Court of Federal Claims Dismisses Informant's Reward Claims

Billy W. Jarvis v. United States,
Fed. Cl. Section 7623 Ė Expenses of Detecting Frauds

The Court of Federal Claims has dismissed an IRS informantís claim for a reward under a tax-informant agreement, holding that the informant breached his agreement with the IRS and is not entitled to a reward.

Billy Jarvis entered into an agreement with the IRS under which he was to provide information on Taxes owed by several taxpayers. In return, the IRS agreed to pay Jarvis a protion of the taxes collected and not to disclose his identity. Jarvis expected that the IRS would collect $100 million in taxes. Instead, the IRS settled with the taxpayers and collected only $23 million. Also, an IRS agent disclosed Jarvisí identity to the taxpayers, who then sued Jarvis.

Jarvis submitted to the IRS a demand for his reward, and the IRS calculated that Jarvis would be entitled to $1,769,100 if he satisfied all contractual conditions. The IRS never paid Jarvis any money. Jarvis sued the government for breach of contract, arguing that he was entitled to at least $3 million as a reward and that the IRS breached an implied covenant to collect the full amount of the taxes owed. He also sought damages (the costs of defending himself in the taxpayersí civil action against him) for the IRSís disclosure of his identity.

The Court of Federal Claims dismissed a lawsuit brought by Jarvis, holding that there was no bad faith in the IRSís calculation of his reward, the IRS had no duty to maximize the reward, and the government had no obligation to pay litigation costs arising from the disclosure of the informantís identity. Billy W. Jarvis v. United States, No. 97-806T (May 19, 1999). (For the full text, see Doc 1999-18497 (11 original pages) or 1999 TNT 114-15.)

The Court of Federal Claims also denied Jarvisí motion to reconsider its previous decision, explaining that the agreement contained no indemnification provision and that the IRS was not bound by any provision implied from the partiesí dealings. In any event, the court said the evidence suggests that Jarvis would have been sued regardless of the IRSís disclosure. Billy W. Jarvis v. United States, No. 97-806T (Aug. 16, 1999). (For the full text, see Doc 1999-27481 (5 original pages) or 1999 TNT 164-12.)

Court of Federal Claims Judge Eric G. Bruggink, after a trial and ruling denying Jarvisí claim for a reward, held that Jarvis breached his agreement with the IRS and is not entitled to a reward. Finding that he disclosed information violating the reward agreement, arranged to split the reward with his advisors, and compromised his status and credibility as a key witness, the court dismissed Jarvisí complaint.

TA Citations:
Doc 2000-25352 (17 original pages); 2000 TNT 194-10

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