Two former Ernst & Young LLP tax attorneys, Richard Shapiro and Martin Nissenbaum, won reversal of their convictions for developing illegal tax shelters sold by the accounting firm from 1999 to 2001.
A three-judge panel of the U.S. Court of Appeals in New York ruled 2-1 that the convictions weren’t supported by sufficient evidence. The court today also affirmed guilty verdicts against former Ernst & Young tax lawyer Robert Coplan and a former accountant at the firm, Brian Vaughn. The four were convicted after a 10-week trial in 2010.
Jurors found that the former Ernst & Young executives sold illegal shelters to wealthy clients based on fraudulent factual scenarios. That helped the clients reduce or eliminate tax liabilities on incomes of more than $10 million.
The scheme generated billions of dollars in paper losses used to offset taxes owed, prosecutors said. The government lost $2 billion in taxes in a scheme that involved about 40 people, the judge said.
The four were members of New York-based Ernst & Young’s VIPER Group, which stood for Value Ideas Produce Extraordinary Results.
Each of the four was convicted of one count of conspiracy and two counts of tax evasion. Coplan was also found guilty of obstructing the Internal Revenue Service and making false statements. Nissenbaum, a former national director of Ernst & Young’s personal income tax and retirement planning practice, was found guilty of obstruction. Vaughn was convicted of making false statements.
In its decision today, the court also affirmed a 15-month prison sentence imposed on a fifth man in the case, Charles Bolton, an investment adviser who pleaded guilty to a single count of conspiracy. The court threw out a $3 million fine against Bolton, sending the matter back to the trial court to reduce it to $250,000, which the court said was the maximum allowed under the law.
Ernst & Young, which wasn’t charged, said it cooperated with the government’s investigation.
Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, declined to comment on the ruling.
The case is U.S. v. Coplan, 10-583, U.S. Court of Appeals for the Second Circuit (Manhattan).