Friday, February 25, 2011

Context & A "Controversial" Newspaper

[Update III, 4.42pm: This story has been now been covered by the Detroit News, the Daily News, the N&O, WRAL, Lax Power, and Deadspin; and yet, to date, no reporter has answered either of the following two questions: (1) Why was a tax lien sent not to the subject but to the offices of a man named David Weiss?; (2) Did David Weiss actually have anything to do with Seligmann's taxes? It would seem to me before rushing to print reporters would get these questions answered.]

[Update II, 3.47pm: And now the Daily News chimes in (as does the Daily Mail in Great Britain). Again, if and when the lien is withdrawn, I wonder how many of these outlets will run the news, featured in as prominent a place. I plan to keep track.]

[Update, 10.11am: The story has now been picked up by WRAL, the N&O, and Deadspin, with the N&O article including this charming quote from Raleigh tax attorney Jack Cummings: "You've got enough zeros there that somebody has bound to have thought about it and decided that they didn't owe any tax." Since the same article features a quote from Jim Cooney saying all taxes were paid, and since Richard Emery previously had stated that the lien was imposed in error, Cummings is essentially accusing Seligmann's attorneys of having lied.* I don't have much of a doubt which of the two is more credible.

If and when the lien is withdrawn, I wonder how many of these outlets will run the news, featured in as prominent a place.]

The Detroit News blared the following headline: “Controversial ex-Duke lacrosse player owes IRS $6.5M; lawyer calls it mistake.” The lede: “Nearly four years after receiving an undisclosed settlement from Duke University, Reade Seligmann, one of three lacrosse players exonerated in a racially charged rape case, owes the IRS almost $6.5 million in taxes, according to public records.”

The story, originally posted on the News’ “Tax Watchdog” blog by Robert Snell, has a few problems.

The first, of course, is its headline. There are a lot of adjectives or adverb-adjective combinations that come to mind in describing Reade Seligmann. “Falsely accused” is the obvious selection. “Widely praised” is another. But “controversial” seems like a highly unusual choice. What exactly is “controversial” about Seligmann?

The controversial headline selection is particularly problematic in that the dubious word choice appeared not in the posting by Snell, whose headline was fair and highlighted the denial by Seligmannn’s attorney. Instead, the controversial selection of the adjective “controversial” appeared in an item (with the same text, and linked above) that appeared on the News’ website. I e-mailed the News’ metro editor and web editor to ask why they chose “controversial” to describe Seligmann; neither replied.

The Snell posting itself suffers from two problematic elements. The first comes in its use of the “reportedly” standard. Snell concludes his article with the following line: “[Seligmann] reportedly is studying law at Emory University in Atlanta.” I did a Google search of “Reade Seligmann Emory” a few hours after the Snell posting appeared; the two items that most prominently appeared were posts from the Liestoppers board and the Free Republic board. Snell considered these items credible enough to use in his article, with a “reportedly” tag. So his article provides an example of the standards for which he uses a “reportedly” standard. (I don’t see any problem with how Snell handled this matter.)

Snell’s post—a he-said, IRS-said item that to any neutral reader would almost certainly leave the impression that the IRS is right—hinges on a quote that he obtains from an expert, “Tax lawyer Jeffrey Freeman of Birmingham, Mich.” According to Freeman, as paraphrased by Snell, “someone would have to make about $20 million in one year to generate a $6.5 million tax bill.”

Yet by the posting’s “reportedly” standard, Snell’s expert would seem to have undercut the lien’s validity. In July 2007, Bernie Reeves of Metro reported, “The settlement paid by Duke University to the three families of the falsely accused lacrosse team members — estimated to be around $18 million — follows on the heels of similar deals.”

The settlement amount, of course, was confidential. But Reeves’ item would seem to be a credible enough source—by a “reportedly” standard, in any case—for use by the News. Passing along the information from Metro would have tilted Snell’s story from its he-said, IRS-said approach to a story that the IRS might well be wrong. (The amount of the lien would have exceeded the amount of Seligmann’s individual settlement by around $500,000, producing a tax rate on the settlement of more than 100 percent.) And if the IRS made a mistake, Snell’s post is a much different story—something to the effect of “Falsely Accused ex-Duke Player Still Getting Unfair Treatment.”

