Opinion ID: 297983
Heading Depth: 2
Heading Rank: 1

Heading: The Background — the Selected Investments Bankruptcy.

Text: 3 The controversy between the parties had its origin in the bankruptcy litigation of the Selected Investments, Corporation. 2 The Selected Investments Corporation was an Oklahoma corporation organized in 1930 which dealt in securities with the general investing public. Without going into collateral details, we may say that the organization was a cleverly manipulated, fraudulent scheme which operated for more than 20 years without being discovered. See Burns v. United States, 286 F.2d 152 (10 Cir. 1961). Sufficient funds to meet the claims of its investors, thereby avoiding undue complaint which might attract the attention of public authorities, were acquired by the hazardous expedient of not paying income taxes. 4 However, by the early 1950's, the company had come to the attention of both state and federal taxing authorities and it was apparent that the day of reckoning was fast approaching. Not having a tax attorney on its staff, the company in February 1953 hired the defendant O'Bryan, who was both a certified public accountant and practicing attorney specializing in tax matters, to represent it in the tax litigation. The circumstances of O'Bryan's retention are not entirely clear, as will become evident, but it is undisputed that he in fact spent a good deal of time attending to the corporation's tax problems and was in substantial measure successful in obtaining significant rulings favorable to the corporation. 5 In the complicated proceedings which ensued with both the state and federal authorities, it became apparent that the company's federal tax liability would be determined in part by decisions in the state courts. In 1957, the Supreme Court of Oklahoma ruled in the company's favor and against the Oklahoma Tax Commission on a claim for more than $500,000 of back state taxes. Selected Investments Corporation v. Oklahoma Tax Commission, 309 P.2d 267 (Okl.1957). Based on this decision, the federal authorities thereupon ruled that all back federal income taxes, if any, owed by the company, would be waived, but that in the future the company's tax liability would be computed differently, resulting in substantially increased payments. It later developed that certain Oklahoma Supreme Court Justices had been the recipients of a bribe in connection with the above decision. 6 The company was unable to continue its operations in the accustomed manner following the federal ruling as to its future tax liability and attempted to reorganize in a state receivership proceeding. This attempt precipitated in involuntary bankruptcy proceeding which was filed in the federal district court of Chief Judge Chandler. 7