by Brian Mahany
A former CPA and banker at Deutsche Bank AG was sentenced to 3-1/5 years and ordered to pay $115,700,000 for his role in helping clients evade taxes. David Parse will have to serve about 3 years before eligible for early release. He was convicted of mail fraud and obstruction charges.
Prosecutors say he steered clients into bogus tax shelters that he helped create. He then helped those same customers avoid detection by the IRS. For his efforts he made $3 million but must pay many times that in restitution. The restitution figure represents lost tax revenues.
The IRS and Department of Justice has not flinched when it comes to prosecuting bankers, lawyers and accountants. This case was no exception and was part of one of the largest tax evasion conspiracies in history. Interestingly, the jury acquitted Parse of the conspiracy charges.
Parse was involved with former law firm giant Jenkens & Gilchrist. At one time, that firm had 600 lawyers. After a number of malpractice suits tied to the phony tax shelters, the firm folded and ultimately paid a $76 million fine to the IRS.
As is common in most criminal tax evasion cases against bankers and accountants, the IRS ultimately gets the client lists. That is bad news for the many businesses and people who participated in these abusive tax shelter transactions. Although Parse elected to go to trial, most bankers immediately turn over their client lists and agree to cooperate in return for a reduced sentence.
After the sentencing, United States Attorney Preet Bharara said, “David Parse used his professional acumen to help his wealthy clients make an end-run around the IRS, depriving the treasury of billions in tax revenue. And for his role in this sprawling and massive fraud, he is now paying the price.”
A Deputy Assistant Attorney General for the Department of Justice expressed similar thoughts. “Today’s sentencing reflects the Justice Department’s continuing commitment to the investigation and prosecution of accountants and other professionals who promote fraudulent tax shelters. The sentence imposed is a clear warning that those who commit such frauds risk significant jail time and other criminal sanctions.”
Four lawyers from the former Jenkens firm were previously convicted and are appealing.
The messages from this case are clear. Financial professionals who promote illegal tax shelters will be prosecuted. The hidden message is Justice’s drive to use the professionals to gain access to the clients participating in these schemes. We have seen many criminal prosecutions of bankers involved in setting up unreported foreign accounts or offshore accounts formed in the name of a fictitious entity (“nominee accounts”).
The tax shelters involving Parse were extremely large and attracted very wealthy taxpayers. Much more common are illegal welfare benefit plans set up under section 419 or 412 of the Internal Revenue Code. We have seen an uptick in phony captive insurance plans as well.
If you are the victim of a fraudulent tax shelter or nonconforming 419 plan, give us a call. Our tax fraud lawyers have helped taxpayers unwind these plans, negotiate penalty abatements with the IRS and even sue the promoter (insurance agent or stockbroker) selling these plans.
Mahany & Ertl – America’s Tax and Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many locations.
Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific topics, just click the tax or fraud tab or type in the name of a particular topic such as “accounting malpractice” in the search bar. We have posted hundreds of informative articles on our site.