I e-mailed Snell to ask him why he used the “reportedly” standard to include a throw-away item about Seligmann and Emory but declined to use the “reportedly” standard to include an item that would seem quite germane to his story. He said he wasn’t aware of the Raleigh Metro item, nor a vaguer comment by anti-lacrosse extremist (but very well-connected) Tim Tyson that seemed to confirm the Metro report. He was kind enough to respond (twice), and I appreciate his candor, but the problem with the exclusion remains.

Snell’s second problematic element: his post (accurately) reported that the lien notice was sent not to Seligmann but to a New York accountant named David Weiss. Snell paraphrases Seligmann’s civil case attorney, Richard Emery, to the effect that Weiss was someone “with whom the Seligmann family consulted several years ago.”

Why the IRS would send a tax lien notice not to the subject of the lien but to someone with whom the subject’s “family consulted” Snell doesn’t say. I suspect that most fair-minded readers would come away with the impression that Weiss prepared Seligmann’s taxes (I certainly did)—even though the article never actually makes such a claim. And if, in fact, Weiss did no such work, then the story is a much different one—something to the effect of why the IRS would be sending a huge tax lien to an accountant that actually hadn’t been responsible for preparing Seligmann’s taxes.

There’s something “controversial” going on here. But the controversy doesn’t involve Seligmann.

*--modified slightly for clarity, and to point out Richard Emery had already gone on the record, publicly, to deny the validity of the lien before Cummings accused Seligmann or "somebody" representing him of being a tax cheat.


Anonymous said...

In addition, news reports say Seligmann first learned of this from the newspaper.

Yet the IRS lien notice says that demands for payment were made and not responded to; hence the lien.

Something is wrong here.

(And if an IRS lien officer actually signed a lien without any prior notice being given or any process followed, there needs to be an investigation.)

Anonymous said...

This is exceptionally unusual. But the N&O and WRAL are right on the case this morning. No word from these two 'respected' newzorgz about the progress of the lawsuits. Progress...ha!

Anonymous said...


You have gone way over the top in your assertions about Cummings (a person whom I do not know). Before alleging that Cummings called Cooney a liar, it would have been nice to lay out your evidence. After all the lacrosse fiasco should teach anyone to wait for the facts before making judgments and not to rely on the press for getting things even close to right.

So, do you have any evidence that Cummings was aware of the representation of Cooney that the taxes had been paid according to law?

Do you have any evidence of what questions were asked that elicited the answer quoted? A fair minded person reading the article could reasonably conclude that Cummings was asked by the reporter whether a disputed amount this large could be the result of arithmetical error. An answer that arithmetical error is not likely to be behind a dispute for an amount this large is eminently sensible. Alternatively, a reader might conclude that Cummings was asked about whether settlement payments were taxable.

Do you have any evidence about whether he was asked about the liklihood of a monumental screw-up by the IRS and, if the question was asked, what his answer to that question was?

It may of course be true that Cummings was aware of Cooney's representations and so implied that either Cooney lied or is egregiously ignorant of the tax code. But those who are fair-minded or sensible wait for better evidence than an isolated quotation in the same local press that got the lacrosse case wrong from the beginning.

The academics at Duke relied on the assertions of a drunken whore. You rely on the answer quoted by a reporter to an unknown question in an unknown context. It seems to be a general fault of academics to make instant conclusions on the basis of inherently unreliable sources.


kcjohnson9 said...

To the 2.51:

Many thanks for your perceptive analysis of academics.

I have modified the post slightly, for clarity, noting that Richard Emery had previously gone on record denying the claim well before the N&O reporter could have even approached Cummings.

I suppose it's possible, as you suggest, that Cummings was misquoted, and did not accuse Seligmann of cheating by saying, "You've got enough zeros there that somebody has bound to have thought about it and decided that they didn't owe any tax." But as someone who has followed Joe Neff's work closely for several years, I don't recall Neff ever making up quotes. Feel free, however, to compare my relying on Neff's credibility to "the academics at Duke [relying] on the assertions of a drunken whore."

Anonymous said...

Is Cummings a Communist?

Anonymous said...

I specifically did not say that Cummings was misquoted. I have seldom experienced misquoting by reporters. What I said was that the answer is meaningless without knowing what question was asked and in what context. You have not indicated that you have any evidence as to the tenor or context of the question that elicited that Cummings' quote.

