The word is spreading among the thousands of cocktail waitresses, food servers, bartenders, busboys and bellhops who make most of their money from tips. The rank-and-file workers complain that they were not consulted on the new tip formulas.

If there really is more money in town, said Arturo Valadez, a sommelier at Mandalay Bay, it's not necessarily reaching workers' pockets.

"I'm not against paying (more) taxes, but the way they are doing it isn't necessarily the most accurate or effective," he said.

The issue is coming to a head as the IRS and Las Vegas casinos negotiate a new agreement on how much tip income workers should declare to avoid being audited by the government.

Since the early 1990s Las Vegas casinos and the IRS have agreed on how much tip income the employees should declare.

Since then, the IRS has struck similar agreements with other industries nationwide, including restaurants, hair salons and barbers. In total, tip agreements with employers have yielded billions of dollars in additional taxes for the government. Included in the voluntary participation are more than 47,000 establishments nationwide. That the agreements were born in the cash-rich casino industry is apparent in the IRS tip-reporting guide for taxpayers, which specifically mentions casino workers and features an illustration of a royal flush on its cover page.

The agreements, much like hard-won union contracts, are complex, site-specific and subject to change. Each tipped position at each participating Las Vegas casino has its own tip estimate because casinos individually negotiate rates, which differ by shift and job.

A food server in a coffee shop during the day shift, for instance, might be expected to declare $13,000 in tip income, whereas a swing-shift server in a full-service restaurant could be required to declare more than $20,000 in tip income. Employers withhold taxes on the estimated tips.

The agreements ease the paperwork burden for workers and the IRS. Workers don't have to track their tips, and the IRS doesn't spend time auditing workers.

And workers know a good deal when they see it: Many earn more in tips than the amount estimated by the IRS.

That's probably why, according to the IRS, 80 percent of Nevada's more than 100,000 tip-earning hotel workers participate in the agreement program, which is voluntary for employers and workers.

More than four years ago the casino industry fought to keep down proposed tip rates that lobbyists said would have doubled, tripled and even quadrupled workers' claimed tips. Both sides wrangled over rates in the years leading up to the three-year tip agreement reached in 2003. Hoping to capture even more unreported tips, the IRS expanded the template of the Nevada agreement to casinos nationwide.

The local tip agreements expired Dec. 31, although the old rates apply until a new agreement is reached in coming weeks.

Even though tip rates probably will go up for many Las Vegas casino workers, the alternative to participating in the tip agreement isn't all that appealing.

The IRS requires tipped workers who don't participate in the agreements to track daily tips and report the aggregate on their tax returns - and risk being audited. The IRS offers a worksheet with spaces for tips earned each day, a separate column for tips shared with others and spaces for co-workers' names.

After spending eight hours on their feet at work, most are unlikely to spend their free time logging tips on a spreadsheet.

That's why the IRS negotiated rates that might be less than actual tips yet guarantee a stream of tip taxes - up to $900 million annually in Nevada - that might otherwise go uncollected.

The American Gaming Association, which helped casinos negotiate the 2003 agreement, is involved in the latest round of discussions with the IRS.

A spokesman for Senate Majority Leader Harry Reid, D-Nev., who has assisted the industry in the negotiation process, said the IRS has agreed to phase in tip-rate increases over the three years of the new agreement rather than hit workers with a bigger tax bill all at once. The phased-in increase would extend beyond Nevada to include New Jersey, the Gulf Coast and other U.S. casino markets.

The second step of the process - determining the tip rates for each casino - has been more time consuming and contentious, with the IRS "pushing for substantial increases for certain positions," Reid spokesman Jon Summers said.

IRS, American Gaming Association and Culinary Union representatives are meeting this week to iron out a compromise.

The Culinary, which began union contract negotiations with Strip casinos two weeks ago, isn't taking any chances. The union, which represents 55,000 tip-earning workers, is proposing that employers contribute to a "defense fund" to assist employees who choose not to participate in the upcoming agreement and therefore might become subject to IRS audits.

"A coffee shop waitress on graveyard can be audited after she decides not to participate because she thinks rates are too high. We don't think that's fair," Culinary Union Secretary-Treasurer D. Taylor said. "A casino executive who gets called in for an audit and is questioned has legal representation. An individual worker should not have to take on the IRS by himself."

