Guilty Plea by former BDO accountant re J&G shelters

[jcolvin2]

http://www.usdoj.gov/opa/pr/2009/March/09-tax-243.html
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FOR IMMEDIATE RELEASE
Tuesday, March 17, 2009
http://WWW.USDOJ.GOVTAX
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Former Accounting Firm Vice Chairman/Board Member Pleads Guilty to Tax Fraud Related to Tax Shelters Claimed More Than $1 Billion of Fraudulent Tax Losses

WASHINGTON – Adrian Dicker, a United Kingdom chartered accountant and former vice chairman and board member at a major international accounting firm, pleaded guilty today to conspiring with certain tax shelter promoters to defraud the United States in connection with tax shelter transactions involving clients of the accounting firm and the law firm Jenkens & Gilchrist (J&G), the Justice Department and Internal Revenue Service (IRS) announced. In the hearing before U.S. Magistrate Judge Theodore H. Katz in the Southern District of New York, Dicker, who is a resident of Princeton Junction, N.J., also pleaded guilty to tax evasion in connection with a multi-million dollar tax shelter that Dicker helped sell to a client of the accounting firm.

According to the information and the guilty plea, between 1995 and 2000, Dicker was a partner in the New York office of the accounting firm (which he identified during his guilty plea as BDO Seidman) and which maintained offices in among other places, Chicago and Los Angeles. From early 1999 through October 2000, Dicker was on the firm’s Board of Directors, and through October 2003 he served as a retired partner director. From 1998 until 2000, Dicker was one of the leaders of the firm’s "Tax Solutions Group" (TSG), a group led by the firm’s chief executive officer, Dicker and another New York-based tax partner. The activities of the TSG were devoted to designing, marketing, and implementing high-fee tax strategies for wealthy clients, including tax shelter transactions.

According to the information and the guilty plea, Dicker and the other two TSG managers used a bonus structure that handsomely rewarded the accounting firm personnel involved in the design, marketing, and implementation of the TSG’s transactions, including: the individual who referred the client to TSG personnel; the TSG member who pitched and closed the sale; other TSG members; and TSG management. From July 1999, Dicker, the CEO, and the other TSG manager earned and shared equally 30% of the net profits of the TSG. Dicker earned approximately $6.7 million in net TSG profits, as well as salary and bonuses between 1998 and 2000. In addition, the CEO of the firm doled out additional bonuses from the profits earned as a result of the sale of the tax shelter products. Moreover, the firm made the sale of the tax shelter products a focal point of its aggressive "value added" product promotion activities, using a "Tax $ells" logo and other marketing hype to induce employees to generate additional tax shelter sales.

According to the information and the guilty plea, while serving as a manager of the TSG, Dicker, along with other TSG partners, engaged in the design, marketing, and implementation of two different tax shelter transactions with the Chicago office of the law firm of Jenkens & Gilchrist, as well as an international bank with its U.S. headquarters in New York. As a member of TSG and the accounting firm’s tax opinion committee – which reviewed the tax opinions issued in connection with tax shelter transactions sold by the accounting firm and J&G – Dicker knew that the tax shelter transactions he helped vet and sell would be respected and allowed by the IRS only if the client had a substantial non-tax business purpose for entering the transaction, and the client had a reasonable possibility of making a profit through the transaction. Dicker and his co-conspirators knew and understood that the clients entering into the tax shelter transactions being marketed and sold with J&G had neither a substantial non-tax business purpose nor a reasonable possibility of earning a profit, given the large amount of fees being charged by the accounting firm and J&G to enter the transaction. Those fees were set by the co-conspirators as a percentage of the tax loss being sought by the tax shelter clients. Dicker also knew that the clients who purchased the tax shelter had no non-tax business reasons for entering into the transactions and their pre-planned steps.

