A sensational tax shelter case has wrapped up in the Seattle area with the two defendants pleading guilty. The men, Jeffrey Greenstein, and Charles Wilk, were indicted last year. At that time, Greenstein’s attorney said his client “adamantly denies the allegations in the indictment and looks forward to clearing his name at trial.” Trial had been slated for September 2010. My, how things have changed.
Greenstein and Wilk managed an investment company called Quellos Group LLC. Quellos was considered, at the time, to be one of the world’s largest managers of mutual funds made up of hedge funds: the funds portion of the company was sold to BlackRock in 2007 for $1.7 billion. BlackRock was not part of the investigation.
From 1999 to 2006, Greenstein and Wilk used the company to convince clients to engage in a complicated scheme using offshore funds and shell entities to create false losses for their tax returns. The tax shelter was actually a sham and was used to avoid more than $240 million in back taxes; clients of the firm were not aware that these losses were false and most have agreed to repay the back taxes.
Under the plea, Greenstein and Wilk agreed to charges of conspiracy to defraud the government and aiding in the filing of a false tax return. They must pay $7 million in penalties plus the cost of their prosecution. The best part? They also have to give speeches at their graduate schools about ethics. Yeah. As an attorney, Wilks was no doubt required to attend ethics classes to keep his license – a lot of good that did him. Nonetheless, he’ll likely be addressing NYU (where he received his LLM in Tax) about staying clean; Greenstein will deliver a similar speech to the University of Washington. Great press for those schools, no?
That’s not all. They’ll probably still do time. Under the plea, the recommendation for prison time will be somewhere between two and six years. Greenstein is age 48 and Wilk is 51; they’ll be out of jail in time to retire.
The plea came after a series of pre-trial maneuvers by the defense, most of which were unsuccessful. The prosecution had a pretty solid case against the two, including the testimony of former Hollywood attorney Matthew Krane, who pleaded guilty last year to a host of related charges. Krane repped the mega-rich Haim Saban, the man responsible for inflicting introducing the Power Rangers to our children. Krane took a kickback for his part in the arrangement and attempted to flee the country once the scheme was uncovered; Saban was not said to be aware of the scheme and has repaid the taxes.
Sentencing for Greenstein and Wilk will be held on January 28, 2011. Under the terms of the plea, those speeches to grad school students have to be completed prior to that time.
When will the Euram bank boys that made up the phony confirms be charged? Bert Cohen, of Capital Insight fame and Thrifty insider trading was the Chairman of Euram. When will he be charged and have to give up the 20 mln Quellos.