By Gina Tabonares
Variety News Staff

THE initial payment of $10 million to qualified low-income taxpayers of Guam by the government may happen soon as the court gears up to approve the preliminary settlement agreement with two Earned Income Tax Credit classes.
After hearing all parties involved in the consolidated three EITC class suits, U.S. District Court Judge Frances Tydingco-Gatewood took the issue under advisement and declared that she will decide no later than Monday if she will approve the petition of the governor and the two EITC classes that entered into a $90 million settlement agreement.
With the need to revise the earlier submitted settlement agreement, Tydingco-Gatewood reserved her decision on the petition.
She, however, instructed the governor’s lawyers Atty. Dan Benjamin and Atty. Kathy Fisher of Calvo & Clark to submit the revised agreement on Monday so she can review the revised copy before she makes her decision.
Tydingco-Gatewood also instructed all lawyers concerned to submit their proposed scheduling order for her signature two days after she makes her order assuming that she approves the settlement.
According to Mike Phillips, the lead counsel for both the Santos’ and Torres’ groups, only slight changes are to be made in the agreement and these will not change the main content of the agreed document.
Once the preliminary settlement agreement is approved, it will pave the way for Gov. Felix Camacho to begin the immediate partial payout of the 1997 and 1998 EITC claims.
Atty. Benjamin said the government is ready to release the $10 million set aside for the settlement and the early payment of benefits of the government by providing an incentive for persons with 1997 and 1998 EIC claims to join the settlement.
Atty. Phillips said that once the preliminary settlement is approved, a notice for a fairness hearing will be issued to EITC claimants to determine whether there are objections to the settlement.
After the fairness hearing, Phillips said the judge can issue her final order whether she will allow the approval of the settlement.
Based on the settlement agreement, the government will pay the EITC class not more than $15 million for their claims for tax years 1995, 1996, 1999 and 2000. The amount will be divided proportionally among claimants found eligible for the EITC by the Guam Department of Revenue and Taxation based on the value of their claims, up to 100 percent.
For tax year 1998, the government will pay the EITC class not more than $15 million for their claims for tax year 1998 which will be divided proportionally among claimants found eligible for the EITC by DRT based on the value of his or her claim, up to 100 percent.
The same amount will be divided equally among claimants found eligible for each tax year from 2001 to 2004.
Coercive settlement
The settlement was, however, opposed by Simpao class lawyers who branded the agreement “coercive” and “full of deficiencies.”
Atty. Nancy Pacharzina, who argued on behalf of the Simpao group, told Judge Tydingco-Gatewood not to approve the settlement because it does not address the EITC issue but only applies to the payment of the class.
“We are not against any settlement but we are just here to work for what is best for the class,” Pacharzina said.
She said the proposed settlement’s intent to make immediate payments to class years 1997 and 1998 before it can be granted or denied final approval can be a potential waste of public funds by the government of Guam if the settlement is denied and at the same time a violation of the Guam Illegal Expenditures Act.
Some of the settlement deficiencies she mentioned include the failure of the parties involved to provide information to the court on the value of the claims.
“There was no information provided on the actual value of claims including interest based on the principle of $15 million/year payment. What common rate is the settlement compromised with? What structure did the settlement use in calculating the amount with full value of interest? None. Because this settlement only provides 50 percent of the refund,” Pacharzina stated during the oral argument.
She argued that the settlement has no information on the value of the claims, the value of assets and the government’s ability to pay.
“It is a trap. Something is not always better than nothing,” Pacharzina stressed as she added that if the court allows the preliminary settlement it will create future litigation that will be imprimatur to the judicial approval and will trigger notice to the class that there is preferential treatment among class members.
Objector
Atty. Benjamin, however, replied that the court should not allow the Simpao’s group to object branding the group as an “objector” who chose not to be part of the settlement.
“If they opted in they would know all the information collected but they made the choice to be out of the group and they are now trying to make an objection. It is like having our own recipe and they are putting some sour (ingredients),” Benjamin reacted.
Reacting to Atty. Pacharzina’s statement that there was not enough information on the computation provided, Benjamin said that the Governor through an executive order has started to put out claims forms that will allow qualified taxpayers to be involved.
“That is why we need to have a preliminary approval. We cannot just assume based on hypothetical spreadsheets. The DRT provides a list where every qualified taxpayer can be notified of his claim,” reacted Benjamin on the issue of class notification.
Unlike the COLA case in which a settlement was based on the court order, Benjamin said the EITC settlement is based on vigorous litigation and the settlement is the best offer reached for the class.
Meanwhile, Judge Tydingco-Gatewood is scheduled to consult the EITC mediator, Judge William Cahill, who facilitated the settlement negotiations among the three EITC groups last year.
Tydingco-Gatewood also wants Simpao’s group to declare whether they want to participate in the settlement agreement meaningfully.
The chief judge said her conversation with Cahill will be recorded and will be provided to the concerned parties.