On May 7, a Manhattan jury found four former or current Ernst & Young executives that participated in "VIPER" (value ideas produce extraordinary results)--Robert Coplan, Martin Nissenbaum, Brian Vaughn, and Richard Shapiro-- guilty of selling illegal tax shelters to high wealth clients with annual income of more than $10 million in a scheme that operated from the late 1990s through 2006. See U.S. v. Coplan, 07cr453 (S.D.N.Y. May 7, 2009).
The four were charged with varying counts of conspiracy, obsturcuting the IRS, making false statements to the IRS and tax evasion. The charges of conspiracy, tax evasion, and false statements carry a maximum sentence of 5 years in prison (and 3 of supervised release), while the obstruction charges carry a maximum of 3 years in prison and 1 year of supervised released. Each count also could result in a fine of $250,000.
Others had already pled guilty, including an attorney at Arnold & Porter, Peter Cinquegrani, and a financial consultant in Tennessee, Charles Bolton. Although the firm wasn't charged in these cases, it had agreed in 2003 to pay a $15 million penalty to the IRS for marketing tax shelters and failing to comply with required reporting rules.
See the following for more information on these charges, as well as Ernst & Young's tax shelter promotion during the late 1990s and early 2000s:
Department of Justice Press Release after Indictment (May 30, 2007)
Globin, Ex-Ernst & Young Officials Convicted in Tax Shelter Scheme, Bloomberg.com, May 8, 2009
RTT News, Four Ernst & Young Patners Found guilton on Criminal Tax Shelter Charges, May 8, 2009.
Hilburn, Ouachita accountant convicted of conspiracy, The News Star.com, May 9, 2009 (noting that Vauhgn now operates a company called "Creative Fundraising Solutions of West Monroe").
Bray, Four Convicted in Tax-Shelter Fraud Trial, Dow Jones, May 7, 2009
Promoter of Ernst & YOung Tax Shelters Defrauds IRS, North Country Gazette, Jan 22, 2009 (regarding Charles Bolton's use of and promotion of contingent deferred swap shelters to convert ordinary income to capital gain and then defer for one year the tax on the capital gain).
Browning, Guilty Plea in Tax Shelter Case, NY Times, Jan. 23, 2009.
Browning, 2More Indictments in Tax Shelter Case, NY Times, Feb. 20, 2008.
Dept. of Justice, Report to the President: Corporate Fraud Task Force 2008 (briefly addressing tax shelter prosecutions on page 1.11)
Weisman, Senators Question Tax Shelter Letters, Washington Post, Oct. 27, 2005 (regarding Harriet Miers's firm's sale of opinion letters in support of Ernst & Young shelters).
Gimme Shelter, CBS, Oct 17, 2003 (about Ernst & YOung's promotion of COBRA shelter to Henry Camferdam)
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