Lawyer gets 15 years prison for record U.S. tax fraud scheme

Reuters News
Posted: Jun 25, 2014 4:45 PM

By Nate Raymond

NEW YORK (Reuters) - A former partner at the defunct law firm Jenkens & Gilchrist was sentenced to 15 years in prison on Wednesday following his conviction in what prosecutors call the largest criminal tax fraud in U.S. history.

Paul Daugerdas, who once ran the law firm's Chicago office, had been found guilty by a New York federal jury on charges including conspiracy, tax evasion and mail fraud.

Prosecutors said Daugerdas reaped $95 million from the scheme, which involved fraudulent tax deductions or benefits exceeding $7 billion and $1.63 billion in lost U.S. tax revenue. U.S. District Judge William Pauley, who imposed the sentence, said Daugerdas had "tapped into the incredible greed of the wealthy," and corrupted numerous professionals to advance a scheme to promote fraudulent tax shelters.

"Daugerdas is in a class by himself," Pauley said. "He was at the apex of tax shelter racketeers."

Pauley also ordered Daugerdas to forfeit $164.7 million and pay $371 million in restitution jointly with other co-conspirators. Prosecutors said Daugerdas, 63, devised and supervised the promotion of fraudulent tax shelters over almost two decades. They said much of the fraud took place while he worked at Jenkens & Gilchrist, which Daugerdas joined in 1998. Other attorneys at the 600-lawyer firm as well as co-conspirators at Deutsche Bank AG and accounting firm BDO Seidman helped carry out the fraud, prosecutors said. Jenkens & Gilchrist, based in Dallas, dissolved in 2007 after agreeing to pay a $76 million penalty to the Internal Revenue Service in connection with the investigation. Daugerdas was indicted in 2009. A jury found him guilty in 2011, along with former Jenkens partner Donna Guerin; Denis Field, BDO's former chief executive; and David Parse, a Deutsche Bank broker. The jury acquitted another Deutsche broker, Raymond Brubaker. Parse was sentenced in 2013 to 3-1/2 years in prison. Daugerdas, Guerin and Field won a retrial after the judge determined a juror had lied during jury selection, a fact Pauley recounted Wednesday in questioning why prosecutors had not brought charges against her.

Guerin pleaded guilty to conspiracy and tax evasion charges ahead of the second trial and was sentenced last year to eight years in prison. At the retrial, Daugerdas was found guilty on seven of the 16 counts he faced, while Field was acquitted.

Prosecutors had sought at least 20 years in prison for Daugerdas, a term his lawyer argued ignored his acquittal on charges that encompassed much of the case.

"The verdict should make a difference," Henry Mazurek, Daugerdas' lawyer, said. One other Jenkens & Gilchrist partner and five BDO partners pleaded guilty to related charges. BDO USA, as the accounting firm is now known, agreed in 2012 to pay $50 million to resolve related claims. Deutsche Bank separately agreed in 2010 to pay $553.6 million as part of a non-prosecution agreement. The case is U.S. v. Daugerdas, U.S. District Court, Southern District of New York, No. 09-cr-00581.

(Editing by Marguerita Choy, Leslie Adler and David Gregorio)