According to the information and the guilty plea, in order to make it appear that the tax shelter clients of Dicker, other TSG members, and J&G had the requisite business purpose and possibility of profit, Dicker and his co-conspirators reviewed and approved the use of a legal opinion letter issued by J&G that contained false and fraudulent representations purportedly made by the clients about their motivations for entering into the transactions. In addition, Dicker and his co-conspirators created and used, or approved of the creation and use of, other documents in the transactions that were false, fraudulent, and misleading in order to paint a picture for the IRS that was patently untrue – that is, that the clients had a legitimate non-tax business purpose for entering the transaction and executing the preplanned steps of the transaction. Dicker also admitted during his plea that TSG members created and placed into client files certain paperwork that falsely conveyed fabricated business purposes and rationales for clients entering into the shelters. The false paperwork was created to mislead and defraud the IRS.

Dicker and his co-conspirators caused the clients to file false and fraudulent tax returns reporting the tax benefits flowing from the shelter transactions. In total, the fraudulent tax shelters implemented by Dicker, the accounting firm, J&G, and the financial institution that assisted them, caused clients to report over $1 billion in false and fraudulent tax losses, resulting in the evasion of over $200 million.

Dicker admitted during the plea proceeding that he and other TSG members pitched tax shelter transactions to clients as a way for the client to eliminate the taxes they were facing from taxable events, such as the sale of businesses or stock. Dicker assisted in selling a particular client a tax shelter known as the "short option" transaction, for which the client was charged approximately $133,000 by the accounting firm and $201,000 by J&G in order to produce losses to offset the taxes due to the IRS on the $6.7 million the client received in connection with the sale of certain stock. The short option transaction of the client, however, had the reasonable possibility only to net a profit of $67,000 – the cost the client was required to pay to Bank A for the options transaction. Thus, there could be no profit to the client. The client ulitimately filed tax returns with the IRS reporting false and fraudulent losses purportedly generated from his short options shelter, thus evading a substantial amount of taxes that he would otherwise have had to pay.

According to the information and the guilty plea, the client ultimately filed tax returns with the IRS reporting false and fraudulent losses purportedly generated from his short options shelter, thus evading a substantial amount of taxes that he would otherwise have had to pay.

Dicker faces a maximum sentence of five years in prison on the conspiracy charge and five years in prison on the tax evasion charge. On each count, the maximum fine is the greatest of $250,000 or twice the gross gain or gross loss from the offense. Restitution to the IRS can be imposed on all the charges.

Co-conspirator Michael Kerekes, a principal of BDO Seidman and also a former member of BDO’s TSG and tax opinion committee, pleaded guilty on Feb. 13, 2009, to similar conspiracy and tax evasion charges.

Dicker is scheduled to be sentenced on Dec. 11, 2009, by U.S. District Judge Gerald E. Lynch.

John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division, commended the IRS agents who investigated the case, as well as Tax Division trial attorney Nanette L. Davis and Assistant U.S. Attorney Stanley Okula of the Southern District of New York, who are prosecuting the case.

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[Demosthenes]

