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Irs Gets Costly Lecture About Revenge Woman Awarded $325,000 After Agency Retaliated For Remark On Agent’s Accounting Skills

Fri., June 6, 1997

In hindsight, insulting the IRS agent during an audit was probably not a good idea.

But Carole Ward let fly with this gem: “Honey, from what I can see of your accounting skills, the country would be better served if you were dishing up chicken-fried steak on some interstate in west Texas, with all the clunky jewelry and big hair.”

A short time later, federal agents raided a business owned by her son and then released confidential information about her taxes to the media in what Ward called “character assassination.”

This week, a federal judge reprimanded the IRS for its actions and awarded the woman about $325,000 in damages and attorney’s fees.

“By this award, this court gives notice to the IRS that reprehensible abuse of authority by one of its employees cannot and will not be tolerated,” U.S. District Judge William Downes said after the nonjury trial. “Part of that responsibility requires that you accept criticism, however inaccurate and/or unjustified, in silence.”

Ward, 49, said she is not proud of what she said to auditor Paula Dzierzanowski during the 1993 audit. The meeting was one of several regarding income taxes owed by the children’s clothing stores owned by her son, Tristan, then 20.

Two weeks later, IRS agents seized and padlocked the stores with a so-called jeopardy assessment demanding $325,000 in back taxes from Ward. Such an order is considered extreme and is normally used when the IRS fears it is in danger of never collecting the taxes, said Ward’s attorney, William C. Waller.

Ward’s family depended on the stores as their sole source of income, and the seizure put them in desperate straits. She said her family even lost their electricity because they were unable to pay bills.

Why the IRS targeted Ward rather than her son is unclear, said another of her attorneys, Dennis Mark. “They took the position that Carole Ward owned the stores,” he said.

By July, Ward had hired a tax attorney and the parties had agreed that the actual amount owed by Ward was only about $3,500.

“It was over and done,” Waller said.

But then the IRS went public with information about Ward that was the crux of her lawsuit.

IRS District Director Gerald Swanson and his assistant, Patricia Callahan, appeared on a Colorado Springs, Colo., talk show and disclosed tax return information. They also discussed the original $325,000 dispute and allegations against Ward even though the case had been settled, Waller said.

The IRS also disclosed information to the TV program “Inside Edition” in the form of a fact sheet about the dispute.

The IRS agents said that since Ward already had gone public with information about the dispute, they were within their rights.

However, the judge found their behavior negligent.

Another IRS agent, James Scholan, disclosed more information about the dispute in a letter published in a local newspaper.

Scholan said he had obtained that information from newspaper accounts, but the judge ruled that he had obtained it as an IRS employee, committing a “blatant violation.”

Ward also was upset about notices posted in the windows of her stores during the seizure that, she said, implied she was a drug smuggler.

The judge found that the IRS had caused mental distress, emotional damage and humiliation to Ward.

“Public servants cannot be arbitrarily selective in their treatment of citizens, dispensing equity to those who please them and withholding it from those who do not,” the judge said.

The IRS had no comment on the case. Nor did the Justice Department’s tax division.

Ward said she is glad to be vindicated.

But her son’s stores still are struggling, she said, and the fight took a huge toll on her personally.

“When you take on these people, … it would be wonderful if I felt like dancing on graves, but by the time you get the victory, it doesn’t feel like a victory,” Ward said. “They take out the joy.”

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