Saturday, November 15, 2008
From Friday's DOJ press release:
John B. Ohle III, a former member of the tax shelter promotion group at a national bank, has been charged with conspiring with lawyers at the law firm of Jenkens & Gilchrist and others to defraud the United States in the sale of a tax shelter known as "HOMER," the U.S. Attorney’s Office for the Southern District of New York, the Tax Division of the Department of Justice and the IRS announced today.
According to the indictment, between 1999 and 2002, Ohle was a supervisor in the Chicago office of a national bank’s "Innovative Strategies Group" (ISG). The indictment states that ISG provided estate planning and tax shelter strategies for high net worth clients, including a tax shelter called "Hedge Option Monetization of Economic Remainder" or HOMER. ISG sold 36 HOMER strategies to wealthy clients in 2001, according to the indictment, creating almost $430 million in fraudulent tax losses and resulting in the evasion of approximately $100 million in taxes.
The indictment alleges that Ohle and his co-conspirators marketed HOMER as a legitimate tax elimination strategy, despite the fact that HOMER was actually designed as a carefully planned series of steps to fraudulently produce the tax loss amounts desired by the clients. Jenkens allegedly issued a false and fraudulent opinion letter that found that it was "more likely than not" that the transaction would withstand IRS challenge. Ohle and two Jenkens lawyers are alleged to have known that the opinion letter contained false representations, including that the clients had a substantial non-tax business purpose in engaging in the HOMER transaction; that the clients created the HOMER trust for estate planning purposes; and that the clients exchanged the options for third-party notes for sound economic reasons. In order to participate in the HOMER transaction, the indictment states that the client had to pay fees of 6% of the desired tax loss. ...
Ohle faces up to 38 years in prison and fines of up to $2 million or twice the gross tax gain or loss on the charges.