Denis Field, the former chairman and CEO of accounting firm BDO Seidman, was convicted along with two attorneys from the law firm Jenkens & Gilchrist and a Deutsche Bank broker, of participating in a $7 billion tax shelter scheme that lasted a decade.
According to prosecutors, the defendants, all of whom are CPAs, netted $130 million in illicit profits from the scheme. Field, 53, was not only the chairman and CEO of BDO Seidman at the time, but also the head of its national tax practice, and one of three heads of BDO’s Tax Solutions Group.
He was convicted Wednesday following a 10-week trial, along with three co-defendants: Paul M. Daugerdas, 60, a lawyer and the former head of the Chicago office of Jenkens & Gilchrist and its tax practice; Donna M. Guerin, 50, a tax lawyer and shareholder at J&G’s Chicago office; and David Parse, 49, a former Deutsche Bank broker.
Raymond Craig Brubaker, 55, a banker at Deutsche Bank who was also charged along with the defendants, was acquitted by the jury on all counts. U.S. District Judge William H. Pauley III presided over the trial.
"The multi-billion dollar tax fraud scheme perpetrated by this corrupt group of attorneys, accountants, and bankers was stunning in scope, and today’s guilty verdicts are a just result,” said Manhattan U.S. Attorney Preet Bharara in a statement. “These privileged professionals wove an intricate web of deceit that spanned nearly a decade, enabling them to enrich themselves and their well-heeled clients to the tune of hundreds of millions of dollars. Surely there are many Americans who dread April 15th, but they put their checks in the mail nonetheless. These defendants thought they were above the law and found out the hard way that they were not.”
According to the trial evidence and other documents filed in the case, from 1994 through 2004, the four defendants participated in a scheme to defraud the IRS by designing, marketing, implementing and defending fraudulent tax shelters for their clients. Prosecutors claimed the defendants tried to prevent the IRS from detecting their clients’ use of the tax shelters, and to keep the IRS from understanding how the transactions operated to produce the tax results reported by clients. The shelters were marketed to clients as cookie-cutter products designed to eliminate or reduce large tax liabilities.
Prosecutors said the clients were not seeking any profit-making investment opportunities, but were instead seeking huge tax benefits from the scheme. The clients had to follow a pre-planned series of steps designed to lead to the specific tax benefits they sought. The defendants created transactional documents and other materials that fraudulently described their clients’ motivations for entering into the tax shelters and for taking various steps to yield the tax benefits.
As a result of the tax shelters, the defendants made millions of dollars in fees, commissions and bonuses. For example, Field received $18 million in distributions and bonuses, Daugerdas made $95 million and Guerin made $17 million from the sale of the shelters.
Field, Daugerdas and Parse also used the tax shelters for themselves to evade personal tax liabilities on the substantial income they were receiving from selling the tax shelters. For example, Daugerdas used the shelters to reduce the income taxes he owed on the $95 million he made in fees on the illegal shelters to less than $8,000; without the shelters, he would have owed over $32 million in taxes.
Field, Daugerdas and Guerin, were each convicted of conspiring to defraud the IRS and to evade taxes, and of corruptly endeavoring to obstruct and impede the Internal Revenue laws. The defendants were also convicted on multiple counts of tax evasion relating to the use of various tax shelters for specified clients, and of mail fraud. Daugerdas also was convicted of tax evasion based on his use of fraudulent tax shelters to eliminate or reduce his personal income tax liabilities between 1999 and 2001.
Parse was found guilty of mail fraud and obstructing the tax laws.
On the conspiracy charge, each defendant faces up to five years in prison; three years of supervised release; a fine of the greatest of $250,000 or twice the gross gain to the defendant or twice the gross loss to the IRS; and restitution. On the mail fraud charge, each defendant faces up to 20 years in prison. Each count of tax evasion carries a maximum penalty of five years in prison; three years of supervised release; a fine of the greatest of $250,000 or twice the gross gain to the defendant or twice the gross loss to the IRS; and costs of prosecution. Each defendant also faces up to three years in prison; one year of supervised release; and a fine of the greatest of $250,000 or twice the gross gain to the defendant or twice the gross loss to the IRS on the charge of corruptly endeavoring to obstruct and impede Internal Revenue laws.
The defendants are scheduled to be sentenced by Judge Pauley on October 14.
Several other defendants involved in the case have previously pled guilty: Adrian Dicker, 56, a former vice chairman of BDO Seidman and a member of the Tax Solutions Group; Charles W. Bee, Jr., 65, a former BDO Seidman vice chairman and board member; Robert Greisman, 60, a tax partner in BDO’s Chicago office and a member of BDO’s Tax Solutions Group; Michael Kerekes, 48, a principal of BDO Seidman and a former member of BDO’s TSG and Tax Opinion Committee; and Erwin Mayer, 47, a lawyer and former shareholder at J&G’s Chicago Office in its tax practice.
In December 2010, as part of a non-prosecution agreement with the U.S. Attorney’s Office, Deutsche Bank agreed to pay $553,633,153 to the United States, and also admitted criminal wrongdoing, in connection with its participation in financial transactions which furthered the fraudulent tax shelters.
