Two prominent figures in the high-end marketed tax shelters of the 1990s and early part of the last decade were sentenced for tax crimes last week. From the Department of Justice Press Release:
Quellos founder and former CEO JEFFREY I. GREENSTEIN, 48, of Mercer Island, Washington, and former Quellos tax attorney CHARLES H. WILK, 52, of Seattle, pleaded guilty in September 2010. Today both men paid the IRS $7 Million in penalties related to their personal gain realized from the design, promotion and implementation of the fraudulent tax shelter, which they called POINT. The estimated tax loss from the scheme is $240 million. Those losses have since been repaid by the taxpayers.
Most of the big tax shelters at least involved real transactions, even if they were rigged to create tax losses without economic substance. Not so here, according to the press release:
Greenstein and Wilk did not tell clients, or the attorneys who evaluated the proposals, that the POINT transaction was predicated on a sham. They knew but did not disclose that there was no offshore investment fund, and that no shares of stock were actually purchased and possessed by any offshore investment fund. They knew that the purported offshore investment fund was merely a shell entity with nominee administrators and no assets or employees.
Other than that, it was a great shelter. Jack Townsend has more, including observations of the way tax shelter promoter sentences seem to vary inexplicably.