Conviction in a Tax Shelter Fraud Case May Deter Others From Conducting Fraudulent Acts
Evidence introduced during the ten week trial included testimony from twenty-four of the defendants’ former clients, misleading letters written by Guerin and Daugerdas, and testimony from former Jenkens & Gilchrist partner Erwin Mayer. Mayer testified that Daugerdas had bragged once, “I was a taxpayer for a brief time in the early nineties.”
During trial, evidence showed that Daugerdas’ fees for marketing four tax shelters were $95 million. It was also discovered during trial that Guerin was part of a conspiracy that created over $7 billion in fake losses and tax benefits. Guerin received $17.5 million for participating in the conspiracy.
The four individuals will be sentenced on October 14, and many believe that the prosecution will ask for long prison terms. All four defendants could receive up to twenty years in prison. The defense attorneys, during appeal, will likely argue the constitutional vagueness of the standard of conviction under the economic substance doctrine.
A series of guilty pleas in tax shelter cases has helped prosecutors secure convictions in the face of defense lawyers who decried the charges against their clients as almost immoral in the gray world of tax law, where professionals are obligated to test the limits of the Internal Revenue Code.
Mark Hamblett, Conviction of Lawyers in Tax Shelter Case Seen as Deterrent, New York Law Journal, May 26, 2011.
Special thanks to Jim Hillhouse (WealthCounsel) for brining this article to my attention.