The tax court judge who assessed a massive judgment against United Parcel Service Corp. last year "misconstrued, misread, misconceived, disregarded and distorted'' the company's actions and US tax law, UPS lawyers wrote in an 84-page brief filed this week at the 11th US Circuit Court of Appeals in Atlanta.

The Bermuda-based reinsurer Overseas Partners Ltd., as a former UPS subsidiary, is in the middle of the huge controversy, which could see UPS pay more than $2.4 million in back taxes if the 1999 ruling is not overturned. If UPS wins, it could recoup the $1.8 billion it has set aside, plus interest, in what is already one of the largest tax cases in US history.

Overseas Partners was set up by UPS in 1984 to handle "extra value'' insurance bought by UPS customers. By directing revenue from its highly profitable insurance business through OPL, UPS reduced its financial risk and its federal income tax payment.

The Internal Revenue Service challenged the practice, however, and last year Tax Court Judge Robert Ruwe agreed. He called the OPL arrangement a "sham transaction,'' rejected testimony from top UPS executives and ordered the company to pay back taxes on OPL income plus interest and penalties.

According to an article in the Atlanta Journal and Constitution, UPS lawyers called US Tax Court Judge Robert Ruwe's 1999 ruling "irreconcilable'' with higher court decisions and urged the appeals court to reverse it.

"There's a great deal of concern in the business community about the tax court unravelling all sorts of legitimate transactions,'' said Shirley Hufstedler, a lawyer for Morrison & Foerster, a Los Angeles firm representing UPS.

"It's causing an uproar because of the long-term economic consequences.'' Legal experts said the case could take months, even years, to resolve.

UPS appealed, and the papers filed this week gave the first glimpse of the company's legal strategy.

In court documents, UPS insisted its actions served legitimate business purposes and were consistent with US laws. Company lawyers say OPL signed contracts with many other businesses, OPL stockholders paid federal taxes on dividends, and UPS paid excise taxes on the money it sent overseas.

"This case bears no resemblance to a `tax shelter' case,'' UPS lawyers wrote.

"Any resulting tax savings arose solely from Congress' decision to tax foreign insurance companies through an excise tax, rather than an income tax.'' BUSINESS BUC