scheme is called a bond linked premium structure or as the i r s n l note not the se c refers to it son of boss that's the description that's given for this case was dismissed on twelve b six without leave to situations like webs the treasury lost something in the neighborhood of three and a half billion dollars from these kinds of tax schemes perpetrated by this this entity that was engaged in marketing these that tax that activities in this case i think illustrates a very clearly why a twelve p six dismissals are just favorite we have the evolving understanding of what took place with respect to this conspiracy we have the circumstance that indicates the united states  investigation a department of justice investigation indictments of a deferred prosecution agreement signed by kate b m g in which you did miss the existence of the conspiracy all of this post dated the decision making process of the party posing the motion so now i think it would be helpful to me if you would tell me why i love the fact of each issue under appeal why it was wrong for this judge to dismiss i'm more than happy to your hon but i would add one for the thing that with respective dismissals under twelve the sects that the district court should freely grant amendments to the complaint and in this case we have an original complaint that was forty pages long and amended complaint in the tr reversal whether there is a rico claim or whether there was a denial of leave to amend because if p s l are a applies obviously there is a well pleated securities claim present and that was something that was requested is released in the amended complain violation the court deny that my point is under either scenario whether there is a p s l are defense present in this case these securities claim should have been allowed to be to proceed at the district court did not we believe large accounting firm in vibrant what a large law firm that that enabled this particular tax scheme to proceed and allow the taxpayer to believe that the taxpayer would be able to deal with the capital gains that said mr representations that were made very direct in the written letter and this is one of the problems with this case because in this case the the district court relied on evidence outside the records of the written representations we're talking about amended complaint it's even work detailed in terms of all of the specific contacts between the conspirators and mr swartz and the indications to him that all is well notwithstanding any written representations all is well you don't need to worry been something that was pleaded in the alternative as was true in the amended complaint they pleaded rico and then in the alternative the securities and the state securities violation but i think this case this case moves so fast i mean i know there was there was a complaint filed and within sixty days motions to dismiss followed no discovery on jurisdiction no discovery on the merits no answers were filed but in the cases gone that's how fast this case proceeded and the events transpiring apart from the sophisticated but he pleaded in this complaint that he was unsophisticated and tax matters and he relied on professionals i know that he ran an excerpt of a travel business an educational travel business that was successful it took  hundred ninety nine now that when i start because your client after that time had plenty of warning by professionals that weren't right happening most probably illegal so i notice that you nine there was a second one issued on september five two thousand tax that the tax letters that were issued by these law firms by law from a k p m g were issued on december twenty seventh or excuse me that they were going to december thirty first and i don't worry we'll take over the preparation of your tax returns and they kind of edged moss adams out of the picture so in terms of reliance he could like think legitimately rely on one of the biggest law firms in america one of the biggest accounting firms in america concern about this case by saying she wasn't shedding any tears for multimillionaires in terms of her analysis of the washington consumer protection act portion of the case actually look at it is the fact that individuals who seem to be pretty good people who have been with the public at large general public i think that's an extraordinarily dangerous path down which to travel because in fact with respect to the washington consumer protection act plan you have to show a capacity to see the public and she was saying people who happen to be wealthy aren't the public you know the concern i have in the payment of taxes because the public at large it doesn't mean that the fiscus is impacted by three and a half billion dollars may think with three and a half billion dollars can do in the federal budget to good purpose the point here is when the district court starts to talk in terms of the wealth of the of the parties as a factor in determining whether or not they are part of the public i could conceive of us a different district court said well if they're poor folks obvious many multimillionaire instantly have we have that the latest thing that we provided to the supplemental authorities your honor eighteen hundred taxpayers eighteen hundred of them to the tune of three and a half billion dollars the i r s has collected from on the that there might be some question about this well i mean you can be characterized as protecting themselves but but that they wrecked they advised him of what the risks were that attach to it and the additional fact that you have with respect to my clients should not properly been considered by the district court that was not an argument that was made to love and arguments that are not made below cannot be raised in this court in the first instance what appellant argue to the district court below with respect to those letters was he acknowledged that he had signed them but he said while they were part of the fraud they were pretty sure vice brought it and therefore it's not fair for the alleged coconspirators to get the benefit of the did not make the point did not make the argument that these are not properly before the district court a motion to dismiss and as i said did not even make that point in his opening brief before this court so that argument whatever weight it might have had to have been properly presented i think  adversary when he said that with there was a well pleaded securities fraud cap there are other elements that you have to plead to have a successful securities fraud claim one of them being reliance and i think the reason why the district court did not grant leave to a man and as a securities fraud book but nonetheless the district went on to dismiss the state law claims with prejudice that's a little bit unusual usually going to this stage of the proceedings and you're right right at the gate if you knock out the federal jurisdictional case judge pickering did that no one suggested that she do otherwise i think that her having done so i think it was within her discretion to do so and i don't think there'd be any purpose served at this juncture for having spent the time and energy to consider those claims and hearing the expense of having extensive briefing oral argument on them and now them having been brought up to this court to have the basic questions of reasonable reliance