White-Collar Crime

2nd Circuit Reverses Tax-Shelter Convictions of 2 Former Ernst & Young Lawyers

Saying that there wasn’t sufficient evidence to support a conviction, a divided federal appeals court panel Thursday reversed the convictions of two former Ernst & Young tax attorneys for developing abusive tax shelters sold by the accounting and financial firm between 1999 and 2001.

However, the New York City-based 2nd U.S. Circuit Court of Appeals upheld the conviction of a third former Ernst & Young tax lawyer and an ex-accountant there. Businessweek, Reuters and the Wall Street Journal (sub. req.) have stories.

The now-unconvicted lawyers are Martin Nissenbaum, who formerly served as national director of the personal income-tax and retirement-planning practice at Ernst & Young, and Richard Shapiro, a tax attorney. The conviction of former in-house tax lawyer Robert Coplan was affirmed. All had been convicted of conspiracy and tax evasion.

In its written opinion (PDF), the majority explained that there wasn’t enough evidence that Nissenbaum and Shapiro knowingly agreed to participate in the alleged criminal conduct of the group involved in creating the tax shelters.

A three-line email from March 2000 was “the government’s only attempt to identify an affirmative act by Nissenbaum that would demonstrate the requisite criminal intent,” Judge José A. Cabranes wrote in the 75-page opinion. “That is simply not enough.”

The Associated Press also has a story.

Earlier coverage:

ABAJournal.com: “Are More Law Firms in IRS Sights in Ongoing Tax Shelter Probe?”

ABAJournal.com: “Lawyer, Big Four Partners Charged in Tax Fraud Scheme”

ABAJournal.com: “Judge Orders Convicted Tax Lawyers to Warn About Misleading the IRS”

ABAJournal.com: “Ex-Arnold & Porter Partner Gets Probation in Tax-Shelter Case, Wanted to Be ‘Big Shot’”

Updated at 5:04 p.m. to include information from Wall Street Journal.

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