Opinion ID: 614361
Heading Depth: 1
Heading Rank: 1

Heading: United States Government's Early Interest in Stonehill, and Potential Involvement in the Investigation of William Saunders, Taxpayers' Business Associate and Attorney

Text: The earliest document mentioning Stonehill is a memorandum from the U.S. Embassy to the State Department, dated February 21, 1951, in response to the State Department's request for a discreet investigation into Stonehill's affairs. The memorandum describes Stonehill's tobacco business and his reputation of not paying his full income tax. The Embassy in Manila says it will continue to observe Mr. Stonehill's business operations and report any significant developments. Interest in Stonehill appears to have been renewed nine years later. On April 27, 1960, IRS Agent James Griffin wrote to the audit division that Mr. William W. Saunders, an attorney. . . , reported in confidence, that Harry S. Stonehill had forwarded a check from a Swiss bank account to Honolulu. (Emphasis in original.) The money was used to purchase land in Oregon. Griffin said that if it is desired that further information be gathered on the above matter, please send the request as if the source was from some other area. Otherwise the source of information might be compromised. On July 21, an individual whose name has been redacted filed an Application and Public Voucher for Reward for Original Information. Although there is no clear evidence supporting their contention, Taxpayers contend that this Application was filed by Saunders. On June 30, 1960, Louis Blissard, the U.S. Attorney for the District of Hawaii, wrote a memorandum to Lukban, responding to Lukban's request for information concerning an indictment against a man named Ted Lewin. Although most of this memorandum concerns Lewin's indictment for illegal currency transactions, the memorandum mentions that part of the money Lewin was using was actually money belonging to Harry Stonehill. Some of Blissard's information came from William W. Saunders, a Honolulu attorney, who is in some business ventures with Stonehill. Saunders told Blissard that Taxpayers did not want Lewin to testify concerning Lewin and Stonehill's association in activities in the Philippines. On August 16, 1960, the IRS Office of International Operations (OIO) sent Chandler a memorandum forwarding Stonehill's 1958 tax returns to evaluate whether an audit was warranted. Chandler responded on August 31, 1960. Chandler stated that he had for some time been aware of the need for investigation of Stonehill, but that it would be a difficult case that is beyond our present capacity in view of current workloads. He informed the OIO that the Stonehill case would of necessity remain in our unassigned backlog for an indefinite. . . length of time. In September 1960, Blissard wrote a memorandum to Charles Rice, the Assistant Attorney General for Tax, calling his attention to Stonehill's activities, noting his belief that Stonehill owes and has not paid large amounts of income taxes, and briefly explaining the basis for that belief. Shortly thereafter, Blissard sent at least one other similar memorandum to Rice, in which he wrote that he had spoken with Lukban, who had provided him with information concerning Stonehill's financial dealings. Rice forwarded this information to the Commissioner of Internal Revenue. We note two things about these early documents. First, although there was some U.S. interest in Stonehill prior to the appearance of Spielman, there was no action taken due to a lack of capacity. Second, during this period Saunders was giving information to U.S. authorities concerning Stonehill. There is no evidence, however, that Saunders was serving as Stonehill's attorney at that time.