Billionaire investor Peter R. Kellogg and IAT Reinsurance Co. Ltd., the Bermuda-based insurance company his family owns, are suing the Internal Revenue Service for refunds of $186 million in taxes and interest they paid after the IRS revoked IAT's tax-exemption retroactively. In court documents, Kellogg and IAT claim IRS officials were "unduly prejudiced" against them by a "politically charged atmosphere" created by journalists and that the IRS arbitrarily timed the revocation to maximize the taxes owed and "punish" them.
The IRS also disallowed IAT's deduction of $1.3 million in business and personal travel expenses for Kellogg in 2000 and 2001. IAT argues its board properly authorized payment for Kellogg's personal travel since it "recognized the need for Mr. Kellogg to travel privately because of his status including being listed by Forbes magazine." Forbes estimates that Kellogg, 70, is worth $2.7 billion. He ran Wall Street's top market maker, Spear, Leeds & Kellogg, until engineering its sale to the Goldman Sachs Group in 2000 for $6.5 billion.