Legal News

Criminal Trial for Former Jenkens & Gilchrist Tax Head Kicks Off in NYC

By Ashby Jones

Remember Paul Daugerdas? Of course you do. Wrote WSJ colleague Nathan Koppel in a 2007 profile of Daugerdas’s former law firm, the now-defunct Jenkens & Gilcrhist:

n 1998, Chicago tax lawyer Paul Daugerdas approached a Dallas law firm, Jenkens & Gilchrist, with a proposition. He said he sold tax shelters and advice to wealthy clients, charging them, in part, a percentage of their tax savings. If Jenkens brought him aboard, he said, he could generate as much as $6 million a year in revenue, according to three former Jenkens partners.

Fast forward some 13 years: Daugerdas now finds himself in a much different place — in a courtroom fighting for his freedom. On Thursday, the three-month long criminal trial of Daugerdas and four other defendants kicked off in a Manhattan federal court. Click here for the New York Law Journal story on Day 1.

According to the NYLJ story, prosecutor Jason Hernandez opened by telling the jury that there was no legal justification behind the billion-dollar tax shelters created and marketed by Jenkens, BDO Seisman and Deutsche Bank.

Daugerdas’s alleged role: creating opinion letters for some 1000 wealthy clients that effectively blessed the shelters.

“The defendants crossed the line from legal to illegal early on,” Hernandez said in his opening statement. “And they never looked back.”

Daugerdas, who had been the head of Jenkens & Gilchrist’s Chicago tax practice, made $95 million in fees through four different shelters that the government argues lacked any economic substance, and his partner, Donna Guerin, made $17.5 million.

The pair are on trial along with former BDO Seidman CEO Denis Field and bankers Raymond Craig Brubaker and David Parse, formerly of Deutsche Bank.

“This is a case about greed and lies and a massive fraud on the IRS,” said Hernandez.

Daugerdas’s attorney, Chris C. Gair, a partner at Jenner & Block in Chicago, said the government was going to rely on cooperating witnesses who will lie to spare themselves prison sentences, including former Jenkens & Gilchrist partner Erwin Mayer, who pleaded guilty last fall.

Mayer “doesn’t have the integrity to stand up for what he believes in, he doesn’t have the guts,” Gair told the jury. “He believed those shelters had a substantial chance to make a profit.”

Gair said Thursday that the IRS had opened up a loophole that Daugerdas was obliged to exploit.

“Folks, Paul Daugerdas is a tax lawyer. It’s his job to interpret the Internal Revenue Code, to advise his clients and to do his best to help those clients pay the least amount of taxes they lawfully can,” he said.

Full post as published by Law Blog - WSJ.com on March 04, 2011 (boomark / email).