It sounds like something right out of Hollywood: a lawyer takes a kickback in exchange for setting up wealthy clients in a multi-billion dollar tax loss-generating scheme. He then applies for a false passport using an assumed name – which passport is found, along with crystal meth, date-rape drugs and horse tranquilizers, inside his home.
In fact, it is out of Hollywood – only it’s not a movie. It’s real life and Hollywood tax attorney Matthew Krane is center stage. Krane has pleaded guilty last Thursday to evading tax by failing to claim $36 million in undeclared income. As part of his plea, he’s agreed to cooperate with the feds as part of an ongoing investigation. As a result, he’ll serve no more than five years in prison for the tax evasion charge, as well as a charge of attempting to obtain a false passport, ostensibly to flee the country after his participation in the scheme was discovered.
Krane will testify against Jeffrey Greenstein and former tax attorney Charles Wilk, who were the alleged masterminds behind a tax shelter referred to as the Portfolio Optimized Investment Transaction, or POINT. Six investors, including Robert Wood Johnson IV (heir to the Johnson & Johnson fortune) and Haim Saban, contributed more than $1.5 billion to the tax shelter, which generated false losses.
If the name Saban rings a bell, it’s because he has aligned himself with such politicos as Shimon Peres and was, at one time, the Democratic Party’s biggest individual donor (interestingly, though, he supported Bush’s re-election in 2004 on national security issues and only “grudgingly supported” Obama in 2008). He has consistently been ranked by Forbes magazine as one of the richest people in America for the past few years.
Saban, Johnson and the other investors were eventually found to be on the hook for more than $400 million in back taxes, penalties and interest; Saban alone was said to owe $250 million. The six investors will not face criminal charges.
Greenstein and Wilk were indicted in June 2009 as part of an ongoing government investigation into Point. Greenstein faces 18 counts of conspiracy, fraud and tax evasion. He is the former chief executive and a co-founder of the Quellos Group. Quellos was considered 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 is not part of the investigation.
Dechert’s Andrew J. Levander, Greenstein’s lawyer, has stated that his client “adamantly denies the allegations in the indictment and looks forward to clearing his name at trial.” Wilk is being representing by John Keker of Keker & Van Nest.
Greenstein and Wilk have apparently rested their defense on the idea that the POINT plan was reviewed and blessed by outside firms, including, reportedly, mega-firms Cravath and Bryan Cave. Their trial is scheduled for September 2010.
“The six investors will not face criminal charges.” What in the hell? Are you telling me (well main stream media, USAGA, etc.) that one of these investors didn’t know about the fake losses? I can’t imagine them losing money year in and year out and keeping their money there.
I know. They claim that they didn’t know… What’s particularly interesting is that Haim Saban – the guy who made $1.6 billion by selling the Family Channel to Disney – claimed that he was duped because he was financially not sophisticated. And the feds bought it.
Saban was a large financial supporter of a number of powerful pols, including Hillary Clinton and President Bush. Not that it means anything…
Is every tax shelter criminal even when legal opinions are written? It seems that the government’s plan is that after the lawyers write a bad opinion, then in exchange for not going to jail they testify against the promoter. How does that make sense? I looked at the CDS stuff and Locke Lord is nowhere to be found in any of the indictments. Is that because of the pressure put upon the Treasury by Harriet Myers, former counsel to George Bush?
How can a promoter go to jail when they relied on the lawyer’s opinion?
This makes no sense!
Yes! I love angry people who blame lawyers! When you were looking at the “CDS Stuff” did they explain to you what a tax shelter actualy was, or what a legal opinion is?
Why yes I was explained that the transaction was restructured by Locke Lord and that they issued a “should opinion” therefore, that mean that they were 80% confident that I should prevail on audit. In fact Mr. Clifton even told me this himself when he showed me a draft of his opinion.
Should he not be blamed, since I relied on his advice as an attorney in one of the premiere law firms in Texas to at least give me an honest opinion of the risks.
If it was his structure I relied on, then why is he nowhere to be found in any of the charges?
The comments from the Treasury indicate that the ‘design’ of the shelter was part of the conspiracy – if this is true, then isn’t it his design?