Four current and former partners of the giant accounting firm Ernst & Young were charged Wednesday with tax fraud conspiracy and other crimes relating to tax shelters that helped the wealthy escape taxes on incomes exceeding $10 million.
All four worked in a group set up by the company in 1998 to develop tax shelters, according to an indictment filed in U.S. District Court in Manhattan. They allegedly defrauded the Internal Revenue Service from 1998 through 2004 by designing, marketing and selling fraudulent tax shelters.
U.S. Attorney Michael Garcia said in a statement that the indictment targets "tax professionals whose deceit costs this country untold millions in tax revenues."
An Ernst & Young spokesman did not immediately return a call seeking comment. It was not immediately known who would represent the four men at court appearances later Wednesday.
The indictment said the partners knew that if the IRS detected use of the tax shelters by their clients, it would aggressively challenge the claimed tax benefits.
To hide the tax fraud from the IRS, the defendants created documents containing false and fraudulent descriptions of the clients' motivations for entering into the transactions, the indictment said.
The partners enticed clients to participate in the shelters by getting law firms to provide letters claiming that the tax shelter losses or deductions would "more likely than not" survive IRS challenge, the court papers said.
The four knew the opinions were based on false and fraudulent statements but believed they would undermine the ability of the IRS to determine the clients' tax liabilities and decide whether penalties should be imposed, according to the indictment.
The partners were seeking entry into the highly lucrative tax shelter market that was already being explored by other companies, the indictment said.
Those charged were identified as Robert Coplan, 54, a Plano, Texas, lawyer who once was a branch chief in the IRS' Legislation and Regulations Division; Martin Nissenbaum, 51, of Brooklyn, a lawyer; Richard Shapiro, 58, of Rye Brook, N.Y., also a lawyer, and an accountant, Brian Vaughn, 39, of Calhoun, La.
They were charged with conspiracy to defraud the IRS, tax evasion, making false statements and impeding and impairing the lawful functioning of the IRS.