Paul Daugerdas, a former lawyer at the defunct law firm Jenkens & Gilchrist, and three others were convicted of a 10-year tax shelter scheme that generated more than $1 billion in phony losses.
A federal jury in New York reached the verdict today following a 10-week trial of Daugerdas and his co-defendants, Denis Field, the former chief executive officer at accounting firm BDO Seidman LLP; Donna Guerin, a Jenkens & Gilchrist lawyer; and Robert Craig Brubaker and David Parse, two certified public accountants who formerly worked as client advisers at a Deutsche Bank AG unit called Alex.Brown.
Field, Guerin and Parse were found guilty of tax evasion and other charges. Brubaker was acquitted of all nine counts including mail fraud, conspiracy and obstruction. The jury began deliberations on May 12.
Daugerdas, the former head of Jenkins & Gilchrist’s Chicago office, was convicted on more than 20 counts, including conspiracy, multiple counts of tax evasion and attempting to impede the Internal Revenue Service. U.S. District Judge William Pauley allowed the defendants to remain free pending their sentencing on Oct. 14.
After court, Daugerdas’s lawyer, Chris Gair, said, “We’ll be filing appeal and post trial motion papers and look forward to sentencing.” Daugerdas declined to comment as he left court.
Daugerdas and six other people were indicted in June 2009 on charges of conspiracy and tax evasion for selling phony tax shelters from 1994 to 2004. Two of those indicted, former BDO Seidman LLP partner Robert Greisman and former Jenkens & Gilchrist attorney Erwin Mayer, pleaded guilty and are cooperating with the government.
The case stems from a wider U.S. probe of illegal tax shelters. Prosecutors said the defendants used shelters named “Short Sales,” “Short Options Strategy,” “Swaps” and “Homer,” to generate fraudulent tax losses for at least 931 wealthy individuals.
The scheme generated $1 billion in phony tax losses, Manhattan U.S. Attorney Preet Bharara said in a statement. Daugerdas earned more than $95 million; Guerin made $17 million; Field received $18 million and Parse earned $6 million, Bharara said.
Daugerdas, 60, of Wilmette, Illinois; Guerin, 50, of Elmhust, Illinois; Parse, 49, of Elmhurst, Illinois and Field, 53, of Naples, Florida were all convicted of mail fraud and could face as long as 20 years in prison.
Barry Berke, who defended Brubaker with co-counsel Paul Schoeman, said after court that their client “did not belong here and we are thrilled and gratified by the jury’s verdict.” They said Brubaker could have faced more than 50 years in prison if he had been convicted of all nine counts.
Jenkens & Gilchrist avoided prosecution in March 2007 by admitting it developed and marketed tax shelters that generated more than $1 billion in phony losses, the U.S. said. In January 2005, Jenkens agreed to pay $81.6 million to clients who had sued over its tax-shelter advice. Jenkens shut down after reaching the non-prosecution agreement, which didn’t apply to lawyers at the Dallas-based firm. The firm blamed its demise on its lawyers in Chicago, where Daugerdas ran the office.
The case is: U.S. v. Daugerdas, 09-CR-581, Southern District of New York (Manhattan).