Former lawyer Paul Daugerdas was convicted in a retrial for what U.S. prosecutors called the biggest criminal tax fraud in history, while former BDO Seidman Chief Executive Officer Denis Field was acquitted.
The mixed verdict was delivered by a jury yesterday in Manhattan federal court after deliberations that began Oct. 29. The men were charged with running a 10-year scheme that created $7 billion in fraudulent tax deductions and more than $1 billion in phony losses. Prosecutors claimed the scheme cost the U.S. Treasury $92 million.
The men were on trial for a second time, on charges of conspiracy, tax evasion and attempting to obstruct the Internal Revenue Service. Their 2011 convictions were overturned because a juror in the first trial lied about her background to get on the case.
Daugerdas, who worked at Jenkens & Gilchrist law firm, was found guilty of seven counts, including tax evasion and conspiracy. He was charged with 16 criminal counts, Field with seven. The trial began with jury selection Sept. 9.
Field “is extremely grateful to the jury for seeing the truth,” his lawyer, Sharon McCarthy, said in an e-mail. “We are beyond relief that Denis Field can now move on with his life and put these terrible years behind him.”
Daugerdas and Field were among seven people were indicted in June 2009 for selling phony tax shelters from 1994 to 2004. Two of the people charged, former BDO Seidman partner Robert Greisman and former Jenkens & Gilchrist attorney Erwin Mayer, pleaded guilty and agreed to cooperate with the government.
Prosecutors claimed the defendants used shelters named “Short Sales,” “Short Options Strategy,” “Swaps” and “Homer” to generate fraudulent tax losses for at least 931 wealthy individuals.
A jury returned guilty verdicts on May 24, 2011, against Daugerdas and Field; Donna Guerin, another former Jenkens & Gilchrist partner; and David Parse, who worked for Deutsche Bank AG unit Alex. Brown. Craig Brubaker, a second former Alex. Brown accountant, was found not guilty.
U.S. District Judge William Pauley presided over both trials.
“Mr. Daugerdas, I’m certain this is a difficult moment for you and we will all endeavor to move forward,” Pauley said yesterday after the verdict was read. Sentencing was scheduled for March 21.
Pauley dismissed the 2011 convictions of Guerin, Daugerdas and Field after finding that Catherine Conrad, Juror No. 1, had lied repeatedly about her background, including that she was a suspended attorney and an alcoholic, in an effort to make herself “more marketable” as a juror.
Pauley let Parse’s conviction stand after ruling that his lawyers failed to disclose information they had about Conrad. He sentenced Parse to 3 1/2 years in prison. Guerin pleaded guilty and was sentenced to eight years in prison.
Jenkens & Gilchrist avoided prosecution in March 2007 by admitting it developed and marketed tax shelters that generated more than $1 billion in phony losses. Jenkens shut after reaching the non-prosecution agreement, which didn’t apply to individual lawyers at the former Dallas-based firm.
The case is U.S. v. Daugerdas, 09-cr-00581, U.S. District Court, Southern District of New York (Manhattan).
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