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July 31, 2014


Cooperating witness sentenced in IRS tax fraud investigation

A few weeks ago, we covered the 15-year prison sentence handed down in a tax fraud case against Paul Daugerdas for his role in designing and promoting sophisticated tax shelters.

This week, a U.S. District Judge sentenced a cooperating witness in the criminal tax case to prison for six months. In addition, because of his role in promoting tax shelters he must pay restitution of $220 million along with co-conspirators.

In 2010, the man pleaded guilty to charges of conspiracy and tax evasion. He went on to testify at two of the trials of co-conspirators. His testimony was one key to the conviction of his former partner, Daugerdas.

Each of the charges that he pleaded guilty to carried a five-year prison sentence. While defense attorneys requested leniency because of the cooperation, the judge decided that prison was warranted based on the massive fraud that netted the witness $28 million in fees. During the hearing, the judge said, “If caught one can’t just give back the ill-gotten gains, strike an agreement with the government and move on.”

Because of its part in the scheme, the law firm of Jenkens & Gilchrist went out of business after it agreed to pay the Internal Revenue Service $76 million for tax fraud.

Convictions against seven others related to the tax fraud scheme included one sentence of eight years in prison.

Accusations of tax fraud carry very serious penalties as demonstrated by these prosecutions and sentences. Even after cooperating with the government there may still be prison time on the table.

Do not go up against the might of the IRS and Justice Department alone. At the first indication of an investigation, talk to an experienced tax attorney who can help you obtain the best possible outcome and move on with your life.

Source: Reuters, “Lawyer-turned witness ordered to prison for U.S. tax fraud,” Nate Raymond and David Ingram, July 30, 2014.


Tax Crimes