Quellos Group founder and CEO Jeff Greenstein and attorney Charles H. Wilk were indicted in June 2009 for aiding in the filing of a false tax return and conspiracy to defraud the government. They pleaded guilty in September of this year.
Quellos' clients have paid $240 million in back taxes. The government does not appear to be planning to charge them with any crimes.
"Magical Transactions ... Secret Agreements"
Greenstein and Wilk allegedly set up a shell investment fund, located on the Isle of Man, that would allow customers to deduct the fund's false losses from their capital gains. The service was called Portfolio Optimized Investment Transaction (POINT).
The prosecutors who filed court documents against the pair stated that "[t]hese seemingly magical transactions that purportedly offered attractive investment returns while at the same time providing hundreds of millions of dollars in tax savings were nothing but sham transactions based on false statements, fraudulent documents, secret agreements, and concealment of the truth."
Clearly, the government is intent on prosecuting those it views as conspiring to circumvent tax laws.
Sentencing in January
Greenstein and Wilk each face up to six years in prison. Their sentencing is scheduled for January 2011.
In exchange for the pair's agreement to pay $7 million in fines and speak about business ethics to their graduate schools, the IRS is recommending no more than six years in prison.
The IRS stated that this case should be a warning to those who would conspire to illegally avoid taxes: "The IRS will diligently investigate and seek to prosecute those who peddle bogus tax shelter schemes, whether domestic or offshore, which are designed to evade federal income taxes."
Although the defendants' scheme was allegedly a fund with no investments, other tax shelters may be legal. The advice of an experienced business attorney, therefore, is invaluable. Whether you have questions about your investments or you believe your business may come under investigation, contact an attorney who can provide insight.