Appellate Judges

The Fantasy Play: A Corrupt Lawyer, A Deutsche Banker and a Wayward Juror Walk Into a Federal Court in NY

The corrupt lawyer receives 15 years instead of the mandatory life sentence and the Deutsche Bag, errr, banker gets to walk…read on.

Forfeiture Order

DEC 21, 2021 | REPUBLISHED BY LIT: DEC 29, 2021

NEW YORK – A partner at the defunct Dallas-based law firm Jenkens & Gilchrist was sentenced to 15 years in prison in 2014, following his conviction in what prosecutors call the largest criminal tax fraud in U.S. history.

Paul Daugerdas, who once ran the 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.

Daugerdas was also ordered to forfeit $164.7 million and pay $371 million in restitution with other co-conspirators.

The forfeiture proceedings are only now settling at the end of 2021 – 7 years later – and the amount recovered is not known, over and above the $500k agreement. e.g. what the wife has in “other assets” which were regarded as personal and not part of the agreed forfeiture settlement.

Wife of convicted Big Law partner loses sanctions bid against U.S.

Eleanor Daugerdas argued government should have submitted unredacted documents

Paul Daugerdas was found guilty in major criminal tax fraud case

SEP 29, 2021 | REPUBLISHED BY LIT: DEC 29, 2021

Sept 29 (Reuters) – A Manhattan federal judge on Tuesday blocked the sanctions request of the wife of a former Big Law partner who was found guilty for his part in one of the largest criminal tax fraud cases in U.S. history.

Eleanor Daugerdas, the wife of Paul Daugerdas, sought to sanction the federal government after prosecutors turned over redacted, not unredacted, bank records of Jenkens & Gilchrist’s Chicago law office, which her husband once ran.

Those records, which the federal government obtained in 2007 from Davis Polk & Wardwell as part of a separate investigation into accounting firm Ernst & Young, were already redacted by the time the government obtained them, wrote U.S. District Judge Denise Cote wrote in a 10-page order.

Eleanor Daugerdas had argued that the federal government violated its duty to preserve evidence by never obtaining unredacted versions of the records.

Cote was not persuaded. “The grand jury’s possession of subpoena power does not mean that every conceivable document subject to subpoena is deemed in the government’s possession or under its control,” the judge wrote.

Daugerdas was found guilty on charges including conspiracy, tax evasion and mail fraud by a New York federal jury in 2013. He was convicted of overseeing fraudulent tax shelters for about two decades, mostly at now-defunct Jenkens & Gilchrist, costing the U.S. government more than $1.63 billion in tax revenue.

Two other people were also convicted in connection with the scheme — former Jenkens partner Donna Guerin and David Parse, a Deutsche Bank broker. The jury acquitted another former Deutsche broker, Raymond Brubaker, and Denis Field, former chief executive at accounting firm BDO Seidman.

Jenkens & Gilchrist, which was based in Dallas, was among the country’s highest-grossing law firms and was home to more than 600 lawyers before it eventually shut its doors for good in 2007, the same year it reached a settlement with the Internal Revenue Service related to its tax shelter advice.

In June 2014, U.S. District Judge William Pauley gave the federal government the go-ahead to forfeit more than $160 million of Paul Daugerdas’ assets. Two months later, Eleanor Daugerdas filed a petition to claw back $10 million of those assets, arguing she had a right, title and interest to that money.

Although Pauley and the 2nd U.S. Circuit Court of Appeals denied her petition, the 2nd Circuit allowed her to do more fact-finding. Pauley ordered the federal government in July 2018 to produce the bank records, which didn’t occur until December 2020, in part due to the COVID-19 pandemic.

Even with the redacted records, Eleanor Daugerdas asserted in April that they were enough to support her petition.

Cote, whose decision was released by the court on Wednesday, was assigned to the case after Pauley died in July.

Paul Daugerdas is due to be released from an Illinois federal prison in 2027.

The case is United States of America v. Paul M. Daugerdas, et al., U.S. District Court for the Southern District of New York, 1:09-cr-00581.

For Eleanor Daugerdas: James DeVita, of the Law Office of James R. DeVita PLLC

For the U.S.: Kiersten Fletcher, of the U.S. Attorney’s Office for the Southern District of New York

Ex-Big Law partner can’t blame trial counsel for tax fraud conviction – judge

FEB 17, 2021 | REPUBLISHED BY LIT: DEC 29, 2021

(Reuters) – A Manhattan federal judge has rejected another attempt by an attorney who was found guilty of the largest criminal tax fraud in U.S. history to vacate his conviction and sentence.

U.S. District Judge William Pauley on Tuesday rejected Paul Daugerdas’ habeas petition, after he claimed that his attorney during his first trial, Jenner & Block of counsel Charles Sklarsky, was ineffective.

