$1 billion lawsuit against IRS seeks reparations for alleged conspiracy against agricultural investment firm.

COACHELLA, Calif.--(BUSINESS WIRE)--Jan. 9, 1995--AMCOR Capital Corp., a Coachella-based agribusiness and investment firm, Monday announced that it filed a $1 billion lawsuit against Internal Revenue Service and other government agents in U.S. District Court in Los Angeles on Jan. 3.

According to the complaint, AMCOR seeks actual and punitive damages for violations of their constitutional rights, conspiracy, invasion of privacy and unlawful disclosure of confidential tax- return information.

The plaintiffs, which include AMCOR, two of its principals and certain affiliated limited partnerships, claim the defendants violated their rights guaranteed under the First, Fourth, Fifth, Sixth and 14th Amendments to the U.S. Constitution.

The complaint avers that the violations were a result of IRS misconduct and subsequent cover-up activities connected with federal agents' attempt to frame AMCOR and its syndicated partnerships for tax fraud.

Suit to Redress Damage Caused by Flawed IRS Investigation

The alleged conspiracy stemmed from a routine IRS civil investigation of selected AMCOR limited partnerships in May 1988, with which AMCOR cooperated fully.

According to the suit, a group of Texas farmers -- previously under contract to grow crops for AMCOR partnerships -- were improperly granted nonprosecution agreements by the government in exchange for testimony against the company. At the time, the farmers owed AMCOR and its investors more than $1 million for contracted crops.

The IRS then taped a series of 1988 meetings held between AMCOR's and the farmers' counsel to discuss payment terms -- an action that allegedly violated the plaintiff's attorney/client privilege. The complaint goes on to describe how excerpted portions of these tapes were used by IRS agents to obtain a search warrant that culminated in the March 21, 1989, raid of AMCOR corporate headquarters by 25 armed government agents.

AMCOR principals present during the raid reported that IRS agents ordered 20 employees to leave the premises and confiscated 265 boxes of important company and partnership records. During the invasion, IRS agents reportedly told AMCOR that the search warrant applied to an investigation of a third party. The records were not returned for more than four years, and then only after AMCOR attorneys threatened court action.

Although the IRS' criminal investigation accused AMCOR principals of knowingly committing tax fraud by condoning fraudulent crop contracts, a U.S. Department of Agriculture director later confessed that he had accepted bribes for preparing fraudulent contracts. He further testified that no one from AMCOR was aware of the scheme.

According to the complaint, IRS agents were advised of this and deliberately omitted the information when requesting a grand-jury investigation of AMCOR.

AMCOR was first notified that the IRS was conducting a criminal investigation of its operation by a Wall Street Journal reporter who had received a copy of a previously sealed affidavit prepared for the search warrant. The complaint states that the IRS purposely leaked the affidavit to the news media to damage AMCOR.

``The IRS played fast and loose with our constitutional rights,'' according to AMCOR Chairman Fred Behrens. ``We were broadsided by a criminal investigation that had been taking place in secret for months, and were deprived of our right to defend ourselves in the court of law or the court of public opinion.''

Another intimidation technique claimed in the complaint involved the illegal use of the civil tax process to develop evidence for the criminal case. In July 1989, the IRS sent AMCOR tax disallowance letters, requiring their distribution to several hundred investors. After AMCOR complied, the IRS unilaterally retracted the disallowances.

The complaint alleges that these disallowance notices were sent in order for the IRS to gain information to support its criminal investigation that could not otherwise have been legally obtained.

In the summer of 1990, a grand-jury investigation was convened, only to be subsequently terminated. The complaint alleges that IRS agents violated grand-jury secrecy rules during the proceedings. The suit further claims that the government unnecessarily delayed 12 months in notifying AMCOR that the case had been terminated.

According to AMCOR President Robert Wright, investors have logged numerous appeals demanding congressional inquiry of IRS misconduct in this case. Congressional offices that made such inquiries received a written response from the IRS stating, ``...the alleged misconduct by IRS employees were referred to IRS Inspection, which determined them to be unfounded.''

According to the complaint, an IRS special investigator later testified under oath that no such determination was ever made.

``Our government abused the legal process and violated the spirit, and in some cases the letter, of the law. Our company and investors were devastated in the process,'' said Behrens.

``The so-called public servants at the IRS refused to discuss or explain anything; they just showed up with a search warrant they got by lying to a federal magistrate and ransacked our offices. When they didn't find what they were looking for -- a nefarious tax-fraud scheme -- they put all their energies into covering their tracks. This cost us and our investors six years of our lives and untold millions of dollars. We really have no choice but to demand justice.''

The six-year battle devastated AMCOR's access to conventional credit sources; caused AMCOR common stock to plummet to 25 cents from $4 per share, resulting in delisting from NASDAQ; and forced the company to prematurely sell or lease properties to generate working capital.

CONTACT: The PBN Co.

              Susan Keefe or Anjanette Stayton, 310/983-8096
                      or
              Peter Bartelme, 415/989-0536