Wednesday, October 20, 2010

Another Tax Shelter Lawyer Bites the Dust

Erwin Mayer, a Paul Daugerdas partner and co-defendant in the tax shelter indictment in SD NY, has pled guilty. I have previously blogged on various aspects of the indictment in four parts: Part 1, Part 2, Part 3, and Part 4. Mayer pled to two counts -- conspiracy and tax evasion, both 5 year felonies exposing him to a maximum 10 year sentence.  He also agreed to forfeit money and property worth in excess of $10,000,000,.

The press release by USAO SDNY here summarizes the key admissions for guilts as follows:
During the guilty plea proceeding, MAYER acknowledged that he 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. MAYER 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. MAYER admitted that the tax shelters had no reasonable possibility of resulting in a profit because among other reasons, the costs and fees for most of the transactions exceeded the potential profit, if any.
For some more nuance, see the WSJ Law Blog here.

Daugerdas and a fellow lawyer Donna Guerin remain standing defendants in the case, at least for now.  It is unlikely that the prosecutors will offer Daugerdas a deal -- at least one that would not put him away for a very long time.  But we'll see what happens on Guerin.

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