Friday, July 10, 2009

Update on the Daugerdas indictment -- Guilty Plea by Defendant Greisman (BDO)

Robert S. Greisman, former DBO Seidman former partner, pleads guilty. See the USAO SDNY press release here. The plea is to three counts - (i) the (ubiquitous) defraud / Klein conspiracy (18 USC § 371), (ii) tax evasion (§ 7201), and (iii) tax obstruction (§ 7212). The parts of the press release that addresses the big issue - the lie - previously discussed in the blogs here are:
GREISMAN knew that the tax shelter transactions would be allowed by the IRS only if there was a reasonable possibility of a profit. GREISMAN also knew that, given the costs and fees to the clients, and the nature and duration of the transactions, the tax shelters had no reasonable possibility of resulting in a profit. In addition, GREISMAN knew that the clients who purchased the tax shelter had no non-tax business reasons for entering into the transactions, and that the fees were set as a percentage of the tax loss sought by the clients. To make it appear that the tax shelter clients had the requisite business purpose and that there was a possibility of profit, GREISMAN and
his co-conspirators reviewed and approved the use of a legal opinion letter issued by J&G that contained false and fraudulent representations purportedly made by the clients about their motivations for entering into the transactions.
* * * * GREISMAN and his co-conspirators caused the clients to file false and fraudulent tax returns incorporating the supposed tax shelter benefits. GREISMAN coordinated the provision of information to the IRS in the course of audits of BDO tax shelter clients, including bogus paperwork that contained false descriptions of the clients' motivations for entering into the transactions. In addition, GREISMAN assisted certain clients in providing false testimony to the IRS, when those clients were audited and questioned by the IRS.

GREISMAN also specifically admitted criminal responsibility based on the sale by BDO of a tax shelter known as the "short option" transaction to one client, who was charged fees of approximately $513,000 by BDO Seidman and $230,000 by J&G. The short option tax shelter purportedly generated losses sufficient to offset the taxes due on $9 million of income the client had received. In fact, the short option transaction had the reasonable possibility only to net a profit of $90,000, thus resulting in no potential profit to the client. The client nonetheless filed tax returns with the IRS reporting false and fraudulent losses purportedly generated from the short options shelter, thereby evading a substantial amount of taxes that he would otherwise have had to pay.
The plea to three counts -- two 5 year and one 3 year count -- permits a maximum sentence of 13 years by stacking each of the counts of conviction. With inclusion of relevant conduct (assuming all or most of the amounts alleged in the indictment are included under conspiracy theory), the Guidelines indicated range for sentencing is likely to exceed 13 years. Under the post-Booker regime, of course, the Guidelines range -- here capped at 13 years -- is only advisory, so I would expect that he will receive less. Indeed, there may have been an explicit or implicit Government agreement to recommend or not to oppose a sentence materially less than 13 years.
This plea does not bode well for the remaining defendants in the Daugerdas case. In particular, by requiring a plea with a maximum sentence of 13 years, Mr. Greisman and the Government signaled that their case is perceived as very strong indeed.
For prior blogs on the Daugerdas indictment see here.

1 comment:

  1. Let me start by saying I love the United States. As a prior officer in the United States Army and veteran, I used my opportunities to gain my JD from a prestigious university.

    After reading the details of this case and similar past cases, it seems the government is continuously putting an enormous amount of pressure on defendants most likely using tactics typically used against mob bosses and international drug traffickers. This is what makes innocent people plead guilty and lie to protect themselves and their families. Is the government really trying to argue that the defendants convinced thousands of educated people, most of which had their own expensive competent lawyers counseling them, to commit a criminal scam? Absolutely absurd. The defendants found a legal strategy and the government is trying to convict them of a crime. This case is illogical and the government should be ashamed. They’ve probably spent too much time and effort in investigation to sit back and not indict, and continued forward with attempted prosecution. Wouldn’t our tax dollars be better spent indicting actual criminals who have committed real crimes against the United States? The defendants in this case did not deceive, steal or embezzle money from the United States; they only used legal standing concepts and innovative ideas to gain a profit, just like any other business does. Admit it was a legal strategy and move on.


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