Mark Allison Quoted in Tax Notes, Court Reverses Convictions of 2 Former E&Y Shelter Promoters

Tax Notes
Excerpt taken from the article.

The Second Circuit has overturned the conspiracy and tax evasion convictions of two attorneys accused of promoting abusive tax shelters while in the employ of Ernst & Young LLP.

The November 29 decision establishes boundaries for what the Second Circuit considers criminal conduct on the part of defendants charged in promoter and evasion conspiracies and is seen as offering some relief to practitioners engaged in structuring transactions that may push legal limits. (For United States v. Coplan, No. 10-583-cr (2d Cir. 2012), see Doc 2012-24490 or 2012 TNT 231-17.)

The attorneys, Martin Nissenbaum and Richard Shapiro, were found guilty in May 2009 following a 10-week jury trial in the District Court for the Southern District of New York. Also convicted were Robert Coplan, an attorney, and Brian Vaughn, an accountant, all of whom were part of E&Y's Strategic Individual Solutions Group. A fifth defendant, Charles Bolton, an independent investment adviser, pleaded guilty to a single conspiracy charge.

Counts two and three of the indictment charged all the trial defendants with tax evasion in violation of section 7201. Under United States v. Romano, 938 F.2d 1569 (2d Cir. 1991), to prove a violation of section 7201, the government must prove beyond a reasonable doubt that there was a substantial tax deficiency, willfulness, and an affirmative act "with the intent to evade or defeat a tax or payment of it," Cabranes wrote.

Yet it was the court's holding against conspiracy that saved both Shapiro and Nissenbaum from affirmed guilty verdicts for counts two and three -- notably that they lacked the requisite mental state.

Not every conversation or statement implies a malicious purpose to defraud the government, said Mark D. Allison of Caplin & Drysdale. But while "there may very well have been inappropriate purpose behind these statements, at least in isolation, it's hard to see how you can pool [them] together to create a motivation that wasn't present on its face," he said.

Click on the above PDF to read the complete article by Shamik Trivedi.


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