Former Accounting Firm Vice Chairman and Board Member Pleads Guilty to Tax Fraud Related to Tax Shelters Claiming Over One Billion Dollars of Fraudulent Tax Losses
NEW YORK, June 3 /PRNewswire-USNewswire/ -- Lev L. Dassin, the Acting United States Attorney for the Southern District of New York,Patricia J. Haynes, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service (IRS), Criminal Investigation Division, and John A. DiCicco, the Acting Assistant Attorney General for the Tax Division of the Department of Justice, announced that Charles W. Bee, Jr., a former Vice-Chairman and board member at a major international accounting firm, pleaded guilty today to a three-count felony information charging him with conspiracy to defraud the United States in connection with tax shelter transactions involving clients of his firm and of the law firm Jenkens & Gilchrist (J&G); tax evasion in connection with a multimillion-dollar tax shelter that Bee helped sell to a client of his firm; and to giving material false deposition testimony regarding his firm's tax shelter practice. According to the information and statements made during his guilty plea proceeding beforeUnited States Magistrate Judge Theodore Katz in Manhattan federal court:
From 1984 through October 2003, Bee, a Certified Public Accountant, was a partner and became a director and Vice-Chairman of accounting firm BDO Seidman. From 1998 through October 2000, Bee, along with the firm's CEO as well as New York-based partner Adrian Dicker (who has previously pleaded guilty to similar tax fraud charges) was one of the leaders of the Firm's "Tax Solutions Group" (TSG), the activities of which were devoted to designing, marketing and implementing high-fee tax strategies, including tax shelters, for wealthy clients. Bee, together with other TSG partners, designed, marketed and implemented two different types of tax shelters with theChicago office of the law firm Jenkens & Gilchrist and with an international bank in New York.
Bee knew that the tax shelter transactions would be allowed by the IRS only if there was a reasonable possibility of a profit. Bee also knew that, given the costs and fees to the clients, and the nature and duration of the transactions, the tax shelters had no reasonable possibility of resulting in a profit. In addition, Bee knew that the clients who purchased the tax shelter had no non-tax business reasons for entering into the transactions, and that the fees were set as a percentage of the tax loss sought by the clients. To make it appear that the tax shelter clients had the requisite business purpose and that there was a possibility of profit, Bee and his co-conspirators reviewed and approved the use of a legal opinion letter issued by J&G that contained false and fraudulent representations purportedly made by the clients about their motivations for entering into the transactions. Bee and other TSG members also developed a consulting agreement containing false and fraudulent statements to disguise the fact that the fees clients would be charged by BDO Seidman were solely for the tax shelters. Finally, Bee and his co-conspirators caused the clients to file false and fraudulent tax returns incorporating the supposed tax shelter benefits. In total, the fraudulent tax shelters implemented by Bee, BDO Seidman, J&G, and the financial institution that assisted them, caused clients to report over $1 billion in false and fraudulent tax losses, resulting in the evasion of over $200 million in taxes.
Bee also specifically admitted criminal responsibility based on the sale by BDO of a tax shelter known as the "short option" transaction to one client, who was charged fees of approximately $133,000 by BDO Seidman and$201,000 by J&G. The short option tax shelter purportedly generated losses sufficient to offset the taxes due on $6.7 million the client had received from a stock sale. In fact, the short option transaction had the reasonable possibility only to net a profit of $67,000, thus resulting in no potential profit to the client. The client nonetheless filed tax returns with the IRS reporting false and fraudulent losses purportedly generated from the short options shelter, thereby evading a substantial amount of taxes that he would otherwise have had to pay.
Finally, Bee admitted that in February 2005, while under oath during a deposition in Jade Trading v. United States, a Court of Federal Claims case involving a tax shelter sold by BDO and another promoter, he knowingly made false material statements concerning BDO's tax shelter practice.
As part of his plea agreement, Bee agreed to forfeit $20 million, representing the money BDO Seidman paid to Bee from tax shelter fees. Bee also agreed, in partial satisfaction of the forfeiture, to forfeit four residences, three located in Boca Raton, Fla., and one in Saddle Brook, N.J. Bee also agreed to forfeit a 40-foot Coachman Legend recreational vehicle.
Bee, 63, who resides in Fredericksburg, Va., and Boca Raton, Fla., pleaded guilty to one count of conspiracy to defraud the IRS, one count of tax evasion and one count of perjury. He faces a maximum sentence of five years in prison on each of Counts One, Two, and Three. On each count, he also faces a maximum fine of the greatest of $250,000 or twice the gross gain or gross loss from the offense. Restitution to the IRS can be imposed on all the charges.
Co-conspirator Michael Kerekes, a principal of BDO Seidman and also a former member of BDO's TSG and Tax Opinion Committee, pleaded guilty on February 13, 2009, to related conspiracy and tax evasion charges. Fellow co-conspirator Adrian Dicker, a former Vice-Chairman of BDO Seidman and TSG member, pleaded guilty on March 17, 2009, to conspiracy and evasion charges as well.
Bee is expected to be sentenced on a date to be set by United States District Judge Deborah A. Batts.
Mr. Dassin thanked the IRS and the Department of Justice Tax Division for their efforts in this case. Mr. Dassin added that the investigation is continuing.
Assistant United States Attorney Stanley Okula and Trial Attorney Nanette L. Davis from the Department of Justice Tax Division are in charge of the prosecution.
SOURCE U.S. Department of Justice