Noted Fraud Investigator Fights Big IRS Penalty

Noted Miami fraud investigator Lewis B. Freeman has sued the Internal Revenue Service to challenge a $4.8 million civil penalty he says the agency wrongly assessed against him. The IRS imposed the penalty for Freeman's alleged involvement in promoting an abusive tax shelter involving pre-tax employee parking benefits.

The federal-court lawsuit by the veteran forensic accountant and lawyer asserts he had "no role" in any illegal scheme. In an interview with Forbes, Freeman said he sued because his administrative appeal within the IRS could not be completed before the quick deadline specified by federal law for bringing such lawsuits.
"This is like an episode from 'The Twilight Zone,'" he said. Freeman's firm, Lewis B. Freeman & Partners Inc., is frequently hired in fraud cases and often serves as a court-appointed receiver or trustee. The slogan on its Web site is "We make the numbers clear." Quick with a quip, Freeman himself is regularly quoted by journalists as an expert on fraud and white-collar crime. He readily agreed that the mere existence of the litigation was embarrassing to him.

The big question is whether it becomes a lot more than that. The IRS, which as a matter of policy declines media comment on litigation involving taxpayers, has not yet had time to answer Freeman's complaint in court.

As the story was told by Freeman's complaint in U.S. District Court, Miami, and by his lawyers, five years ago Freeman was one of four shareholders in an unnamed corporation that provided counseling to companies on employee benefits. One topic concerned so-called 132(f) plans, named after the tax code section that allows tax breaks for commuter mass transit and parking costs. That section permits employees to divert a portion of their pay for commuter-cost reimbursement; the employee gets the money tax-free and the employer does not have to pay the Social Security and Medicare taxes it would owe on regular salary.


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