Lawrence M. Richey v. United States Internal Revenue Service

The Internal Revenue Service appeals from the district court’s judgment on a jury verdict in favor of Lawrence Richey in Rich-ey’s action for return and abatement of civil penalties imposed for preparing false tax returns, pursuant to 26 U.S.C. § 6694 . Richey was convicted in 1987 of willfully aiding and abetting the preparation of fraudulent tax returns in violation of 26 U.S.C. § 7206 (affirmed in U.S. v. Richey, 874 F.2d 817 (9th Cir.1989) (unpublished memorandum decision)). This civil action was stayed pending the resolution of the criminal proceedings against Richey. The IRS argues that the district court erred by denying the IRS’s motion for partial summary judgment on the ground that Richey was collaterally estopped from relitigating whether his conduct in preparing the fraudulent tax returns was willful. The IRS also contends that the district court erred in instructing the jury on the standard for determining whether Richey negligently understated his clients’ tax liability. We agree with the IRS and therefore reverse.

I.

Lawrence Richey was employed by the Internal Revenue Service as a Revenue Agent from 1955 until 1980, when he retired. Following his retirement,…