Furthermore, you still have not provided any evidence that Cummings had any knowledge of what had been asserted by other lawyers. Normally people are interviewed before a story runs so Cummings is unlikely to have learned from the article what other lawyers had said. Indeed, it is possible that the reporter when interviewing Cummings was unaware of what the other lawyers would say. The reporter's knowledge depends on the order in which he talked to the various lawyers.

Finally, it is not "cheating on your taxes" to pay what you believe you owe. There is enough discussion about clarification of the law in Cummings' answer to infer that he was asked whether the settlement might have been tax exempt and that, in Cummings' opinion, it likely was not. The most that it is reasonable to infer therefrom is that Cummings implied that Seligmann relied on incorrect tax advice, which is far short of accusing Seligmann of fraud or Seligmann's lawyers of lying.


kcjohnson9 said...

To the 7.15:

My apologies for suggesting that you implied that Cummings was misquoted as opposed to your apparent implication--that N&O reporters in a story co-authored by Joe Neff somehow asked Cummings misleading, improper, inappropriate, or unprofessional questions.

If I did not state it clearly enough in my previous post, allow me to do so now: in the five years I have known Neff and his work, I have never known him to behave in the sort of manner that your above comment implied--and I find it stunning that anyone who followed the lacrosse case and Neff's work in it (perhaps you didn't do so) would compare my relying on Neff's credibility (as I did in this instance) to other academics relying on the credibility of a "whore."

As to what Cummings did or did not know, there are three options: he knew of what Richard Emery said the day before and ignored it; he knew of what Cooney said through questions from N&O reporters; or he made an extraordinary allegation against Seligmann and Seligmann's integrity without even a bare minimum of investigation. (And by "bare minimum," I refer to a 10-second google search.) Options one and two are accusing Seligmann's attorneys of lying; option three, it seems to me, would reflect far worse on Cummings' character, and since I do not know Cummings, I was and remain disinclined to assume the worst of him.

I am delighted, nonetheless, that you have now made it clear that you have not challenged the validity of Cummings' quote. Perhaps you interpret the following inflammatory comment--"You've got enough zeros there that somebody has bound to have thought about it and decided that they didn't owe any tax"--as "impl[ying] that Seligmann relied on incorrect tax advice," as if the issue at play here was whether my accountant improperly advised me on a $10 write-off. I suspect that the number of N&O readers who had your remarkably charitable interpretation of Cummings' insights about "enough zeros there" would range somewhere between 0 and 1.

William L. Anderson said...

Once again, we have someone from the Raleigh-Durham area making inflammatory statements. One would think that the people from that area brutalized Reade enough, but I guess not.

I appreciate your sticking up for Reade, K.C., as he is a good man and does not and did not deserve what Duke University and the State of North Carolina has done to him. As I have said before, why anyone would ever send his or her child to Duke University, I will never know.

Anonymous said...

KC Johnson, thanks for keeping this blog alive!

Anonymous said...

Let's not get distracted from the main point here, which is really good news: If Reade Seligmann really owes the IRS $6.5 million, then the three falsely-accused players collectively walked off with a ton of Duke cash. Good for them. Oh, yeah, and we've established that Duke is willing to pay lots of money when it's caught screwing up. Bodes well for the remaining civil suit.

Anonymous said...

I saw the pdf of the lien document and I wonder if someone is pulling a hoax. I do not know but I wonder.

Someone made the point that the IRS would have contacted the taxpayer directly, not through an accountant. I had a recent situation, not a lien, but I had failed to file a W2 for one of my wife's jobs. The IRS contacted me directly. I then went to my accountant who filed an amended tax return.

I would wonder why Mr. Cummings would not raise that issue, why the IRS would contact an accountant rather than the taxpayer.

Anonymous said...

I am a retired IRS Revenue Officer, 1995, so some changes may have been made.

First the Tax Lien is improperly prepared. The lien should show the address of Seligmann or where he has assets. If Weiss's name is on the lien it should show that it is in care of, if he has a properly executed Power of Attorney for Tax matters. As it is shown, this lien could also attach to assets of Weiss Pllc in New York if that is where he is located, which I assume is his office address. The lien would also attach to any assets that Seligmann may have in New York. But as I recall he was a resident of New Jersey.

