Saturday, 2 March 2013


This tax fraud, being reviewed now,  dates back to 1994 - 2004. It is an example of top lawyers and global accountants assuring clients that "aggressive tax avoidance" is legal - when it is nothing more than fiddling the books - and covering the maze with legal and auditing jargon. While the professionals face long prison terms and large fines, which they are trying to wriggle out of by criticizing one of the jurors - ironically accusing the juror of telling lies about her status - the reports tell us nothing about what has happened to the 931 wealthy individual clients. 

At a guess - for example the first clients in 1994 - for every $100,000 "sheltered" will be taxed at say 30% - $30,000, with compound interest at say 5% - 1994 to 2013 making $79,000 - plus a penalty depending on how many false documents they signed - usually equivalent to the original tax, another $30,000 - which adds up to $109,000 for every $100,000 of income - plus tax on the annual income from the buried $100,000.  And they will be lucky to avoid a prison sentence.

You say evasion - I say avoidance 

So it is that in the majority of tax evasion cases the whole of the capital sum involved is repatriated to The Treasury. With globally $21 trillion "hidden" offshore by such scheming - the US Treasury can target about $16 trillion for repatriation. This is just the amount of the US fiscal debt. What an amazing coincidence. My estimate for the UK is about $2 trillion - which will pay 3 years fiscal budget and replenish all our bust banks so they can invest in UK jobs. 

Tax "avoidance" schemes are pompously claimed by professional tax-planners to be legal - until someone shouts "The Emperor has no clothes". Then the house of cards collapses and the entire silly sham is revealed. In this case - the lawyers, accountants, bookkeepers and hundreds of clients are faced with charges of tax evasion regarding a scheme that was trumpeted as "clever and Legal". It was neither - It was simply fiddling the books. 

Tax-Shelter Lawyers Acted in Bad Faith, Prosecutor Argues

The former head of the Chicago office of the defunct law firm Jenkens & Gilchrist and others accused of marketing phony tax shelters acted in “bad faith” by providing letters saying the investments would probably survive tax authorities’ challenges, a prosecutor told jurors.
Paul Daugerdas and four co-defendants “cannot possibly claim that they were acting in good faith” with the letters, which were a “total farce,” Nanette Davis, a Justice Department attorney, told jurors today in closing arguments at their trial in federal court in Manhattan.
“These were not lawyers acting in good faith,” Davis said. “These were lawyers with a product they were selling which could get them huge fees. These were lawyers acting in bad faith.”
Charles Sklarsky, a lawyer for Daugerdas, attacked the credibility of the government’s cooperating witnesses during his closing argument by saying they have a “motive to fabricate.” Sklarsky said his client is a “good man” who is being punished for using aggressive strategies.
“He’s a lawyer who pushed the law, who took aggressive positions that the IRS didn’t like,” Sklarsky said, referring to the U.S. Internal Revenue Service. “There’s no question about that. But just because the IRS doesn’t like the positions you take doesn’t make you a criminal.”
Daugerdas is one of seven people indicted in June 2009 on charges of conspiracy and tax evasion for selling phony tax shelters from 1994 to 2004. Prosecutors said the defendants used the shelters to generate more than $7.32 billion in fraudulent tax losses for at least 931 wealthy individuals.  

Ex-Jenkens & Gilchrist Lawyer Gets 8 Years in Tax Case
By Patricia Hurtado - Mar 2, 2013 5:01 AM GMT

Former Jenkens & Gilchrist lawyer Donna Guerin was sentenced to eight years in prison and ordered to pay $190 million for her role in what the U.S. called the largest criminal tax fraud in history.
Guerin, 52, pleaded guilty in September 2012 just as she was set to be retried with three other defendants for running a 10-year scheme that created $7 billion in fraudulent tax deductions, more than $1.5 billion in phony losses and $92 million in actual losses to the U.S. Treasury.
U.S. District Judge William Pauley in New York, who presided over the case, said that as both a lawyer and a certified public accountant, Guerin had violated her oaths to uphold the law by helping her clients avoid paying their taxes through shelters.
“It’s the modern-day equivalent of Hawthorne’s story of Midas,” Pauley said yesterday. “Everything she touched turned to gold with tragic consequences. Her fall has been Faustian.” Guerin was “the embodiment of the American dream, but then her lust for money turned her dream into a nightmare,” he said.
Pauley ordered Guerin to report to prison on May 14. The judge also directed her to pay $200,000 before she surrenders to U.S. prison authorities and said she must turn over 20 percent of her gross income after she’s released from prison. Guerin and her lawyer declined to comment after the hearing.  

The restitution that Guerin must pay is more than the $123 million Ernst & Young LLP will pay to settle a U.S. tax-fraud probe as part of a non-prosecution agreement. The accounting firm “admitted wrongful conduct” by its partners and employees in connection with four tax shelters, from 1999 to 2004, according to yesterday’s statement. About 200 Ernst & Young clients used the shelters to try to avoid more than $2 billion in taxes, Manhattan U.S. Attorney Preet Bharara’s office said in a statement.
The case is U.S. v. Daugerdas, 09-cr-00581, U.S. District Court, Southern District of New York (Manhattan). 

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