Pauley found Daugerdas’ arguments “meritless” and rejected his bid for an evidentiary hearing.

“This court devoted more than 75 days to hearing evidence and arguments over the course of two trials and is intimately familiar with the conduct of Daugerdas’ counsel throughout the proceedings,” Pauley wrote. “Counsel conducted themselves in a highly effective and professional manner.”

Pauley’s ruling comes six months after he denied Daugerdas’ motion to be released early from his 15-year prison sentence after testing positive for COVID-19.

Daugerdas, who once ran defunct law firm Jenkens & Gilchrist’s Chicago office, was found guilty on charges including conspiracy, tax evasion and mail fraud by a New York federal jury in 2013.

Jenkens & Gilchrist was among the country’s highest-grossing law firms and was home to more than 600 lawyers before it eventually shut its doors for good in 2007, the same year it reached a settlement with the Internal Revenue Service related to its tax shelter advice.

Prosecutors said Daugerdas reaped $95 million in a scheme that involved fraudulent tax deductions or benefits exceeding $7 billion, and that resulted in $1.63 billion in lost U.S. tax revenue.

Sklarsky did not respond to a request for comment. Daugerdas, who is due to be released from an Illinois federal prison in 2027, represented himself in the manner.

A spokesman for the Southern District of New York U.S. attorney’s office declined to comment.

The case is Paul Daugerdas v. United States of America,

U.S. District Court for the Southern District of New York, 18-cv-00152.

For Paul Daugerdas: Pro se

For U.S.: Stanley Okula, Jr. and Nanette Davis, of the U.S. Attorney’s Office

Judge Urges Prison Furlough For Author Of “Biggest Tax Fraud Ever”

MAY 6, 2020 | REPUBLISHED BY LIT: DEC 29, 2021

I thought I could escape COVID-19, which one way or another is all I have written about for the last six weeks, by going back to my routine of reviewing tax decisions that may be of interest. No luck.

What stands out are decisions about whether people serving time for tax connected crimes should be getting compassionate release, because of their vulnerability to COVID-19. Most recently up is a star among tax convicts – Paul Daugerdas.

Memory Lane

There was this time when prominent law firms and the most prestigious accounting firms were engaged in a raid on the Treasury through the marketing of bogus tax shelters. The story of the shenanigans was broken by my esteemed editor Janet Novack in 1998 in a piece titled the Hustling of X-Rated Tax Shelters. Paul Daugerdas stood out.

According to Tanina Rostain and Milton Regan in Confidence Games it was Daugerdas who conceived of offering the shelters to individuals. The Forbes gallery of 10 Notorious Tax Cheats credits Daugerdas with creating $7 billion in phony losses and personally making $95 million from the schemes.

In 2014, a jury in the Southern District of New York convicted Daugerdas of conspiracy to defraud the United States among other crimes. His inmate number is 62444-054 at the satellite camp adjacent to United States Penitentiary in Marion, IL with a projected release date of July 11, 2027.

He is 69 years old, a year older than me. Makes me grateful I stuck with affordable housing rather than the more “sophisticated” shelters being cooked up by the national firms.

COVID-19 Compassionate Release

Daugerdas is in some ways a poster boy for compassionate release because of the danger of COVID-19 exposure in prisons. Besides being 69, he suffers from “Type 2 diabetes, obesity, hypertension, and high cholesterol”.

That is not the only thing that matters. Judge William Pauley III also has to consider:

“(1) “the nature and circumstances of the offense and the history and characteristics of the defendant;” (2) “the need for the sentence imposed;” (3) “the kinds of sentences available;” (4) the Guidelines ranges; (5) “any pertinent policy statement;” (6) “the need to avoid unwarranted sentence disparities among defendants with similar records;” and (7) “the need to provide restitution to the victims of the offense.” “

A Class Of Its Own

Those latter factors put Daugerdas in the “throw away the key” category.

“The nature and circumstances of Daugerdas’s decade-long criminal conduct were unprecedented. He orchestrated the largest tax shelter fraud scheme in American history-one that recruited ultra-wealthy taxpayers and corrupted young professionals at every turn. Daugerdas netted over $95 million in illicit proceeds for his own benefit, and the United States Treasury lost more than $1 billion in tax revenue. When the scheme was uncovered, Jenkens & Gilchrist, P.C.-once a law firm of over 600 lawyers-collapsed.”

Personally I think of taking down a large law firm as a mitigating factor, but the Judge probably doesn’t look at it that way. He went on.

