Saturday, March 23, 2013

USA SDNY Announces Sentencing of Daugerdas Related Defendant (3/23/13)

USA SDNY announced, here, the sentencing of David Parse, a former broker at Deutsche Bank, caught up in the Daugerdas juggernaut.  Key excerpts are:
 DAVID PARSE, a former broker at Deutsche Bank (“DB”), was sentenced in Manhattan federal court today to 42 months in prison on tax obstruction and mail fraud charges stemming from his work in assisting lawyers from the Jenkens & Gilchrist (“J&G”) law firm and BDO Seidman (“BDO”) accounting firm in the design, marketing, and implementation of fraudulent tax shelters that allowed his clients to claim billions of dollars in fraudulent tax losses. Parse was sentenced by U.S. District Judge William H. Pauley III. 
Manhattan U.S. Attorney Preet Bharara said: “David Parse used his professional acumen to help his wealthy clients make an end-run around the IRS, depriving the treasury of billions in tax revenue. And for his role in this sprawling and massive fraud, he is now paying the price.” 
According to the Indictment previously filed in Manhattan federal court, the proof at Parse’s trial, and statements made during his sentencing proceeding: 
PARSE, who was also a certified public accountant, was a broker and investment representative at DB’s Chicago offices between 1997 and 2003. During that period, he worked with attorneys at J&G and accountants from BDO, as well as other DB brokers, 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. 
Among the fraudulent tax shelters designed, marketed, and implemented by PARSE and his 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 – PARSE and other DB brokers assisted the J&G attorneys in marketing and implementing the fraudulent tax shelters, including attending sales pitches for the shelters, setting up bank accounts for the entities employed in the fraudulent tax shelters, and effectuating transfers between the various bank and financial accounts used in the transactions. PARSE also helped to identify and select certain stocks that would be utilized in the tax shelters to disguise from the Internal Revenue Service (“IRS”) the fraudulent losses claimed by the clients. He also steered his own DB clients to the fraudulent shelters, and was given a free tax shelter opinion letter by the J&G attorneys, which he used to evade hundreds of thousands of dollars of his own income taxes. PARSE was paid over $3 million in commissions by DB attributable to the fraudulent tax shelters. 
In addition to his involvement in the marketing and implementation of the fraudulent tax shelters, PARSE also took part in the illegal back-dating of certain tax shelter transactions. The backdating occurred when attorneys at J&G realized, after the close of certain tax years, that certain steps of the tax shelter transaction had been done improperly, and the correct amount or nature of the tax shelter losses could not be produced through the transactions. The J&G attorneys worked with PARSE to create documents and effectuate securities transactions at the bank after the close of the tax year and back-dated them using “as of” dates, which treated the documents as if they had been signed prior to the close of the tax year, in violation of tax accounting rules.
The announcement also contains a summary of the status of the other defendants.

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