A former lawyer with Jenkens & Gilchrist has been sentenced to 15 years in prison for orchestrating a massive fraudulent tax shelter scheme that cheated the government out of over $1.6 billion in tax revenue.
Paul M. Daugerdas, 63, a tax attorney and certified public accountant, was sentenced in Manhattan federal court to serve 15 years for his role in designing, marketing and implementing fraudulent tax shelters used by wealthy individuals to evade taxes.
The 20-year scheme, which Daugerdas hatched while working at Arthur Andersen accounting firm and then continued while a partner at Altheimer & Gray and Jenkens & Gilchrist, generated over $7 billion in fraudulent tax losses and yielded approximately $95 million in fees to Daugerdas personally.
“Paul Daugerdas used his legal and accounting expertise to cheat the system and unlawfully deprive the government of over $1.6 billion of tax revenue,” said U.S. Attorney Preet Bharara. “With today’s sentence, Daugerdas’s giant tax fraud scheme has reached its just conclusion under the law, with a sentence of 15 years in prison.”
Deputy Assistant Attorney General Ronald A. Cimino for the Tax Division added, “Dishonest professionals who market tax fraud schemes to their clients need to sit up and take note of today’s sentence. The Justice Department and IRS are committed to holding responsible those who would misuse their skills and expertise to help others to evade their lawful tax obligations.”
The evidence at trial and other documents filed in the case revealed that Daugerdas and his co-conspirators designed, marketed, implemented and defended fraudulent tax shelters from 1994 through 2004. They plotted to defraud the IRS by corruptly endeavoring to prevent the detection of their clients’ use of these shelters and by creating and assisting in creating transactional documents and other materials that falsely and fraudulently described their clients’ motivations.
The scheme also involved the fraudulent backdating of some of the tax shelter transactions, with Daugerdas and his co-defendants learning that certain transactions had been implemented incorrectly during the year of the transactions. Rather than reporting those results as they occurred, they engaged in corrupt “correcting” transactions after the close of the pertinent tax years, and then backdated them.
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