“Daugerdas’s criminal conduct was in a class of its own, and the conspiracy ensnared hundreds of individuals. While his applicable Guidelines range was life in prison based on the offense level, the statutory maximum for his crimes was 696 months of imprisonment. This Court sentenced Daugerdas principally to 180 months of imprisonment and imposed restitution of $371 million. To date, Daugerdas has served 37% of his custodial sentence. And he has not voluntarily paid a cent of restitution. Granting Daugerdas’s motion would do little to “promote respect for the law” or “provide just punishment for the offense.””

A Decision Worthy Of Solomon

Judge Pauley does not have the authority to order Bureau of Prisons to furlough Paul Daugerdas. Instead he has strongly urged the agency to do so. If that is what is done, he will be going back to prison when the rest of us get to go out of our houses more regularly.

Deutsche Bank broker freed in $7B tax fraud case spoiled by juror’s lies

NOV 16, 2015 | REPUBLISHED BY LIT: DEC 29, 2021

NEW YORK — A former Deutsche Bank broker has been largely freed of the U.S. government’s charges against him in a reversal spurred by a juror with a colorful past, including allegations of punching a police officer and stealing a bag of shrimp while drunk.

Former Deutsche Bank broker David Parse was granted a deferred prosecution agreement that acquitted him of the bulk of the charges against him at a pretrial hearing on Monday, his lawyer, Barry Berke, said. Parse, a certified public accountant with Deutsche Bank’s Alex. Brown & Sons unit, will be released of the remaining two charges after one year, said Berke of Kramer Levin Naftalis & Frankel.

Dawn Dearden, a spokeswoman with the Manhattan U.S. Attorney’s Office, which brought the charges, declined to comment.

It’s the latest prosecution to be overhauled in the 2009 tax case, thanks to wayward juror Catherine Conrad, who admitted at a 2012 hearing to lying about her life in order to win a front-row seat at the 2011 trial.

Parse and three others alleged co-conspirators were convicted at the 2011 trial, including former BDO Seidman CEO Denis Field. A fifth defendant, Deutsche Bank banker Raymond Craig Brubaker, was acquitted on all counts at the same trial.

Prosecutors had charged the group of tax lawyers and bank brokers with helping wealthy individuals avoid taxes for a decade, resulting in more than $7 billion in losses to the government. At the time, it was described as one of the largest criminal tax frauds in history.

The case took an unusual turn, however, when it emerged that Conrad had lied about her colorful background to win a seat on the jury. The concern was that the defendants could not trust Conrad’s vows that she had been impartial.

Conrad presented herself as a stay-at-home wife from Westchester, N.Y., but she was actually a suspended lawyer who lived in the Bronx, it emerged at the post-trial hearing.

Conrad had once been charged with punching a police officer and admitted at the hearing to stealing a bag of shrimp at a convenience store while drunk. In addition to her own past with petty crime and lying about her address, Conrad also failed to reveal her husband’s criminal record, including auto theft.

At the post-trial hearing, Conrad called the defendants “crooks.”

This, combined with false representations about her identity, led all four convictions to be overturned, although it took Parse until this year to be granted a new trial.

Monday’s deal means Parse won’t have to face retrial, and the remaining charges against him will soon be dropped, his lawyer said Monday.

“David Parse was acquitted of virtually all of the charges against him at trial, and we are very pleased that the remaining two will be dismissed as well,”

Berke said Monday.

“David and his family have never wavered in their belief in his innocence, and he had the courage to persevere through this long and unfortunate ordeal.”

Field, the former BDO Seidman CEO, was acquitted of all charges in a 2013 retrial that was also prompted by the problematic juror.

The two other defendants who had their verdicts overturned due to the juror — both former partners of law firm Jenkins Gilchrist — were re-convicted at trial or have pleaded guilty to charges of aiding the tax fraud scheme.

Several other defendants pleaded guilty to the charges in 2009.

Withdrawal as Attorneys for Paul Daugerdas

NOV 20, 2012 | REPUBLISHED BY LIT: DEC 29, 2021

Former Lawyer Foistner Receives 4 Years for $8M+ Theft. Please Distribute to State Bars.

So many lawyers have been stealing millions of dollars for years without any criminal convictions or referral by State Bars. This is a start.

The Disparity in Sentencing Guidelines Between Thievin’ Lawyers and Non-Prisoners is Deplorable

U.S. District Judge Andrew Hanen ordered Walton to serve 24 months in federal prison followed by one year of supervised release.

BigLaw Thievin’ Lawyer Rob Hankes Too Big to Jail and Instead Receives a Suspension

The majority described Hankes’ conduct as grounds for disbarment but instead he is suspended, without referral for criminal prosecution.

The Fantasy Play: A Corrupt Lawyer, A Deutsche Banker and a Wayward Juror Walk Into a Federal Court in NY
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