Snitch Expected $25 Million Reward

By: A.J. Cook

Billy W. Jarvis, controller for Montex Drilling Co., convinced his employers had violated tax laws, became a snitch eager to earn reward money of $25 million.

A year earlier, Jarvis was concerned it would be apparent that he participated in preparing fraudulent tax returns. He asked his brother, Don, an attorney, for advice. Don told him if he didn't report it, he could go to jail. Don suggested that before contacting the IRS, they seek advice from tax experts. The advisors agreed the agency should be told but suggested that first they insist on a reward from the IRS for the information. They agreed to divide what Jarvis would receive: The brothers would get 35% each, and the other three would get 10% each.

After his consultants met with IRS officials in Dallas and Washington, Jarvis signed a contract to help the agency. The agreement would be void if Jarvis disclosed tax information other than to the agency. His reward would be up to 25 percent of the money the IRS recovered from Montex, its owner W.A. "Tex" Moncrief Jr. and his relatives including his nephew Michael Moncrief. The amount was limited to $25 million.

While these negotiations were going on, Tex fired Jarvis. Jarvis didn't mind; he planned to be busy earning a lot of money.

Jarvis gave the government employees two boxes of documents. He said he had accumulated them at his home so he could work on company tax matters after work. Using the snitch's information, the agency got a subpoena and hauled off several truckloads of documents from company headquarters.

Jarvis saw another opportunity, though risky, to make money with his insider information. He told Tex's nephew Michael Moncrief that his uncle had been cheating him. The informer gave details of why he suspected the uncle of fraud and shared information he had given the IRS. Jarvis suggested that Michael hire Gary Richardson as his lawyer. Richardson had previously agreed that, if he got the job, Jarvis could help in the preparation for trial.

For a year, Jarvis met the agents in a secret office near Dallas in McKinney, Texas, interpreting the seized documents. At the same time, he received $5,000 per month for helping Richardson prepare the suit for Michael Moncrief. Michael didn't know Jarvis stood to earn a reward if the IRS increased Michael's taxes, and the IRS didn't know its snitch was receiving money for helping in the suit against Tex.

The Moncriefs and their company settled their dispute with the agency when the taxpayers agreed to pay back taxes of more than $23 million. None of the money was to come from Michael.

Jarvis sued the agency saying they should have collected more than $100 million, so his check should have been $25 million. He lost.

The IRS's Claims Coordinator told Jarvis his check for $1.77 million was in the mail.

The check never arrived.

When he checked on it, Jarvis learned the agency claimed he violated the agreement's confidentiality provision.

The informer sued the IRS again.

Because Jarvis couldn't keep his mouth shut, it cost him. He had disclosed tax information about Tex and the company to Michael Moncrief and so, violated the agreement.

Jarvis received nothing from the IRS.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.