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Four current and former Ernst & Young partners were found guilty May 7 of charges related to the design, marketing, and implementation of tax shelters sold by the firm following a 10-week trial in the U.S. District Court for the Southern District of New York, the Justice Department announced (United States v. Coplan, S.D.N.Y., No. 1:07-cr-453 (SHS), 5/7/09).
According to DOJ, a jury found Robert Coplan, Martin Nissenbaum, Richard Shapiro, and Brian Vaughn guilty of one count of conspiracy related to four tax shelters, and two counts of tax evasion related to clients who used the shelter transaction, known as a “CDS Add-On.” Additionally, Coplan was found guilty of one count of obstructing IRS and making false statements to the service; Nissenbaum was found guilty of one count of obstructing IRS; and Vaughn was found guilty of one count of making false statements to the service.
The four men were members of E&Y's national individual tax shelter group and led an effort to design and market tax shelter transactions used by wealthy individuals to eliminate, reduce, or defer tax liabilities on annual income that generally exceeded $10 million, DOJ said. Between 1999 and 2002, the tax shelter transactions they implemented generated billions of dollars in noneconomic or paper tax losses that were used to offset actual income or gain recognized by the firm's clients, it said.
The defendants, and their co-conspirators—including tax, accounting, and financial industry professionals as well as law firms—worked to design, implement, and defend the tax shelter transactions in ways intended to conceal the true facts and circumstances of the transactions from IRS, DOJ said.
Coplan, of Plano, Texas, is a lawyer and a former tax partner with E&Y and a former branch chief in IRS's Legislation and Regulations Division. Nissenbaum, of Brooklyn, N.Y., is a lawyer and E&Y partner. Shapiro, of Rye Brook, N.Y., is a lawyer and an E&Y tax partner. Vaughn, of Calhoun, La., is a certified public accountant and is a former E&Y tax partner.
Coplan, Nissenbaum, Shaprio, and Vaughn are scheduled to be sentenced Sept. 10. Charles Bolton, who was initially charged as a co-defendant, pleaded guilty to conspiracy to impede and impair IRS in January. David L. Smith, also charged in the indictment, remains at large, DOJ said.
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