Legal News

Gone But Not Forgotten: Jenkins & Gilchrist Trio Indicted for Tax Fraud

By Ashby Jones

It’s been a while since we’d heard word of Jenkins & Gilchrist. That’s not entirely surprising — the Dallas firm blew up a little over two years ago after several of its partners got swept up in a governmental crackdown on tax-shelter fraud. (The firm shuttered after agreeing to a non-prosecution agreement with the IRS, which included a $76 million fine.)

Much of the controversy at the time swirled around a former partner in the firm’s Chicago office named Paul Daugerdas (pictured). Well, on Tuesday, the other shoe dropped on Daugerdas. Federal prosecutors filed an indictment against Daugerdas and two other former Jenkens lawyers, Erwin Mayer and Donna Guerin, alleging 27 counts related to designing, marketing and using fraudulent tax shelters.

Also indicted: two former BDO Seidman partners, including the former CEO, and two former employees of an unnamed investment bank. Click here for the indictment, here for the government’s press release, here for Nathan Koppel’s page-one story from 2007 on the Jenkens meltdown.

The indictment alleges that the seven individuals created bogus tax shelters, took steps to shield them from the IRS, provided clients with “opinion letters” falsely attesting to the shelters’ legitimacy, and also used the shelters for their own personal gain.

The shelters at issue were known as “short sales,” “short options strategy,” “Swaps” and “HOMER.” The shelters allegedly generated more than $7 billion in false tax losses.

A spokesperson for Daugerdas said: “Paul Daugerdas firmly believes that the tax advice provided to his clients was well within the scope of then-existing federal tax law. These opinions were reviewed by numerous attorneys at the law firm that employed.”

Thomas McNulty, a lawyer for Mayer, said his client would plead not guilty and that he “acted in good faith in providing tax advice to his clients and believes that his advice was within the scope of then-existing federal tax law.”

Mark Rotert, a laywer for Guerin, said in a statement that she "has never committed a criminal offense in her life" and "looks forward to being found not guilty."

Full post as published by Law Blog - WSJ.com on June 09, 2009 (boomark / email).