Paul L. Caron

Thursday, November 4, 2010

DOJ Sues Former Seyfarth Shaw Partner Over DAD & DAT Tax Shelters

DOJ The Department of Justice yesterday issued this press release:

The United States has asked a federal court in Chicago to permanently bar John E. Rogers, a Chicago tax lawyer and former partner at Seyfarth Shaw LLP, from promoting tax shelters that allegedly use distressed Brazilian debt to illegally lower customers' reported income, the Justice Department announced today. The suit names two of Rogers's companies-Sugarloaf Fund LLC and Jetstream Business Limited-as additional defendants.

According to the civil injunction suit, filed in U.S. District Court in Chicago, Rogers designs and promotes the Distressed Asset Debt (DAD) and Distressed Asset Trust (DAT) tax shelters. These shelters allegedly falsely claim to enable Roger's U.S. taxpayer-customers to use millions of dollars of purported losses from Brazilian debt to offset the customers' unrelated U.S. income, even though the customers incur no actual losses in connection with the schemes.

In the DAT scheme, according to the complaint, a foreign business (typically a Brazilian retail company) essentially sells low-value, aged "distressed" debt, such as debt from bad checks, to Sugarloaf Fund, a U.S. entity that Rogers created and controls. In return Sugarloaf Fund allegedly pays the foreign company 1 to 2 percent of the debt's face value. The complaint states that Sugarloaf Fund takes portions of the distressed debt and contributes them to multiple supposed "trusts," also created and controlled by Rogers. Rogers then allegedly sells the "trusts" to tax shelter customers for a price pegged to the tax loss to be generated by the shelter. ...

Rogers's abusive DAD and DAT schemes have generated more than $370 million in improper tax deductions for his more than 100 customers, the complaint alleges.

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