Legal News

Queasy Over Quellos: Were Cravath and Bryan Cave Lied To?

By Ashby Jones

Giving advice on tax-shelters can be a bit of a dicey game for law firms. (See, e.g., Jenkens & Gilchrist). So the news that both Cravath and Bryan Cave were mentioned in the indictment unsealed in the Quellos Group matter on Thursday probably wasn’t cause for celebration within those two firms.

The story: Federal prosecutors in Seattle unsealed criminal tax-fraud charges against former executives of investment-management firm Quellos Group, charging them with developing an illegal tax shelter for wealthy clients. The grand-jury indictment of Jeffrey Greenstein, 47 years old, the firm’s former chief executive, and Charles Wilk, 51, a tax attorney and former principal of the firm, alleges they caused about $400 million in fraudulent tax savings for several high-profile clients in 2000 and 2001 and reaped $86 million in fees.

Dechert’s Andrew Levander, who’s gotten lotsa play in the press recently for his representation of Ezra Merkin in the Madoff situation, and John Keker, say their clients, Greenstein and Wilk, respectively, are innocent. Click here for the WSJ story; here for the NYT story; here for the LAT story.

But most interesting to Zach Lowe over at American Lawyer — and most interesting to us, too — is the appearance of Cravath and Bryan Cave in the indictment.

The indictment details that lawyers from both firms signed off on the shelters at issue, indicating with letters indicating to the taxpayers that they were legal. Thing is, reports Lowe, the firms are “extremely unlikely” to get into trouble, largely because Greenstein and others are accused of lying to them, too, in order to get them to bless the shelters.

“It would be impossible to show that any of the taxpayers had knowledge that this was a criminal scheme,” said Mark Bartlett, an assistant U.S. attorney in Seattle. “What the evidence has shown is the lies that were told to the IRS were also told to the taxpayer, and also told to attorneys for the taxpayers.”

Bryan Cave declined to comment to AmLaw. A spokeswoman for Cravath declined to comment.

Full post as published by Law Blog - WSJ.com on June 05, 2009 (boomark / email).