For now, the casinos appear to have the upper hand in this high-stakes game. The industry has threatened to chuck the program entirely - a potential tax loss in the billions for the IRS - unless the agency can agree to a smaller increase in tip rates.

"The rates (the IRS is) talking about are quite scary to folks," Taylor said.

Distributed by Scripps-McClatchy Western Service, www.scrippsnews.com.

Dallas law firm Jenkens & Gilchrist will close and pay a $76 million fine to settle a federal criminal tax-shelter probe, government officials said Thursday. 
 
The penalty stems from the firm's "promotion of abusive and fraudulent tax shelters in violation of the tax law," the Internal Revenue Service said.

Jenkens & Gilchrist, which had more than 600 attorneys until recently, intends to close its main office in Dallas at the end of the month, after having already closing other offices, the U.S. Attorney's office said.

The firm was shutting down because it realized its illegal activities had "caused serious damage to its reputation, revenues and stability," the U.S. Attorney's office said.

The law firm did not have an immediate comment, but in an earlier statement said, "We deeply regret our involvement in this tax practice, and the serious harm it caused to the United States Treasury."

The IRS said some 1,400 high-net-worth investors followed Jenkens & Gilchrist's advice "and will owe interest and penalties on their underpayment of tax."

Government agencies are expected to spend at least $20 billion on the contract over 10 years, the GSA estimates -- a move that will overhaul the government's telecommunications services.

Under terms of the GSA contract, called Networx Universal, agency spending could be increased to as much as $48 billion.

The announcement comes after weeks of anticipation and years of preparation. The four companies have spent millions of dollars preparing bids and called on thousands of their employees to develop proposals and hammer out the details.

The failure to include Sprint is seen as a huge upset as it has provided telecommunication services to U.S. government agencies for 18 years.

"Sprint is disappointed not to receive a portion of the Networx Universal contract," it said in a statement. "The Sprint team spent significant time and energy on the program and has made large investments to meet the diverse requirements of the agencies."

The company said it will request a meeting with GSA next week and will decide whether to "protest or not" after that.

JOCKEYING FOR CONTRACTS MOVES TO SECOND STAGE

Even though Sprint is out of the picture, the three winning companies will still have to compete for individual contracts within the government agencies.

The companies agreement with the GSA would allow them to sell phone and Internet services to as many as 135 federal agencies, such as the treasury and defense departments.

"It's a big win for Qwest," said the company's senior vice president Diana Gowen, while AT&T senior vice president Don Herring said his company could not be happier that it won.

Both said it was too early to say how the contract would impact overall revenue and earnings except to acknowledge that Networx Universal is a very large contract.

"We will get our fair share of the 20 billion, or 40 billion, it's all about your creativity," Gowen said.

It is not mandatory for the agencies to use a company the GSA has chosen, but there are benefits to be had, such as a common billing platform.

The Networx Universal contract is one of two that comprise the Networx program. Companies bidding on Networx Universal had to demonstrate that they could provide 36 mandatory services, such as private phone lines and secure e-mail.

The second, called Networx Enterprise, is expected to be awarded in May 2007 and required companies to show they could provide nine mandatory services. Projected spending on Enterprise is estimated at $20.1 billion.

The complete Networx contract is the third in a series of telecommunications procurement programs developed by GSA that are designed to leverage the buying power of the federal government and save U.S. taxpayers money.

A hacker or hackers stole data from at least 45.7 million credit and debit cards of shoppers at off-price retailers including T.J. Maxx and Marshalls in a case believed to be the largest such breach of consumer information.

For the first time since disclosing the theft more than two months ago, the parent company of nearly 2,500 discount stores put a number on how much card data was compromised _ and it's a number TJX Cos. acknowledges could go still higher.

Experts say TJX's disclosures in a regulatory filing late Wednesday revealed security holes that persist at many firms entrusted with consumer data: failure to promptly delete data on customer transactions, and to guard secrets about how such data is protected through encryption.

"It's not clear when information was deleted, it's not clear who had access to what, and it's not clear whether the data kept in all these files was encrypted, so it's very hard to know how big this was," said Deepak Taneja, chief executive of Aveksa, a Waltham, Mass.-based firm that advises companies on information security.

