A former U.S. Internal Revenue Service employee pleaded guilty to passing information about a tax fraud audit to Commerzbank AG (CBK) while he was working to get a job with the Frankfurt-based bank.
Dennis Lerner, 60, pleaded guilty yesterday in Manhattan to charges of criminal conflict of interest and illegally disclosing federal income-tax information. Prosecutors said he audited Commerzbank in connection with about $1 billion in allegedly unreported income, negotiating a $210 million settlement shortly before being hired as the bank’s tax director.
“Dennis Lerner betrayed the trust put in him as a public servant by parlaying his position at the IRS into a high-powered job at a bank he was auditing through a scheme that may now land him in prison,” Manhattan U.S. Attorney Preet Bharara said in a statement today. “We will not tolerate corrupt government employees and will prosecute and punish them to the full extent of the law.”
Under a plea agreement with the government dated March 1, Lerner isn’t required to admit any alleged misconduct while he was a Commerzbank official.
“Mr. Lerner is looking forward to putting this behind him and moving on with his life,” said his lawyer, Sharon McCarthy.
Margarita Thiel, a Commerzbank spokeswoman, declined to comment on Lerner’s guilty plea.
Lerner faces as many as five years in prison on each of the two counts when he’s sentenced by U.S. District Judge John Keenan June 11. Both sides agreed that federal sentencing guidelines, which aren’t binding on the judge, call for Lerner to get four to 10 months in prison. The agreement doesn’t require Lerner to cooperate with investigators.
Ellen Davis, a spokeswoman for Bharara’s office, declined to say whether the investigation is continuing.
Under the agreement, the government said it will drop one charge that Lerner illegally contacted the IRS as a Commerzbank executive to urge the agency to complete the tax fraud settlement he had negotiated. Prosecutors also agreed to seek dismissal of a count claiming Lerner disclosed to an unidentified Commerzbank employee the name of a confidential IRS whistleblower who provided information about the bank.
According to a complaint filed with the court in September by Special Agent Erik Wood, of the Treasury Inspector General for Tax Administration, investigators recorded conversations between IRS employees and Lerner while he was at Commerzbank.
In the September complaint, Wood said that between July 11 and July 14, 2011, Lerner met privately with an unidentified Commerzbank employee to negotiate the tax fraud settlement, without any other IRS employees present.
The $210 million settlement amount was about 62 percent of the potential taxes due in the case, Wood said. A Commerzbank employee told him that the bank had been willing to settle the the audit for “for an amount substantially greater” than $210 million, Wood said.
Wood said Lerner and the unidentified Commerzbank employee discussed Lerner’s possible employment by the bank during the same time they were discussing settlement terms. Lerner was formally offered the tax director job on Aug. 11, 2011, and started work on Sept. 1 of that year, Wood said.
The case is U.S. v. Lerner, 12-cr-00952, U.S. District Court, Southern District of New York (Manhattan).
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