Tax Lawyers' Sentences Include 'Explaining Dangers of Misleading IRS'

Mark Hamblett

New York Law Journal

Correction: An earlier version of this article incorrectly reported that Robert Coplan would not remain free pending his appeal to the 2nd U.S. Circuit Court of Appeals. Judge Stein has allowed all four men to stay out on bail pending appeal.

Southern District of New York Judge Sidney Stein gave a special assignment to two lawyers he sentenced Thursday in connection with the Ernst & Young tax shelter scandal: Go forth and spread the word about the consequences of defrauding the Internal Revenue Service.

Stein told tax specialists Robert Coplan and Martin Nissenbaum that a condition of their supervised release following prison is to spend 120 hours a year in community service, with at least half of that time devoted to addressing lawyers, bar groups and accounting firm employees about the way their careers were ruined by fooling with the tax code.

Coplan, the judge said during sentencing, is to "set forth his experiences and explain to these people the dangers of misleading the IRS, the dangers of going along with what everyone else is doing, the dangers of thinking all you are doing is your job ... but realizing that, at some point, it tips over into criminal liability."

Coplan, an attorney with a master's degree in tax, worked in Ernst & Young's Washington, D.C., office.

Nissenbaum of Brooklyn, also an attorney with a tax degree, is the former national director of Ernst & Young's personal income tax and retirement planning practice. He was given the same condition at his sentencing in the afternoon. The judge said Nissenbaum had led an exemplary life until his unethical and illegal participation in the tax shelter scam.

"Hopefully, he'll be able to help people guard against becoming unmoored from the ethical pole stars he followed," Stein said. "I think this will be of great service and, I hope, very effective in terms of general deterrence. Nissenbaum has a great deal to give back to his community."

Coplan, 57, and Nissenbaum, 54, were convicted in May 2009, along with Ernst & Young tax specialists Richard Shapiro and Brian Vaughn, with selling tax shelters to wealthy clients that created paper losses. Prosecutors in the Southern District U.S. Attorney's Office estimated the shelters cost the government as much as $2 billion.

The four men, former partners at Ernst & Young, worked in the firm's Viper Group, which stands for Value Ideas Produce Extraordinary Results. The group later changed its name to Strategic Individuals Solutions Group.

Shapiro, a lawyer, and Vaughn, an accountant, are scheduled to be sentenced Friday.

A fifth defendant, Charles Bolton, pleaded guilty last January to conspiracy to impede and impair the IRS. He is scheduled to be sentenced by Stein on Feb. 3. A sixth defendant, David L. Smith, remains at large.

The criminal case against the Ernst & Young partners was one of several prosecutions brought in the Southern District of New York as part of a campaign against tax maneuvers that have no legitimate economic justification.

Stein noted Thursday that there were at least 38 unindicted co-conspirators in the Ernst & Young prosecution and added the defendants were "under pressure from high-ups at Ernst & Young" to devise the tax products and "start raking in millions of dollars" from wealthy clients.

Ernst & Young was never charged and said it cooperated with the investigation.

SENTENCING RANGE

The sentencing guidelines called for Coplan, a former branch chief in the IRS' legislation and regulations division, to serve 23 years in prison, based largely on an estimated loss calculation of over $400 million. But Stein called the guidelines range, which had an upper ceiling of life in prison, "totally inappropriate here" and sentenced Coplan to three years behind bars.

In addition to ordering Coplan to address the tax section of the American Bar Association or other professional groups on "how they can avoid this in the future," the judge also instructed him to spend time helping low-income people with their taxes, as long as it is allowed by law. He was fined $75,000.

Coplan, of Plano, Texas, was found guilty of single counts of conspiracy, obstructing the IRS and making false statements and two counts of tax evasion.

His lawyer, Paula Junghans of Zuckerman Spaeder, fought successfully to have Coplan remain out of prison pending his appeal to the 2nd U.S. Circuit Court of Appeals.

Nissenbaum, who was represented by Isabelle A. Kirshner of Clayman & Rosenberg, was convicted of single counts of conspiracy and obstruction and two counts of tax evasion.

He faced a guidelines sentence of 21 years and eight months in prison, but Stein sentenced him to serve 2 1/2 years. He was also fined $100,000. And, like Coplan, any period of his community service he does not spend speaking with professionals about his experience is to be spent helping low-income people with their taxes.