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Grassley, Wyden Seek Answers on Conservation Easements

JUN. 10, 2019

Grassley, Wyden Seek Answers on Conservation Easements

DATED JUN. 10, 2019
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Grassley, Wyden Press Subjects in Easement Investigation

Monday, June 10, 2019

WASHINGTON — Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) today pressed for fulsome and responsive replies to questions instead of partial answers from individuals associated with three entities in the committee's investigation into syndicated conservation-easements transactions.

In three letters transmitted today, the Finance Committee leaders made clear that incorrectly citing inapplicable legal provisions is not a reason for noncompliance. The senators also made clear that questions need to be answered in writing, not just by referencing provided documents.

Grassley and Wyden launched the probe into syndicated conservation-easement transactions in March with fourteen letters to groups that might have unfairly profited from conservation easements.

For several years now, the IRS has been investigating these transactions. They appear to involve promoters selling interests in tracts of land to taxpayers looking for large tax deductions. In such an arrangement, the taxpayers get inflated appraisals of those tracts of land and grant conservation easements on that land. The resulting inflated charitable deductions are then split among the taxpayers.

The three follow-up letters sent by Grassley and Wyden today can be found at the following links.

Sean Akins, Esq. (for Messrs. Ornstein and Schuler)
Christopher DeLacy, Esq. (for Mr. McCullough)
William Osterbrock, Esq. (for Messrs. Campbell, Pearson and Pickett)

June 10,2019

Sean M. Akins, Esq.
* * *

Dear Mr. Akins:

This letter regards the Senate Finance Committee's investigation into certain conservation-easement transactions, an investigation that began on March 27 of this year, and we are writing to follow up on your response of April 30 to our initial request for information from your client Mr. Robert McCullough.

In our letter to your client, we asked for answers to questions as well as for copies of various documents. You largely responded to these questions by simply stating, "This information is contained in the documents being produced in connection with this response," or something to similar effect. This is an insufficient method of answering questions, especially as those documents contained over 100,000 pages. We understand you and your colleagues met with our staffs in early April to discuss your client's disposition to our letter of March 27, and that disposition was generally one of cooperation. We now ask for that cooperation and, to the extent your client has answered questions by reference to documents, for direct written answers to the questions instead of references to documents.

Furthermore, in your response of April 30, you declined to provide names of your client's investors because the associated investments "are distributed through FINRA-regulated broker dealers and financial advisors." Your letter provides no basis to withhold this information from Congress. Courts have consistently recognized that confidentiality statutes do not prohibit the production of information to Congress unless those statutes specifically refer to Congress.1 We now ask again for such information, which is crucial for this investigation. This applies to all requests for information relating to investor identification, including meeting minutes, vote tallies, etc.

Finally, in your response of April 30, you stated your client' s company did not provide promotional materials to investors, and we understand the reason for that position is that your client provided investments through broker dealers rather than directly to investors. We regard the relevant document request for promotional materials to encompass communications with broker dealers, or other intermediaries, as well as with individual investors, and therefore that request for documents and information should be read as such.

Accordingly, please fully respond to all questions in the March 27 letter we sent to your clients no later than June 21, 2019. Thank you for your attention to this important matter.

Sincerely,

Charles E. Grassley
Chairman
Senate Committee on Finance

Ron Wyden
Ranking Member
Senate Committee on Finance

June 10, 2019

Christopher DeLacy, Esq.
* * *

Dear Mr. DeLacy:

This letter regards the Senate Finance Committee's investigation into certain conservation-easement transactions, an investigation that began on March 27 of this year, and we are writing to follow up on your response of May 15 of this year to our initial request for information from your clients, Messrs. Matt Ornstein and Frank Schuler.

In our letter to your clients, we asked in Question #9 for information that material advisors of reportable transactions must maintain and report to the IRS. You responded to that request by stating we should get that information directly from the IRS, which implies the obvious — that your clients would not themselves be providing that information to us. We now ask again that you promptly and fully provide to us the information requested in Question #9. When our staffs met with you in early April, they stated to you that we would be conducting this investigation separately from whatever work the IRS or the Department of Justice might be conducting in regard to your clients, and we intend to continue with that practice. Therefore, we ask again that your clients provide us with that information without a need for the issuance of a subpoena.

Accordingly, please fully respond to Question #9 of the March 27 letter we sent to your clients no later than June 21, 2019. Thank you for your attention to this important matter.

Sincerely,

Charles E. Grassley
Chairman
Senate Committee on Finance

Ron Wyden
Ranking Member
Senate Committee on Finance

June 10, 2019

William M. Osterbrock, Esq.
* * *

Dear Mr. Osterbrock:

This letter regards the Senate Finance Committee's investigation into certain conservation-casement transactions, an investigation that began on March 27 of this year, and we are writing to follow up on your response of May 24 to our initial request for information from your clients Messrs. Matthew Campbell, Eugene "Chip" Pearson, Jr., and Mark A. Pickett.

In your response of May 24. you declined to provide names of your client's investors "due to the fact that such investor lists contain personally identifiable information, which we are prohibited from disclosing under various state rules and regulations. . . ." Your letter provides no basis to withhold this information from Congress, as the statute and regulation you cite do not restrict the Committee's access to the information it seeks in furtherance of its oversight and legislative responsibilities. See 15 U.S.C. §6802(e)(8); 17C.F.R.§248.1S(a)(7).1 We now ask again for such information, which is crucial for this investigation. This applies to all requests for information relating to investor identification. including meeting minutes, vote tallies. etc. Accordingly, please fully respond to our requests in our March 27 letter we sent to your clients no later than June 21, 2019. Thank you for your attention to this important matter.

Sincerely,

Charles E. Grassley
Chairman
Senate Committee on Finance

Ron Wyden
Ranking Member
Senate Committee on Finance

FOOTNOTES

1See, e.g., F.TC. v. Owens-Corning Fiberglass Corp., 626 F.2d 966,970 (D.C. Cir. 1980); Exxon Corp. v. F. T.C. 589. F.2d 582, 585-86 (D.C. Cir. 1978), cert denied, 441 U.S. 943 ( 1979); Ashland Oil Co., Inc. v. F. T.C.. 548 F.2d 977, 979 (D.C. Cir. 1976)).

1Indeed, Courts have consistently recognized that general confidentiality statutes do not prohibit the production of information to Congress unless those statutes specifically refer to Congress. See, e.g., F. T.C. v. Owens-Corning Fiberglass Corp., 626 F.2d 966, 970 (D.C. Cir. 1980); Exxon Corp. v. F. T.C., 589 F.2d 582, 585-86 (D.C. Cir. 1978), cert denied, 441 U.S. 943 (1979); Ashland Oil Co., Inc. v. F. TC., 548 F.2d 977, 979 (D.C. Cir. 1976)).

END FOOTNOTES

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