The former chairman of Greenberg Traurig's tax practice pleaded guilty Friday to defrauding the Internal Revenue Service and is cooperating with the government in a tax shelter prosecution.
Jay Ira Gordon, who resigned from the bar in 2006 after revelations he took more than $1.2 million in kickbacks on tax shelters he recommended to wealthy clients, pleaded guilty to a two-count information before Southern District of New York Judge John Koeltl.
Gordon, 51, is cooperating with the government in the prosecution of John B. Ohle III, a Chicago tax specialist who was indicted in November for conspiring with lawyers at Jenkens & Gilchrist to defraud the IRS with bogus tax shelters.
The government alleges in the Ohle case that 36 wealthy clients bought the shelters in 2001. The shelters, which the government contends have no legitimate non-tax business purpose, cost taxpayers as much as $100 million.
Gordon pleaded guilty to one count of corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue laws under 26 U.S.C. 7212(a) and one count of conspiracy under 18 U.S.C. 371. Absent his cooperation, Gordon is exposed to three years and five years in prison, respectively, on the counts.
Appearing with his attorney, Gerald L. Shargel, Gordon spoke quietly as he gave Koeltl a brief outline of his crimes.
Gordon told the judge that he steered five wealthy clients to the shelters and failed to disclose referral fees. He also claimed in excess of $10,000 in false and fraudulent itemized deductions on his own return.
Under the second count, Gordon conceded his role in a conspiracy to commit tax evasion with Ohle and others whereby he issued opinion letters vouching for the legality of the shelters. Those letters, he told the judge, contained "false and fraudulent statements and omitted material facts."
Assistant U.S. Attorney Stanley Okula then told the judge that Gordon's opinion letters provided a "false business justification" for the shelters to the IRS.
"The IRS would be led to believe there were legitimate non-tax reasons when, in fact, there were not," Okula said.
Gordon had been a partner at Greenberg Traurig since 1996. He disclosed his misconduct to the firm in 2004 and then resigned from the bar two years later.
Among the wealthy clients he steered toward tax shelter promoters was Peter S. Kalikow, the real estate developer and chairman of the Metropolitan Transportation Authority.
Gordon admitted in an affidavit of resignation from the bar that he did not inform his client or his firm of the more than $675,000 in referral fees he collected.
He also admitted that he asked one tax shelter sponsor to put another $600,000 referral fee in a retainer account at Greenberg Traurig and then converted the money into firm revenue by billing 1,120 fictitious hours. The $526,530 "fee collection credit" he received for the fake billings were considered in his compensation at the firm.
The plea agreement between Gordon and Okula and Assistant U.S. Attorney Nanette Davis calls for Gordon's full cooperation and an admission of all illegal activity.
In return, the government promises to recommend that Judge Koeltl be lenient in sentencing Gordon, not prosecute him further for the fraudulent shelters or prosecute him for claiming false expenses on his tax returns from 1999 to 2002, or prosecute him for diverting his fee income from Greenberg Traurig.
Koeltl set a tentative sentencing date of June 19, 2009.
Shargel and Gordon declined comment as they left the courthouse Friday.
Greenberg Traurig said in a statement, "We asked Gordon to leave the firm more than four years ago and reported him to the appropriate disciplinary committee. We cooperated fully with the federal investigation of Gordon."