WASHINGTON - An omission in the paperwork of his out-of-court settlement with Southeast Toyota Distributors Inc. will cost former Toyota dealer Wade 'Hamp' Griffin III $1 million.
That is the ruling of U.S. Tax Court Judge Joel Gerber, who upheld an order against the former Mobile, Ala., dealer by the Internal Revenue Service.
The case has been argued since Southeast Toyota settled a lawsuit with Griffin in 1994 for approximately $6 million. That settlement failed to cite the health problems Griffin claimed as a result of dealings with the independent distributor.
Under prevailing tax laws, when a person receives damages in a lawsuit because of health problems, the award is not taxable.
Griffin was one of several Toyota dealers who sued Southeast Toyota over its business practices in Alabama, Georgia, Florida and the Carolinas. Southeast Toyota settled all of the cases.
Griffin claimed in the original case that misleading sales figures had led him to buy a Toyota dealership in Enterprise, Ala., in 1987, which was forced into bankruptcy two years later.
Griffin currently owns Hamp Griffin Suzuki, a motorcycle store in the Mobile suburb of Fairhope.
According to court documents, Griffin found a potential buyer for the troubled dealership in spring 1989, but Southeast Toyota would not approve the sale. Griffin closed the dealership in July of that year.
Griffin had argued that because of the dispute with Southeast Toyota, he sought psychiatric treatment in 1989.
Of the settlement's $6 million, Griffin netted only $1.26 million. He paid legal fees and expenses.
But the IRS then demanded $1.44 million in back taxes and penalties on the original settlement amount.
Griffin appealed the IRS charge two years ago.
In January, Gerber ruled in favor of Griffin on the legal fees and rejected the penalties imposed by the IRS. But the judge said even though Griffin had been hospitalized, his lawsuit alleged commercial losses, without mentioning his 'emotional distress or sickness.'