It had been billed as the “largest tax fraud ever” by the feds and the trial was set to teach those that set up illegal tax shelters a lesson. And then it all went very, very badly.
Defendants in the case asked the judge to throw out the charges against them when it was revealed that prosecutors had engaged in misconduct. The alleged constitutional violations by prosecutors resulted in the dismissal of charges against thirteen of the defendants; an appeal to the 2nd Circuit was unsuccessful. Two of the remaining defendants took a plea. And with just four of the original nineteen defendants remaining, the prosecution moved ahead with their case.
During the trial, a juror skipped out, annoying the judge, and defendants again moved for dismissal, claiming that they were blindsided by the prosecution’s change of strategy. The judge did not grant the motion and the trial proceeded. Prosecutors then suffered another serious blow when one of their star witnesses, Steven Acosta, was called out on the witness stand as a liar.
Nonetheless, three and a half years after I originally blogged this story, it has an end:
One defendant, David Greenberg, was acquitted on all charges. It was likely a relative consolation as Greenberg had served five months in jail before trial. Greenberg’s acquittal was thought to have been tied to the flawed Acosta testimony, testimony which embarrassed the prosecution on cross-examination and which the judge referred to as “an injustice.”
Greenberg’s three co-defendants were not so lucky (if you want to call what happened to him lucky). Raymond Ruble was convicted on 10 counts of tax evasion and investment consultants Robert Pfaff and John Larson were each convicted on 12 counts of tax evasion.
Sentencing for Ruble, Pfaff and Larson will be in March of this year. Each count could bring up to five years of jail time.
With that, the “largest tax fraud ever” is over. What was planned as a spectacular prosecution turned instead into a spectacular failure.
Check in later today for my thoughts on what it all means (did you expect any different?).
I heard a tax attorney speak about some of the prosecutor’s tactics. They were outrageous. I think we’ll never know if any of the defendants were rightly convicted or rightly acquited.
Unfortunately the KPMG name will always be remembered in connection with the alleged “largest tax fraud ever” and no one will remember how few of the original defendants were convicted.
I have no connection at all with KPMG but it’s bad for tax preparers everywhere.
Does anyone know whatever happened to Acosta the (star) witness, I read he was to be sentenced in Jan/08.
Glenn, I’ve poked around but haven’t seen anything on actual sentencing. He was supposed to get a max of 16 yrs.