on basic questions under the washington consumer protection act that have been defined by the washington supreme court in the hangman ridge case about what constitutes a public interest impact or t individual i think fairly read what the district court's comments in her opinion indicated was that this is someone who's not part of a a large group of people that there are not many fall into the the strategy has not worked i think as a matter of law having been given those warnings that you can say any reliance he was going to have otherwise would be unreasonable the expected performance or results of the transaction including the legal tax financial or accounting consequences thereof and you have not engaged in the transaction in reliance upon handy such  said we're not going to rely on you want any advice we're getting from you and in entering into this transaction they can't then come back and say we were defrauded by things you told us in entering into this transaction suppose this it's cetera and what this court said in that context is representations can't control conduct and it's always sure it's possible that people made notwithstanding the fact they say they're not going to rely they may rely on things that others tell them but what representations can control is the legal consequences of that reliance the point being that you can't have a a workable judicial system and a workable commercial system if people can't rely on bu in writing and of course frankly have to get into the exercise of determining whether or not notwithstanding the fact that you signed a contract and made a written representation that something else is in fact or a common practice for people to sign think of they have  not raise that argument if there was an instance of a unsophisticated individual in sort of a master situation but when you've got two parties especially you have to sophisticated parties for dealing with each other there's there's no a similar letter saying that there are doubts whether or not the i r s is going to allow allow these deductions that was in paragraph sixteen of the complaint october tenth two thousand now based on based on those allegations mr mr schwartz thinks that he can i'm in the complaint to within his rule eleven obligations to now allege that that that these schwartz is also a sophisticated businessman even taking as true the allegations that he's unsophisticated in tax matters what he's saying is that he reasonably relied upon allegations that he could take eighty million dollars of capital tax and paid no taxes on that that's what he's saying that she thought she was saying to him when you when you're when you're you know you're conferring and getting advice from very sophisticated beings and lawyers and valid maybe but but also contradicting that are these allegations in the complaint that there were there was the engagement letters that advised him of the risk that before he filed the tax returns there was there  relying on any oral representations like a p m c or brown and what she cites to the allegations she uses the engagement letter the possibility of an audit she talks about the sophistication and those are the allegations it's not anything that has to do with the merits that make the amendment any amendment unable to cure the defect in the complaint i think thank you with a million questions thank you very much to amend counsel's argument about reliance is interesting because it omits a whole series of additional facts such as mr swartz was obligated by t p m g to sign a non disclosure agreement he was not entitled to talk about this interesting  deal that had been cooked up to mosques adams and when mosques adams did finally surface some of the tax concerns that it had keep him elbow them out of the way and said don't worry about whatever they told you will do your tax return for you so they  them out of the way to enable them to continue to perpetrate the fraud that they were involved in the bottom line in this case is this case was prematurely dismissed it was very early on in the process there was no answer there was no discovery there was no opportunity to really develop the kind of case that would have been developed given the facts that have occurred in this case since the filing of the complaint this is a case in which the united states senate investigated this set of circumstances this is a case in which the department of justice and the i r s investigated this case a whole bunch of people were indicted including some very significant principals of presidio and keep b m g entered into a deferred prosecution agreement in which you did knitted the existence of this conspiracy mr swartz was a business person he had a nice business that took educators on on travel situations he made some money he was trying to shelter that income that's something i think we all do in terms of our taxes we try to pay the least possible he went to a big four accounting firm on the advice of his broker and the big four accounting firm and this big law firm advice to him that everything was fine with respect to this deal the bottom line here is if you compare the complaint that was filed you compare the amended complaint that was necessary facts if you look at the amended complaint it's an eighty page document that reads like a code pleading documents opposed to a notice pleading document if you like fraud get a little more specific if you do and i think it was in this case your on it was it was more than adequately asserted but the the interesting the interesting trap for the pallies in this case is they have argued that rico doesn't apply it doesn't apply because sorry does and if he does apply then there should have been leave granted to assert the ten b complaint that was proposed in the amended complaint and it was a four page allegation found at the supplemental excerpts of record from one away to one of thirteen that is more than adequate to assert the potential of a federal securities claim here there was a state fraud claim there was certainly a consumer protection claim if you exercise the interesting argument that the district court judge came up with asserting that somehow because you have wealth you're not part of the public and curtailing the advisory services from this sophisticated big four accounting firm and one of the biggest law firms in the united states they he wrote opinion letters that told him what you're doing is just fine we're packaging this whole proposal we'll get deutsche bank involved don't you bank by the way loans fifty three million dollars at seventeen and a half percent interest sight unseen essentially to mistrust works it was a hell of a deal but the point is there was an opportunity and should have been an opportunity under the consumer protection act washington to proceed and it was very unusual in my book for the district court to dismiss with prejudice the state law claims it should have been allowed to have the opportunity to be developed by discovery and all what we can see it would be i can't remember where he alleged that he actually lost  my client has has gone back and paid the amount of tax to which he was obliged to pay that he was obliged to pay and has paid the interest on top of that as well how much would you pay i believe it was a couple of million dollars plus interest of about a half a million dollars so you're