The crackdown on tax shelters continues with a Manhattan jury finding four members of the Ernst & Young accounting firm guilty of all criminal charges following a ten-week trial. The four, Robert Coplan, Martin Nissenbaum, Richard Shapiro, and Brian Vaughn, worked in the SISG (Strategic Individual Solutions Group) set up by Ernst & Young in 1998. Three of the four are attorneys (Vaughn is a CPA). Interestingly, Coplan was at one time a Branch Chief in the IRS’s Legislation and Regulations Division.
Federal prosecutors alleged that the four defendants engaged in conspiracy, tax evasion, and other charges related to the design, marketing, and implementation of tax shelters sold by Ernst & Young. The tax shelters created by the four helped wealthy clients avoid paying between 1998 and 2006.
As part of their scheme, Coplan, Nissenbau, Shapiro, and Vaughn helped clients manufacture losses within the tax shelters. The four then solicited opinion letters from law firms that claimed that the tax shelter losses or deductions would “more likely than not” survive an Internal Revenue Service (IRS) challenge, or “should” survive an IRS challenge. The IRS claimed that the four defendants were aware that the transactions did not meet those standards.
Charges as between the defendants varied. In addition to tax evasion charges, there were claims that the defendants interfered with the investigation. Coplan was charged with “corruptly endeavoring to impede the due administration of the Internal Revenue laws by instructing E&Y individuals to destroy documents related to the COBRA transaction when he knew of a pending IRS audit of the transaction.” Coplan and Vaughn were both charged with making false statements to the IRS.
The defendants had pleaded not guilty. Charles Bolton, initially charged as a co-defendant with the four, had already pleaded guilty earlier in the year.
Each of the conspiracy, tax evasion, and false statements counts carries a maximum sentence of five years in prison and three years of supervised release. Each obstruction of justice count carries a maximum sentence of three years in prison and one year of supervised release. In addition, each count is subject to a maximum fine of the greatest of $250,000 or twice the gross gain or loss derived from the offense. Sentencing is scheduled for September 10, 2009.
David L. Smith, the alleged mastermind behind the scheme who was charged with conspiracy along with the remaining defendants, failed to appear before a federal judge last year. Investigators tracked him to British Columbia, Canada, where he is believed to be living; his daughters are said to be attending private school there. He is allegedly working with Vancouver law firms to increase his vast wealth; he is charged with personally failing to report almost $20 million in income. Reportedly, the U.S. Marshal’s office was preparing a warrant for extradition but Smith has not yet been brought to New York. The US Department of Justice has not offered further comment.
You can read the indictment from 2007 here as a pdf.
What about Mike Hamersley? Hamersleazey based on his Senate testimony is guilty of tax fraud based on his very own definition of tax fraud. How can this be, not only is Hamersleazey a nationally renowned tax shelter crusader, Hamersleazey is a high level tax shelter lawyer for the California FTB. Here is an excerpt from a Hamersleaze email which based on his Senate testimony is tax fraud “Then P sold the S stock to its lawyer for $1. As a result of the transaction, S is a dormant corporation and remains dormant until it is dissolved. Pursuant to our phone conversation, there is substantial authority (at a confidence level of approximately 20 -30 percent) to conclude that the above transaction can be characterized as follows for federal income tax purposes”. Note, P and S are foreign tax haven companies which were used to generate 10s of millions in phony tax deductions (based on Hamersleazey’s definition of tax fraud to the Senate) for Hamersleazey’s client; Hamersleazey goes on in the email chain describing the result that would obtain if the IRS were to ever discover the true facts regarding his fraudulent advice; and the transaction was backdated.
For every person they catch, hundreds get away with it. Our convoluted tax code guarantees this kind of behavior.
Whistlewhat,
What is it with you and all these crazy rantings and ravings about Hamersley. You are posting this crap to just about every blog out there. Who are you are you and what exactly is your beef with Hamersley that has made you so obsessed with these finatical musings. Why on earth would you be posting to public websites, emails and other confidential informaton, that if truly from the source you claim them to be from, would certainly be a violation of your confidentiality agreement–not to mention a criminal violation of IRC Section 7216, and if not true, would appear to certainly be libel with respect to Hamersley? Help me out here. Are you just insane? If you believe this information is true about Hamersley, why don’t you just go through the proper channels to make it known to authorities. Of course, if its not true, you will have a very serious problem on your hands taking that course of action.
Whistlewhat, I have known Mike Hamersley for a very long time both at KPMG and now in his capacity with the FTB. Your comments are absurd, and frankly, I am not sure you are dealing with a full deck. Tax partner is right. You appear to have either breached your confidentiality agreement with KPMG and disclosed confidential tax return information in criminal violation of IRC section 7216 or you are practically begging for Hamersley to sue the crap out of you. Are you insane?
Whistlewhat (David Greenberg, the former KPMG tax shelter promoter):
David, what are you going to do when Hamersley finds out that it is you who have been posting all of these false, delusional, and defamatory statements about him just like the ones you have been posting under a number of other aliases on other blogs. It shouldn’t take him too long since you are saying exactly the same things about me and other former KPMGers in emails and in telephone conversations. Taking shots at others does not diminish the magnitude of one’s dastardly deeds.
Let’s keep it nice people. I have a comment policy – please read it: http://www.taxgirl.com/official-comment-policy/
I would prefer to not block or moderate comments so let’s keep it congenial and respectful with no personal attacks. For Pete’s sake, my mother could be reading.
go to you tube….look at “anatomy of a purchase”…..the guy Bert Cohen and his partner Bob Rosenthal (founders of Euram bank….the bank that helped Quellos/Jeff Greenstein committ the biggest tax fraud in US history) knows Smith etc….these guys are the granddaddy of tax cheats and have not been charged…….
Anyone heard if the sentencing actually happened on 9/10/09? If so, do you know the details. Thanks