Former Jenkens & Gilchrist Attorney Pleads Guilty In Manhattan Federal Court To Creating Illegal Tax Shelters That Generated Billions Of Dollars In Fraudulent Tax Losses And Other Charges
FOR IMMEDIATE RELEASE
Thursday, September 13, 2012
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DONNA GUERIN, an attorney, pled guilty today to conspiracy and tax evasion charges stemming from her work in the design, marketing, and implementation of fraudulent tax shelters that allowed her clients to claim billions of dollars in fraudulent tax losses. GUERIN pled guilty before U.S. District Judge William H. Pauley III.
Manhattan U.S. Attorney Preet Bharara said: “Donna Guerin’s flagrant violations of the tax code and of the oath she took as an officer of the court, enabled her clients to claim billions in bogus tax deductions, and contributed to the loss of hundreds of millions of dollars in revenue to the IRS. With her plea today, we continue the process of holding to account a group of professionals who used their training and expertise to facilitate a fraud, the magnitude of which cannot be overstated.”
According to the Indictment previously filed in Manhattan federal court and
statements made during GUERIN’s guilty plea:
GUERIN was a partner at Altheimer & Gray (“A&G”), a Chicago law firm, between 1994 and 1998, and later moved with a small group of A&G attorneys to the newly-formed Chicago office of Jenkens & Gilchrist (“J&G”), a Texas-based law firm with offices throughout the United States. At different times between 1999 and 2005, GUERIN was a shareholder or partner at J&G.
Between 1996 and 2004, GUERIN and other attorneys at J&G worked on the design, marketing and implementation of high-fee tax strategies for individual clients. Those strategies, or “tax shelters,” were designed to allow high-net-worth clients to eliminate, reduce, or defer taxes on significant income or gains. GUERIN and other J&G attorneys worked together with brokers from a financial institution, partners and employees of the accounting firm BDO Seidman, and other entities, in marketing and implementing the tax shelters.
Among the fraudulent tax shelters designed, marketed, and implemented by GUERIN and her co-conspirators were “Short Sales,” “Short Options Strategy” (“SOS”), “Swaps,” and “HOMER.” The Short Sale tax shelter was marketed and sold from 1994 through 1999 to at least 290 wealthy individuals, and generated at least $2.6 billion in false and fraudulent tax losses. The SOS tax shelter was marketed and sold from 1998 through 2000 to at least 550 wealthy individuals, and generated at least $3.9 billion in false and fraudulent tax losses. The Swaps tax shelter was marketed and sold in 2001 and 2002 to at least 55 wealthy individuals, and generated more than $420 million in false and fraudulent tax losses.
In return for receiving a fee from tax shelter clients based on a percentage of their purported tax losses, and the nature of the losses – usually 5% for ordinary losses and 4% for capital losses – GUERIN and others at J&G clients assisted in implementing all of the stages of the tax shelters, including setting up bank accounts and entities such as corporations and partnerships. GUERIN and others at J&G also provided the tax shelter clients a “more likely than not” legal opinion from J&G.
During the guilty plea proceeding, GUERIN acknowledged that she knew that the tax shelter transactions would be allowed by the IRS only if there was a reasonable possibility of a profit and if the clients were entering into the tax shelter transactions for genuine, non-tax business reasons. GUERIN also acknowledged that the losses from the transactions would be allowed only if the clients were utilizing the entities involved in the tax shelters – such as the partnerships and corporations – for legitimate, non-tax, business reasons, and not simply to produce tax losses. GUERIN admitted that she drafted false and fraudulent legal opinion letters as part of the implementation of the tax shelters, which were intended to be provided to the IRS to protect her clients from the imposition of penalties.
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GUERIN, 52, of Elmhurst, Illinois, faces a maximum sentence of five years in prison on the conspiracy charge to which she pled guilty and a maximum sentence of five years in prison on the tax evasion charge. As part of her plea agreement with the Government, GUERIN agreed to forfeit $1.6 million to the IRS, and to sell her residence in order to effectuate that forfeiture.
Sentencing is scheduled for January 11, 2013, at 2:00 p.m. before Judge Pauley.
GUERIN and co-defendants Paul Daugerdas, Denis Field, and David Parse were convicted of various tax fraud charges in May 2011 after an 11-week jury trial trial. GUERIN, Daugerdas, and Field were granted a new trial as a result of certain juror misconduct. David Parse is currently scheduled to be sentenced on October 26, 2012. The trial of Daugerdas and Field is scheduled to begin on April 8, 2013. The charges against these defendants are merely accusations, and they are presumed innocent unless and until proven guilty.
Former J&G partner Erwin Mayer pled guilty to related charges of conspiracy and personal tax evasion on October 19, 2010. Former BDO Seidman Vice Chairman and board member Charles W. Bee, Jr., pled guilty on June 3, 2009, to related charges of conspiracy to defraud the IRS, tax evasion, and perjury. Michael Kerekes, another principal of BDO Seidman and also a former member of BDO's TSG and Tax Opinion Committee, pled guilty on February 13, 2009, to related conspiracy and tax evasion charges. Adrian Dicker, a former Vice Chairman of BDO Seidman and TSG member, pled guilty on March 17, 2009, to related conspiracy and tax evasion charges. BDO partner Robert Greisman pled guilty on July 9, 2009, to related conspiracy, tax evasion, and IRS obstruction charges. BDO partner Mark Bloom pled guilty on July 30, 2009 to a related IRS obstruction charge.
Mr. Bharara thanked the Internal Revenue Service and the Tax Division of the Department of Justice for their work on this case.
This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Stanley J. Okula, Jr., and Jason P. Hernandez, and Special Assistant U.S. Attorney Nanette L. Davis, are in charge of the prosecution.