After announcing with great fanfare the TRO it obtained in federal district court in San Diego freezing over $500 million in investment accounts maintained by xélan, Inc. on the ground that over 3,500 San Diego area doctors and dentists participated in fraudulent tax avoidance schemes (see here), the Department of Justice has suffered some severe setbacks in the case:

• As noted on TaxProf Blog earlier, the district court lifted the TRO freezing Xélan’s assets. (See here for a copy of the district court’s order.)
• Today’s New York Times reports that the Department of Justice has withdrawn its civil lawsuit against xélan:

The Justice Department has withdrawn its lawsuit against a San Diego financial services firm that it said sold questionable tax shelters to thousands of doctors and dentists. The firm, Xelan, is still the subject of a criminal federal grand jury investigation, and the Internal Revenue Service is continuing to seek reimbursement of hundreds of millions of dollars that it says is owed by users of Xelan investment and insurance plans. But last Friday, without making a public announcement, the Justice Department withdrew a civil complaint against Xelan from federal court in the Southern District of California. The complaint had sought to shut down Xelan operations that it had called questionable and had demanded the payment of taxes and penalties.

For a copy of the notice of dismissal, see here.

For blogosphere coverage of this "stunning defeat for the DOJ," which includes copies of all of the court documents in the case, see here.