Saturday, June 25, 2022

Good Article on the Abusive Syndication Easement -- Legislative and Judicial Initiatives (6/25/22)

I recommend to readers this article:  Peter Elkind, The Tax Scam That Won’t Die (Propublica 6/17/22), here.  Key excerpts related to tax crimes:

Criminal investigations of industry practices are reportedly underway in three states. The crackdown’s most sensational case became public in February, when a federal grand jury in Atlanta indicted North Carolina developer Jack Fisher, a major syndication deal promoter and owner of Inland Capital Management. The 135-count indictment charged Fisher and six associates with participating in a conspiracy to sell $1.3 billion worth of illegal tax shelters. The charges against Fisher include wire fraud, conspiracy to defraud the U.S., money laundering and aiding in the filing of false tax returns. He has pleaded not guilty.

The indictment was backed by a string of damning statements attributed to Fisher, including several secretly recorded by an undercover government agent posing as an easement promoter.

The indictment, for example, charged that Fisher’s conservation deals relied on “fraudulent” and “grossly inflated” land appraisals, often valuing the easement properties at more than 10 times what he had paid for them just months earlier. It asserted that Fisher routinely “pre-determined” these valuations before any appraisal was actually performed, telling his two “hand-picked” appraisers what valuation he needed to generate the generous deductions he’d promised investors. In one recorded conversation described in the indictment, Fisher said one of the appraisers simply “puts down whatever we say.” In another, he said he always made sure easement valuations were high enough to make sure investors “can still get a good return on their money,” even if a later IRS audit reduced their charitable deduction.

The government also charged that Fisher frequently orchestrated the illegal backdating of checks and tax documents, allowing him to keep offering unsold stakes in his deals to investors as much as nine months after the year-end tax deadline, after the easement was already donated. In one recording, Fisher acknowledged rewarding partners at an accounting firm with free shares in an easement deal because “they participated in basically backdating all the documents.” After learning he was under investigation, according to the indictment, Fisher told one associate he could claim that backdated checks weren’t deposited until after the close of the tax year because they had been “lost” on someone’s desk.

Both appraisers, now among Fisher’s fellow defendants, have pleaded not guilty. One says on his website that his firm decided in mid-2019 to stop doing conservation easement work “until there is greater clarity from the courts on conservation easements.”

Three accountants who worked closely with Fisher had been criminally charged earlier. One, Herbert Lewis, has pleaded not guilty. Two others, brothers Corey and Stein Agee, pleaded guilty to conspiracy to defraud the United States and are cooperating with prosecutors. According to the government, the Agees each received $1.7 million in fees from promoting the syndicated deals.

Fisher, a CPA himself, once worked for the IRS.

The indictment said he made $60 million personally from the 15 syndicated easement deals he put together between 2013 and 2020. With those funds, the government said, Fisher purchased a $2 million home on the Caribbean island of Bonaire, an airplane, a $450,000 luxury recreational vehicle, a $750,000 show jumping horse and more.

Fisher’s attorney, Russ Ferguson, said in a statement: “Jack Fisher looks forward to defending the allegations brought by the Department of Justice in court and hopes for a speedy trial. Through a congressionally authorized and IRS-approved tax deduction to encourage conservation, Jack Fisher has conserved nearly 10,000 acres of developable, natural land for generations to come. In doing so, Mr. Fisher has not only followed the law but has acted in conformity with IRS regulations, agency guidance and audit guidelines.” The statement said Fisher stopped promoting easement donations in 2019 because the government “now considers such transactions criminal.”

Of course this initiative goes after abuses in the syndicated conservation easement industry.  Many abusive tax shelters, including conservation easement shelters, are one-offs rather than syndicated.  There are many valuation abuses in such shelters, but they are harder to catch.

Finally, over the years, I have noted that many of the abusive tax shelters have built a legal superstructure that was aggressive and often did not hang together, but in the final analysis it was egregious overvaluation that was the Achilles heel.  Remember from the old, old days (late 1970s and early 1980s) such shelters as Jackie Fine Arts and Barrister?

No comments:

Post a Comment

Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.