The case has led banks to reissue cards to customers as a precaution against further fraud beyond cases detected as far away as Sweden and Hong Kong, according to the Massachussets Bankers Association, which is tracking fraud reports linked to Framingham, Mass.-based TJX, parent company of stores across North America and the United Kingdom.

The only arrests believed tied to the case involve a gift card scam in which 10 people are suspected of buying data from the TJX hackers to purchase Wal-Mart gift cards in northern Florida. The group _ who aren't believed to have committed the TJX hack _ then used the cards to buy $1 million worth of electronics and jewelry at Wal-Mart's Sam's Club stores, according to Gainesville, Fla., police.

Information from 45.7 million cards was stolen from transactions beginning in January 2003 and ending Nov. 23 of that year, TJX said in the filing with the Securities and Exchange Commission after business hours Wednesday. TJX did not estimate the number of cards from which information was stolen for transactions occurring from Nov. 24, 2003, to June 28, 2004.

TJX said about three-quarters of the 45.7 million cards had either expired at the time of the theft, or the stolen information didn't include security code data from the cards' magnetic stripes. Starting in September 2003, TJX began masking the codes by storing them in computers as asterisks rather than numbers, the company said.

The filing also said another 455,000 customers who returned merchandise without receipts had their data stolen, including driver's license numbers.

With at least 46 million consumer records accessed, the TJX case outranks the previous largest case tracked by the Privacy Rights Clearinghouse: a June 2005 disclosure by credit card processor CardSystems that hackers accessed accounts of 40 million card holders.

If convicted on federal charges, Christensen, 60, faces up to 30 years in prison and a $250,000 fine on each of two charges. In the federal system prisoners are not eligible for parole until they complete 85 percent of their sentence.

"We're distressed they're going to these lengths," said Christensen's lawyer, Jeffrey Pine, of Providence. "This is overkill."

US Attorney Robert Clark Corrente announced the charges against Christensen last Friday at a press conference launching Project Safe Childhood, a Department of Justice program targeting exploitation of children over the Internet.

Corrente's spokesman, Tom Connell, declined to respond to Pine's accusation.

"Any action we take in the case will take place in court," Connell said. "We will not engage in repartee in the newspaper."

Last week, in US District Court in Providence, Christensen was arraigned on one charge each of interstate travel to entice a minor in sexual conduct and using interstate commerce to entice a minor, according to Corrente's office. The retired software engineer, who is married with two grown sons, pleaded not guilty and was released on a $10,000 bond. He is confined to his home with an electronic monitoring bracelet, and is not allowed access to computers or the Internet. He also is prohibited from any contact with minors.

A woman who answered the phone at Christensen's Granuaile Road home declined to comment.

Federal prosecutors took over the case from Rhode Island's attorney general, who had charged Christensen with one count of indecent solicitation of a minor.

"Our mutual goal is to use the best possible laws to prosecute cases. In this case the federal laws pack more punch than the state laws," said Mike Healey, spokesman for the Rhode Island attorney general.

In December, Christensen received five years probation after pleading guilty in Plymouth Superior Court to soliciting sex on the Internet from a person he believed to be a 13-year-old girl. As in the Rhode Island case, the person was in fact a police officer.

"The distinction between 'political' and 'performance-related' reasons for removing a United States attorney is, in my view, largely artificial," Kyle Sampson told the Senate Judiciary Committee.

"A U.S. attorney who is unsuccessful from a political perspective ... is unsuccessful."

Democrats on the panel immediately rejected the concept of mixing politics with federal law enforcement. They accusing the Bush administration of cronyism and trying to circumvent the Senate confirmation process by installing favored GOP allies in plum jobs as U.S. attorneys.

"It corrodes the public's trust in our system of Justice. It's wrong," said Judiciary Committee Chairman Patrick Leahy. "When anybody tries a backdoor way to get around the Senate's constitutional duty and obligation of advise and consent, it does not sit well."

After being sworn, Sampson, who quit earlier this month amid the furor, disputed Democratic charges that the firings were a purge by intimidation and a warning to the remaining prosecutors to fall in line. Nor, he said, were the prosecutors dismissed to interfere with corruption investigations.

"To my knowledge, nothing of the sort occurred here," Sampson told the committee.