Ruling in tax shelter lawsuit could benefit doctors

The court order returns all seized assets of Xelan Inc. and related companies.

By Katherine Vogt, AMNews staff. Dec. 27, 2004.

A federal judge has lifted a freeze on the assets of a San Diego-based financial services firm and some related entities that have been accused of peddling fraudulent tax shelters, spelling good news for some of the physicians who participate in their programs.

More than $500 million in bank and investment accounts belonging to Xelan Inc. and its family of companies had been frozen since Nov. 4, when the federal government filed a fraud lawsuit and obtained a temporary restraining order to "preserve" the assets for tax payments or fraud claims.

But at a hearing on Dec. 3 in federal court in San Diego, U.S. District Judge Larry A. Burns denied the government's request for a preliminary injunction to keep the assets frozen through the duration of the lawsuit. Instead, he ordered that all the seized assets should be returned.

Michael C. Durney, a Washington, D.C.-based attorney representing several hundred physicians who have participated in Xelan programs, said the ruling was welcomed by his clients, though many are still weary about the allegations against the company as the lawsuit moves forward.

"It's good news in that the freeze had prevented the Xelan entities from honoring their obligations and people were suffering from that," said Durney.

Some of his clients were on disability and were unable to get their monthly disability checks from a Xelan-related insurance program in November, he said. Others were unable to make the premium payments necessary to keep their supplemental insurance active, and still others were unable to get annuity payments from a Xelan-related foundation, he said.