The amount of the lien would also include interest from April 15, 2008 until the assessment date shown on the lien. Additionally, a fraud penalty or negligence penalties, if warranted would also be included.

In my opinion the lien filing and recording has been screwed up by the IRS.

KC - enjoyed the blog which I followed from the beginning and also enjoyed reading the book.

J Allan


Gary Packwood said...

Seems to me that several protected groups are attempting to create a diversion hoping that Reade will comment on the IRS dilemma and put his foot in his mouth before the courts get around to ruling on discovery.

Amateur politicians always think that diversion trumps the truth.

Instead hopefully, Reade is scrambling to write the definitive paper as a eye witness on the impact of diversionary political tactics on our U.S. Constitutional guarantee of due process.

In the near future I don't think I would want to cross swords with Mr. Seligmann in a courtroom where the finer points of constitutional law are debated under the microscope.

The silence often of pure innocence persuades when speaking fails.

Anonymous said...

I am not a tax lawyer, but was a personal injury lawyer for 20 years, and as such I worked with the (very) basics of tax liability as regards lawsuit settlements or verdicts.

And I suspect what we have here is a disagreement about the nature of the settlement moneys. To the extent that there was a recovery for emotional distress, etc, I doubt that the money was taxable at all, as it went merely to make his person whole and so was not "income". However, to the extent that the money represented a substitute for lost income (I am going to guess, without checking, that the lawsuit involved claims for this), then the tax treatment may be different.

A jury verdict would likely have been more specific about the amount awarded under each cause of action, or for each type of damage. But when there is a settlement, well, the reality is that the parties are on their own to take a bona fide position or create some reasonable allocation that the IRS will (hopefully) agree with.

So I believe what we have here, is the IRS making a rash and broad assumption that ALL of the settlement money is taxable, whereas Seligmann (and more to the point, his attorneys and tax professionals) may have made some honest but overly optimistic assumptions about the tax liability. If this is the case, there is really no wrongdoing involved in my opinion, and no "right" or "wrong" answer -- just the usual hassle to be argued, counter-argued and ultimately compromised.

In any event, it is obvious that Seligmann had every right, in this legally complex situation, to rely upon advice from his lawyers and tax preparers. It's nothing like, say, (former NYC mayor) David Dinkins, or certain more recent celebrities, "forgetting" to file any tax return at all for years on end.

Caveat: My knowledge of this issue is from another State and may be stale, so maybe somebody can tell us if these are plausible inferences in Seligmann's case.

One Spook said...

Occam's razor may be useful here.

First, the amount of any lien would include interest and penalties from 2007 to the present.

Second, the taxes may not have been paid, and the demands for payment may well have been sent to the same third party.

It is important to note that the notice of the lien was sent to a third party; not the taxpayer or the taxpayer's attorney. Similarly, the subsequent demands for payment my have been sent to the same third party and neither the taxpayer nor his attorney were aware of this.

If this third party informed the taxpayer and/or the taxpayer's attorney that the taxes had been paid, of course they would assert now that payment was made.

This certainly would not be the first time in history that a third party had claimed that taxes had been paid when, in fact, no payment was made. I have seen cases where fake tax payment receipts were sent to taxpayers by third parties.

The very first commentator had it right, "Something is wrong here."

That said, regardless of what is wrong, the media reaction in this matter is absolutely shameful but sadly, very predictable.

One Spook

Anonymous said...

Anyone think that the timing of this is just a bit coincidental? Brodhead gets appointed co-chair of Obama's "Commission on the Humanities and Social Sciences." And, miracle of miracles, Seligmann gets hounded by the IRS.

Duke Prof

Michael said...


To your list of questions, I'd add: "What is a Detroit reporter doing reviewing NYC tax lien filings with respect to an individual reportedly [according to the same reporter] living in Atlanta?" One would think this is an extraordinary investigative effort with respect to someone without obvious ties to the Detroit metro area (unless I'm missing something about Seligman's background).

Or perhaps the reporter, known to be sympathetic to the "something happened" crowd, was tipped by someone with an agenda?

Anonymous said...

so, what has happened since this post? Does Reade owe? portion? all? what's the update?

kcjohnson9 said...

To the 8.08:

There is no new news. Based on my (admittedly very limited) dealings with the IRS, it's not an agency that tends to resolve issues within a matter of days.

Anonymous said...

Relevant article today in Herald Sun