed tax losses from Currency Options Bring Reward Alternatives (COBRA) transactions and similar instruments will not be allowed, so they may have to pay capital gains taxes to the government, as well as penalties, which could be as high as 40% of the tax outstanding, plus interest.
The plaintiffs are also seeking a declaratory judgement that their advisers and other defendants would be liable for the penalties and interest sought by the IRS or state taxing authorities in connection with tax advice given, as well as recovery of legal and other fees incurred in defending their position with the IRS.
In a statement Jenkens, stated that it would be "inappropriate" to comment in detail about IRS related matters, but that the firm "stands behind its tax opinions, and that any related client actions are without merit."
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