Tax Evasion Results in Fines and Prison Sentences

Chicago Attorney Guilty in Tax Evasion Case

A Chicago-based attorney has plead guilty to tax evasion and conspiracy to commit fraud related to a number of her wealthiest clients.  She had helped her clients evade taxes totaling tens of millions of dollars.  Prosecuting attorneys believe the amount may be the single largest instance of tax evasion brought to court in the history of the United States.

Donna Guerin, 52, stood Thursday before a United States District Court when she entered the guilty plea.  The charges could result in Guerin receiving a prison sentence of 10 years.  The sentencing hearing when Guerin’s final punishment will be set has been scheduled for January 11.  In the plea agreement, Guerin has already forfeiting over $1.5 million in fees she received from the clients to whom she provided illegal advice.

Guerin was a partner with Jenkens & Gilchrist, a law firm that has now been dissolved.  Guerin’s role in the tax evasion effort was to provide letters to the Internal Revenue Service stating that her clients were investing in profitable businesses ventures, knowing full well this was not the case.

“I knew in my heart then and I acknowledge to your honor today that many of our clients were only interested in reducing tax liabilities,” Guerin told Judge William H. Pauley III, who is overseeing Guerin’s trial.

Pauley asked Guerin if she knew she should not be providing these letters to her clients because it was illegal.

“I came to that understanding over time,” Guerin responded.

During a separate trial conducted over a three-month period in 2011, the prosecution provided evidence that the tax shelters created by Guerin and her law firm between 1994 and 2004 were used by the “most well-heeled, richest investors in the world.”  Notable investors in the tax shelters included one of the original investors in Microsoft Corporation, a relative of Armand Hammer, and numerous others.

The tax shelters showed over $6 million in tax losses by the investors, loses that existed only on paper.  The investors were then able to use the losses on their income tax returns to reduce their tax liability owed.  The largest individual shelter had over 550 investors between 1998 and 2000, providing them approximately $4.0 billion in fictitious losses on their investments.

In addition to Guerin, the trial includes Paul M. Daugerdas, who the prosecution believes was the head of the tax evasion plan, and Denis M. Field, who was the Chief Executive Officer of BDO Seidman, one of the United State’s largest accounting and tax firms.  Field was the lead partner over BDO Seidman’s tax arm.

Both Daugerdas and Field have entered pleas of not guilty related to the charges.  A formal trial date for them has not yet been scheduled.

Retired Man Receives 18 Month Prison Sentence for Tax Evasion

A West Virginia man who was running a junk yard and receiving disability checks has been found guilty of tax evasion.  He received an 18 month prison sentence as a result.

Kenneth Harold Hogan, 50, received the sentence from the United States District Court located in Martinsburg, West Virginia.  Hogan was found guilty of tax evasion related to the disability checks.

Hogan began receiving the disability checks in 1995 after he injured his back working for the railroad.  The fact Hogan had no other income was considered in setting the amount of disability income he received.

But when Hogan opened the junk yard, he failed to update his records related to the disability income he was receiving.  As a result, Hogan was paid approximately $125,000 in disability he should not have received.  In addition, Hogan failed to report all of his income to the Internal Revenue Service.

In addition to the 18 month prison sentence, Hogan has to return the $125,000 in funds and now owes the Internal Revenue Service almost $100,000 in unpaid taxes.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.