Former Congressman Walt Minnick said Wednesday it now appears likely he will lose his appeal in U.S. Tax Court and blames one of Idaho’s most storied law firms for his predicament.
Last week, Minnick and his wife, A.K., filed a lawsuit alleging negligence and professional malpractice by Hawley Troxell, a firm that has handled business and personal matters for Minnick for 25 years or more.
Minnick says real estate lawyer Geoffrey Wardle failed to comply with IRS regulations in handling a 2006 conservation easement granted to the Land Trust of Treasure Valley for the Minnicks’ seven-lot, 74-acre development near Hidden Springs, Showy Phlox Estates. The IRS denied Minnick’s claim of a deduction of about $1 million, disallowing $305,629 in tax savings in 2006, 2007 and 2008.
Minnick is suing the IRS in U.S. Tax Court, but said an April ruling in a Colorado case makes Wardle’s mistake potentially fatal to his case.
“It suggests that I’m going to lose,” said Minnick, a Democrat.
Hawley Troxell's managing partner, Steve Berenter, declined comment on Minnick's specific allegations, but said, "We firmly believe that Mr. Minnick was provided excellent legal service and that this firm was not negligent in any respect."
Minnick said he hopes to continue a good relationship with Hawley Troxell. “I have many personal friends in the firm. This is purely an economic matter.”
The lawsuit says Hawley Troxell failed to comply with IRS rules requiring a mortgage on the land be subordinated to the easement and that the gift be immediately vested in the Land Trust.
Minnick seeks a minimum of $305,629 for expected loss of the tax break, plus interest, penalties, state taxes, compensatory damages and legal fees.
Headquartered in Boise, Hawley Troxell has more than 50 lawyers and offices in Pocatello, Coeur d’Alene, Ketchum and Reno.
The firm’s roots go back to James Hawley, who came to Idaho in 1862. Hawley practiced law with William Borah, who went on to become Idaho’s longest-serving member of Congress. Hawley and Borah were prosecutors in the “Trial of the Century,” a 1907 case against union leaders for the assassination of former Gov. Frank Stuenenberg. Hawley later was elected governor. The firm was founded in 1964 by Gov. Hawley’s grandsons, Jess Hawley Jr. and Jack Hawley, and Robert Troxell and Paul Ennis.
Minnick’s attorney in the claim against Hawley Troxell is Bill Mauk, a former Idaho Democratic Party Chairman.
Mauk said suing Minnick’s longtime law firm is simply a business decision. “There is not bad blood here, but you go to professionals to protect your interests. If they don’t protect your interests and there are huge economic consequences, I don’t know that you’d expect anybody to walk away from it.”
The matter was an issue in Minnick’s failed re-election bid in 2010, when Minnick’s campaign said he believed he was in the right. But in June 2011, the lawsuit says, Minnick learned from an IRS filing in Tax Court that Hawley Troxell “had failed to take actions necessary...(to) protect the legal and pecuniary interests of their clients.”
Minnick said he expects to continue to pursue the case in Tax Court, despite what he says are long odds. Mauk said the complaint against Hawley Troxell was filed before the IRS case is resolved to avoid any problems with statutes of limitation.
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