The NBA playoffs feel like they’ve gone on forever this season… But even they must pale in comparison to the feeling that Chris Cohan gets when he checks his mail. His tax nightmare just won’t end.
I know what you’re thinking… who is Chris Cohan? (Or maybe you already know, I didn’t – I tend to be very East-coast-centric when it comes to basketball).
Chris Cohan is the owner of the Golden State Warriors. He’s reportedly worth about $325 million now having posted a nifty gain by buying the Golden State franchise in 1995 when it was worth $119 million. A few years later, he boosted the value of the firm by offering UNC basketball phenom Antawn Jamison to play with the Warriors. The year that he wooed Jamison to Golden State – 1998 – was also the year that he sold Sonic Communications to Charter Communications for more than $200 million.
Neither transaction seems to have worked out well for him long-term. Jamison went on to play for the Washington Wizards where he added to his professional achievements, NBA accolades, and the pockets of another owner.
And the sale of that cable company? The Internal Revenue Service now says Cohan owes more than $160 million in back income taxes and penalties from the sale. The IRS claims Cohan set up three tax shelters – relying upon advice provided by KPMG and Presidio Advisors, Inc. at the whopping cost of $14 million – to avoid taxes on the sale. “All three tax shelters were promoted, funded and closed as a package deal for Cohan’s benefit,” claims IRS agent Bernard McKenna. KPMG got into a little trouble of its own for such shelters, remember? However, while KPMG and Presidio Advisors are both subjects of federal criminal investigations, Cohan is not a target of the criminal inquiry.
Cohan believes that he relied upon the advice of professionals and shouldn’t be held liable for the tax consequences. The San Francisco Chronicle quotes him as saying, “I had no idea what was going on, big picture; tell me where to sign at the end of the day because I’m out of the cable business. So all these decisions were by a group of advisers that were so-called experts in the field.”
It is clear that setting up offshore accounts isn’t illegal. Using them to avoid paying taxes is. US citizens are subject to taxation on their worldwide income. It’s not clear to me how Cohan legitimately thought that he would avoid tax by creating not one, but three shelters, to shield his income from taxation. I guess it wasn’t clear to the IRS either.
This isn’t the government’s first attempt to retrieve these funds. A prior effort was unsuccessful in 2005 after Cohan’s attorneys argued that documents the IRS needed as evidence were protected by the attorney-client privilege. The case was re-opened in 2007 after the federal government argued that Cohan had waived his attorney-client privilege during hearings in U.S. Tax Court.
