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Last week, former partners in the law firm of Jenkens & Gilchrist, the former head of accounting firm BDO Seidman, and a former Deutsche Bank broker, were convicted on criminal charges related to a tax shelter scheme that reportedly generated fake tax losses of more than $7 billion. The case illustrates the sort of tax cheating that often goes undetected and which would become less common under a proposal supported by Citizens for Tax Justice.
In December, Deutsche Bank entered into a related non-prosecution agreement with the Department of Justice, admitting criminal wrongdoing and agreeing to pay a $554 million fine in connection to its involvement in tax shelter cases that generated $29.3 billion in bogus tax benefits for their clients.
Five other defendants, former partners at the law firm or the accounting firm, previously pled guilty to criminal charges in the case.
The charges of tax evasion and conspiracy carry possible prison terms of more than 20 years and multi-million dollar fines. DOJ Tax Division attorney John A. DiCicco said that the verdict “sends a loud and clear message that dishonest tax professionals will be held accountable for their crimes.”
In the next few weeks, Senator Carl Levin is expected to introduce a new version of the Stop Tax Haven Abuse bill, which would increase civil penalties for promoting tax shelters. The maximum penalty for knowingly aiding or abetting a taxpayer in understating their tax liability would be 150 percent of the aider-abettor’s gross income from the activity.
That kind of civil penalty, and the possibility of a criminal conviction, should give tax shelter promoters reason to think twice about helping the wealthy dodge their taxes.