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NY judge sends ex-lawyer to prison for 8 years for role in massive tax fraud

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POSTED March 1, 2013 10:11 p.m.


 

NEW YORK (AP) — A former Chicago lawyer who participated in what authorities have called the largest tax fraud in history was sentenced Friday to eight years in prison by a judge who called the scheme to help wealthy clients escape millions of dollars in taxes "breathtaking in its scope and the damage it caused the nation."

U.S. District Judge William H. Pauley III sentenced 52-year-old Donna Guerin, of Scottsdale, Ariz., after she pleaded guilty to conspiracy to defraud the United States and tax evasion. He ordered her to pay $190 million in restitution besides the $1.6 million she agreed to forfeit when she pleaded guilty in September.

Guerin, a former partner at Jenkens & Gilchrist, a Texas-based law firm with offices throughout the United States, had admitted that she helped market tax shelters from 1994 through 2004 to some of the world's richest investors, including the late sports entrepreneur Lamar Hunt, trust fund recipients, investors, a grandson of the late industrialist Armand Hammer and one of the earliest investors in Microsoft Corp.

Prosecutors said the tax shelters produced about $7 billion in phony tax losses that customers could use to reduce their tax obligations by tens of millions of dollars, cheating the Internal Revenue Service of nearly $1.5 billion. One of several tax shelter schemes was marketed from 1998 through 2000, producing at least $3.9 billion in bogus tax losses for at least 550 wealthy people, the government said.

Assistant U.S. Attorney Stanley J. Okula Jr. called it a "truly unprecedented fraud" and the largest loss by the IRS in history.

The judge said the fraud touched some of the nation's largest financial institutions, where legal statements prepared by Guerin and those she trained made many professionals believe the tax shelters were legitimate.

The judge seemed unimpressed with Guerin's statement that she was "truly sorry" for her actions and that she had lost her legal career, her reputation and her ability to raise children.

The judge described Guerin's rise from a humble background to attend law school and secure a great job at a major firm as "the embodiment of the American dream."

"But then," he said, "her lust for money turned her American dream into a nightmare."

The onetime Elmhurst, Ill., resident earned nearly $18 million illegally because she wasn't content with a job out of law school that paid about $200,000, the judge said.

"She became a criminal for two reasons: the lure of money and the belief she would never be brought to justice," he said. "In the end, this case is all about greed."

The judge ordered Guerin to pay $200,000 of her restitution before she reports to prison. He noted that she has moved to a home with four bedrooms and three baths "that she describes as modest."

In 2000, when Guerin turned 40, she was paid $11.5 million, "but it was all fraud, and she knew it," the judge said.

"You had everything, and you squandered it," he said. "You must be punished."

After a 2011 trial, the judge ordered a new trial for three of four people convicted in the case, saying a "pathological liar" who served as a juror had corrupted it.

Before Guerin's plea, she was one of two lawyers facing retrial. The other, Paul M. Daugerdas, of Wilmette, Ill., was described by prosecutors at trial as the mastermind of the tax scheme. Also awaiting trial was Denis M. Field, of Naples, Fla., the former chief executive officer of the accounting firm BDO Seidman and former head of its national tax practice. Both have pleaded not guilty. The retrial is scheduled to start Sept. 9.

 

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