The Talent

June 9, 2009 7:20 PM

Ex-Jenkens Lawyer Paul Daugerdas Indicted for Tax Fraud

Posted by Ed Shanahan

Daguerdas By Paul Braverman

Well, they finally grabbed the tax man.

In 2003, The American Lawyer appeared in federal court in Manhattan, seeking the release of documents from a lawsuit that had been sealed. The motion was granted, and those documents became the basis of an exposé of tax shelter work done by partner Paul Daugerdas and Jenkens & Gilchrist.

Daugerdas, who founded Jenkens's Chicago office, was both an engineer of the shelters, and the author of opinion letters that blessed them as legitimate. According to the article, he made hundreds of millions for the firm, and cooked up billions of dollars in illegal tax shelters.

In 2004, Jenkens settled with former clients for $75 million, with Daugerdas personally paying about $4 million. In 2007, the firm closed as part of a nonprosecution agreement with the IRS. The firm also paid a $76 million fine as a part of the settlement.

The Feds were investigating Daugerdas back when The American Lawyer was filing its motion. Since then they have nailed R.J. Ruble, formerly of Sidley Austin, who worked on shelters with Daugerdas. Last December, Ruble was convicted of tax fraud by a jury in federal court in New York. In April, he was sentenced to 78 months in prison.

But it wasn't until Tuesday afternoon that the Daugerdas investigation yielded results. Daugerdas, former partners Erwin Mayer and Donna Guerin, accountants from BDO Seidman, and bankers from an unnamed foreign bank were indicted for tax fraud. (The American Lawyer reported in 2003 that Deutsche
Bank Securities Inc. was involved in the operation.) The Indictment, filed late Tuesday in Manhattan federal court, charges the seven individuals in 27 separate counts, including conspiracy to defraud the IRS, tax evasion, and impeding and impairing the lawful functioning of the IRS. (Download Daugerdas Indictment)

Earlier in the decade, the elders of the tax bar spoke in apocalyptic terms about the influence that easy tax shelter money was having on the bar. Lawyers such as Daugerdas worked closely with big accounting firms to aggressively market prepackaged shelters. They essentially sold opinion letters they knew would not stand up in court, as the indictment accuses Daugerdas of doing. The activity has reportedly slowed in recent years, but since the shelter deals are guarded by many layers of secrecy, nobody knows for sure.

Unhappily for Daugerdas, justice grinds slow but exceedingly fine.

Related Stories

Lawyers Waiting for Next Tax Shelter Chips to Fall
The Am Law Daily, 9/15/08

In Nonprosecution Deal Over Tax Shelters, Jenkens & Gilchrist to Pay $76M and Shut Doors
New York Law Journal, 3/30/07

The Tax Man's Travails
The American Lawyer, 4/04

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