LawFuel.com – Attorney Announcements – Tax Elimination Strategy Allegedly Resulted in Loss to the
Treasury Exceeding $100 Million
JOHN B. OHLE III, a former member of the tax shelter
promotion group at a national bank, has been charged with
conspiring with lawyers at the law firm of Jenkens & Gilchrist
(“Jenkens”) and others to defraud the United States in the sale
of a tax shelter known as “HOMER,” the U.S. Attorney’s Office for
the Southern District of New York, the Tax Division of the
Department of Justice and the Internal Revenue Service (“IRS”)
announced today.
According to the Indictment, between 1999 and 2002,
OHLE was a supervisor in the Chicago office of a national bank’s
“Innovative Strategies Group” (“ISG”). The Indictment states
that ISG provided estate planning and tax shelter strategies for
high net worth clients, including a tax shelter called “Hedge
Option Monetization of Economic Remainder” or HOMER. ISG sold 36
HOMER strategies to wealthy clients in 2001, according to the
Indictment, creating almost $430 million in fraudulent tax losses
and resulting in the evasion of approximately $100 million in
taxes.
The Indictment alleges that OHLE and his coconspirators
marketed HOMER as a legitimate tax elimination
strategy, despite the fact that HOMER was actually designed as a
carefully planned series of steps to fraudulently produce the tax
loss amounts desired by the clients. Jenkens allegedly issued a
false and fraudulent opinion letter that found that it was “more
likely than not” that the transaction would withstand IRS
challenge. OHLE and two Jenkens lawyers are alleged to have
known that the opinion letter contained false representations,
including that the clients had a substantial non-tax business
purpose in engaging in the HOMER transaction; that the clients
created the HOMER trust for estate planning purposes; and that
the clients exchanged the options for third-party notes for sound
economic reasons. In order to participate in the HOMER
transaction, the Indictment states that the client had to pay
fees of six percent of the desired tax loss.
OHLE has also been charged in a separate conspiracy
with WILLIAM BRADLEY, a Hammond, La., attorney and friend of
Ohle, to defraud the IRS and commit wire fraud in relation to a
scheme to fraudulently obtain referral fees on HOMER
transactions. The Indictment asserts that OHLE, BRADLEY, Chicago
businessman and co-conspirator DOUGLAS STEGER, and others created
false and fraudulent invoices to obtain referral fees to which
they were not entitled for HOMER deals.
The Indictment asserts that OHLE and his coconspirators
schemed to run the funds through BRADLEY and
STEGER’s bank accounts, as well as the bank account of a business
acquaintance of OHLE in San Francisco. Ultimately, according to
the Indictment, OHLE ended up with more than $700,000, STEGER
took more than $200,000, and BRADLEY took $25,000 in fraudulent
fees. At OHLE’s direction, STEGER, who pleaded guilty in July to
tax charges related to the scheme, reported fraudulent fees on
his tax return that should have been reported by OHLE, and then
eliminated taxes on those fees and the fees he retained through
the use of a fraudulent shelter. BRADLEY paid another Chicago
businessman $184,000 of the false and fraudulent referral fees
BRADLEY generated, which the businessman reported on a corporate
return but on which he paid no taxes due to his also claiming
false expenses at OHLE’s suggestion, according to the Indictment.
OHLE also is charged with attempting to evade the taxes
of three HOMER clients and his own personal taxes for 2001 and
2002. According to the Indictment, OHLE filed false personal tax
returns in 2001 and 2002 that failed to report at least
$642,634 and $1.4 million, respectively in income, and concealed
the receipt of income through the use of nominees. OHLE
eliminated taxes due on his 2002 return through the use of a
fraudulent shelter.
The Indictment seeks forfeiture of OHLE’s home in
Wilmette, Ill., OHLE’s condominium in New Orleans and OHLE’s
sports memorabilia collection.
“Hard-working Americans who pay their taxes should know
that we are committed to vigorously investigating and prosecuting
those who design and promote fraudulent tax shelters,” said JOHN
A. MARRELLA, Deputy Assistant Attorney General of the Justice
Department’s Tax Division. “These schemes cheat not only the
United States Treasury, but all of the honest taxpayers who play
by the rules.”
OHLE faces up to 38 years in prison and fines of up to
$2 million or twice the gross tax gain or loss on the charges.
BRADLEY faces up to 5 years in prison and fines of up to $250,000
or twice the gross tax gain or loss on the charge.
“Today’s Indictment demonstrates our resolve to hold
accountable those who play fast and loose with the tax code,”
said EILEEN MAYER, IRS Criminal Investigation Division Chief.
“At some point such conduct passes from clever business
strategies and lawyering to theft from the people. We simply
can’t tolerate flagrant abuse of the law and of professional
obligations by tax practitioners, that by virtue of their
prominence set the standard of conduct for others. Bankers,
accountants and attorneys should be the pillars of our system of
taxation, not the architects of its circumvention.”
The prosecution is being handled by NANETTE L. DAVIS,
Assistant Chief with the Northern Criminal Enforcement Section of
the Tax Division, and STANLEY J. OKULA JR., an Assistant U.S.
Attorney in the Southern District of New York. The Indictment
was unsealed today in Manhattan federal court.
An Indictment is merely an allegation and a defendant
is presumed innocent until proven guilty beyond a reasonable
doubt.
08-290 ###
