Josh Rosner, Hedge-Fund Adviser, Claimed Financial Disability

(Bloomberg) -- Wall Street analyst Joshua Rosner made a name for himself with prophetic warnings that Fannie Mae and Freddie Mac were ticking time bombs and that the U.S. housing market was heading for a collapse.

When the 2008 financial crisis hit, he became an ubiquitous presence on business news networks and a sought-after witness in Congress. He later co-wrote a best-selling book about the meltdown, which describes him on the back cover as an adviser to “global policy-makers and institutional investors.”

Yet as Rosner’s profile grew and, according to people familiar with the matter, he got work from prominent hedge funds like Paulson & Co. and Elliott Management Corp., he was having trouble managing his own finances.

For years, even as he made federal tax payments, Rosner failed to file his returns with the Internal Revenue Service. When he and his accountants finally sorted things out, they discovered he had overpaid hundreds of thousands of dollars. His request for refunds, however, was denied because he sought them too late.

Now, Rosner is suing the government to get the money back. And, he’s making a novel argument for somebody who earns a living as a financial expert, contending the Sept. 11 attacks rendered him “financially disabled.” He also asserts that the IRS has targeted him as retaliation for his public criticism of the Treasury Department’s $700 billion bank bailout a decade ago.

‘Personal Attacks’

The IRS has used “intimidation, harassment, extortive actions and personal attacks,” Rosner wrote in a court filing last year. He added that the “tactics placed me under extreme duress and compelled me to liquidate nearly all of my financial assets.”

The IRS, however, says Rosner couldn’t have run a business or held himself out as an expert if he were truly disabled. Rosner “authored sophisticated financial publications and gave testimony before congressional committees on financial matters, affirmatively demonstrating an absence of financial disability,” the agency’s lawyers wrote in a January 2018 motion.

Rosner, who is not a lawyer, is representing himself. The case could go to trial next year.

“It is bewildering that Bloomberg would write about deeply personal events that occurred in my life nine to 18 years ago,” Rosner, 52, said in a statement. “It has never been claimed that these events have harmed my ability to think or analyze, or have impacted my professional judgment.”

Spokesmen for the IRS and the U.S. attorney’s office in Manhattan, which is representing the tax agency, declined to comment.

Complex Policy

Rosner, who runs his own firm called Graham Fisher & Co., is one of a number of experts who hedge funds hire confidentially to navigate complex policy matters. Demand for such work increased during the crisis with the government’s unprecedented intervention in the financial system.

Rosner’s adjusted gross income was $673,636 in 2008, up from $174,554 in 2006, court documents show. He’s been most sought out for his views on Fannie and Freddie, the housing-finance companies that helped fuel the economic downturn.

One of Rosner’s specialties, according to people who have worked with him, is advocating on Twitter and in media interviews for policies that would benefit clients. Bloomberg is among the news organizations he has spoken with. Paulson and Elliott have both retained Rosner’s services in the past, said the people who asked not to be named because the arrangements are confidential.

“To imply that my opinions, which are often contrary to the financial interests of some of my clients, are anything other than my own is false,” Rosner said in his statement to Bloomberg. “My work is the result of intense research, and investors and policy-makers seek out my opinions because over time they have been proven accurate.”

A spokeswoman for Paulson declined to comment, while a spokesman for Elliott didn’t respond to calls and emails.

Anonymous Lawsuit

Rosner first filed his tax case in 2016 under the name John Doe, though his name was added to the docket a year ago after the judge ruled that he couldn’t remain anonymous.

For now, Rosner has been allowed to keep his clients’ names under seal. He’s argued that the firms are “central figures” in the economy who retained him under strict confidentiality. One required notification if there was a chance it could be mentioned in a court proceeding.

The issue has provoked battles in the litigation. In late September, Rosner filed a motion saying that the IRS had threatened to subpoena him for details on his business. Rosner responded that the information would violate non-disclosure agreements, reveal trade secrets and “result in irreparable damage to my ability to continue in my professional capacities.”

Rosner also contends that the IRS is retaliating against him. In one motion, he describes a “disturbing” incident when an IRS revenue officer showed up unannounced last year at the office of his attorneys in a different tax matter and threatened to file a lien against him. Even though the IRS owed him money, Rosner wrote, he was forced to sell assets to come up with $280,000 so the lien wouldn’t be imposed.

IRS Deadline

The roots of Rosner’s lawsuit revolve around a law that sets a three-year IRS deadline for taxpayers to collect overpayments.

In 2013, Rosner filed his tax returns for 2006 through 2010. They showed he was due refunds for 2006, 2007 and 2008.

Rosner also refers in one motion to negotiations with the IRS over his 2011 through 2014 taxes. While they aren’t part of the lawsuit, he wrote that he owed the government about $280,000 for two of the years, and had overpaid about $416,000 in the others.

The law allows taxpayers with a financial disability to collect refunds even after the deadline has lapsed. The condition is defined as a “physical or mental impairment of the individual which can be expected to result in death, or which has lasted or can be expected to last for a continuous period of not less than 12 months.”

Doctors’ Assessments

Rosner submitted two doctors’ assessments to the IRS, concluding that that he suffered from post-traumatic stress and adjustment disorder with mixed anxiety and depressed mood, largely due to the 2001 attack on the World Trade Center.

“As many as 40 former colleagues and close friends died that day and he spent the next year going to funerals, memorial services and consoling the grieving spouses and families of the deceased,” a psychiatrist wrote in a letter that is partially included in the court file.

The IRS denied Rosner’s refund request. He then appealed through an administrative process. One appellate officer agreed that he had a financial disability and granted him a refund of $89,512 for his 2007 taxes. However, a second officer rejected his appeal for 2006 and 2008, a decision that deprived Rosner of more than $500,000 -- and paved the way for his lawsuit.

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