Malpractice Suit Claims Buchanan Ingersoll Cost Plaintiffs $2M in Taxes
Buchanan Ingersoll & Rooney is facing a suit by two former clients who claim the law firm’s advice cost them more than $2 million in back taxes and penalties.
The National Law Journal (reg. req.) has details of the complaint filed in Washington, D.C., federal court by lobbyists Hector Alcalde and Kevin Fay.
The Arlington, Va., lobbyists claim Buchanan Ingersoll advised them that a capital gains deferral was not in jeopardy when they entered into an arrangement with Derivium Capital LLC, according to the story. Two years later, the Internal Revenue Service sent preliminary notices to the lobbyists asserting the agency’s position that their transactions with Derivium “are in fact sham transactions built into a Ponzi scheme,” the complaint says.
Alcalde and Fay had originally shielded the sale of stock in their lobbying firm from immediate capital gains taxation by transferring it to an ESOP and buying qualified replacement property through an arrangement with Morgan Stanley Dean Witter, the complaint says. But the lobbyists were unhappy with Morgan Stanley and opted for the alternate transaction with Derivium.
The suit claims that then-Buchanan partner Louis Diamond had told them there were “no risks” in the Derivium transaction and their capital gains deferral was safe. Diamond, now a solo practitioner, became a Buchanan partner when his firm, Silverstein and Mullens, merged with the larger firm, the story says.
