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A handful of law firms face being pulled into the largest tax fraud case in U.S. history. Though none has been accused of wrongdoing, business lawyers who worked with indicted telecom baron Walter Anderson and the companies he controlled risk becoming embroiled in the courtroom brawl between prosecutors and Anderson’s defense attorney, Abbe Lowell. Prosecutors have contacted firms for documents, and at least one firm has been notified that it is considered a witness in the case. For his part, Lowell is strongly signaling that his defense will examine the advice Anderson received from lawyers and accountants, though he declined to identify which firms might face such questions. The case, in the U.S. District Court for the District of Columbia, is focused on whether Anderson � one of the highest-flying telecom entrepreneurs during the 1990s � allegedly used an intricate series of transactions involving offshore companies to hide $450 million in assets from the tax collector. Anderson’s companies were advised by a list of firms that includes Swidler Berlin; Arent Fox; and Mayer, Brown, Rowe & Maw, as well as several other European and Caribbean-based firms. Among those, Swidler had the longest relationship with Anderson. For more than a decade, it was Anderson’s primary counsel on dozens of business matters involving regulatory, corporate, and litigation work. For a time, Anderson even lived in a building next door to the firm. Swidler partners contacted for this article declined to comment, but a spokeswoman for the firm issued a statement saying: “Swidler Berlin was never engaged to provide Walter Anderson legal advice regarding any personal tax issue. We have been advised by the Department of Justice that it views Swidler Berlin attorneys only as witnesses in this investigation.” LONGTIME RELATIONSHIP There is no evidence that Swidler attorneys are � or could be � the subject of any investigation, and prosecutors assert in court documents that Anderson lied to his “accountants and others.” That may not matter to Lowell if he decides to target the firm’s advice. The Chadbourne & Parke partner could draw on Swidler’s long relationship with Anderson to sow doubt with a jury. “Mr. Anderson was involved in a series of complex business transactions,” Lowell told Legal Times in response to questions about his defense strategies. “And he didn’t come up with them himself.” A blame-the-advisers defense is a classic strategy, white-collar criminal defense lawyers say. If Lowell can show that lawyers and accountants pointed Anderson toward the transactions that have gotten him in trouble, his client may be able to escape a potential sentence of up to 80 years in prison and tens of millions of dollars in fines. The transactions at the heart of the government’s case appear to have started in 1992, when Anderson created an offshore company called Gold & Appel Transfer S.A. in the British Virgin Islands. In their indictment, prosecutors say that over the next few years Anderson would transfer shares in three telecom companies to Gold & Appel and a number of interlocking offshore entities connected to it. His purpose in doing so, the indictment says, was to hide earnings from the Internal Revenue Service. Swidler provided corporate services for Gold & Appel early on. In 1993, according to a document obtained by The Washington Post, Swidler attorneys filed a letter with the Securities and Exchange Commission stating that “Anderson controls Gold & Appel and is the beneficial owner of substantially all of the equity of Gold & Appel.” The letter, the Post says, states that the movement of assets to the offshore company was “for valid business purposes and not for tax avoidance purposes.” As Anderson grew wealthier by investing in a series of startup telecom companies, his relationship with Swidler grew. By the height of the telecom boom, say two former Swidler attorneys who spoke on condition of anonymity, Anderson was one of the largest clients of Swidler’s 80-attorney telecom group � a practice with 300 to 400 clients, including companies such as WorldCom Inc. Anderson’s key relationship partners at Swidler, say lawyers who worked at the firm, were rainmaker Andrew Lipman, one of Washington’s best-known telecom regulatory lawyers, and John Klusaritz, a tax specialist who once lectured at Harvard Law School’s international business and tax program and who now chairs the firm’s corporate practice. According to SEC documents, work from Anderson and the companies he controlled went to other Swidler attorneys as well: Andrew Ray, Morris DeFeo, Sean McGuinness. And other Swidler attorneys helped Anderson and Gold & Appel buy and sell stakes in telecom companies and advised him and his companies in dealings with federal regulatory agencies. (DeFeo and McGuinness have since left the firm.) Swidler lawyers also represented Anderson in disputes with other investors and the federal government. White-collar defense partners Warren Fitch, James Hamilton, and Michael Levy represented Anderson in the early phases of the criminal investigation into his personal taxes, and as late as last fall, litigators Michael Lichtenstein and Steven Tave (both of whom have left the firm) represented him before the U.S. Court of Appeals for the 4th Circuit in a civil suit brought by one of Anderson’s business partners. Lipman, McGuinness, Tave, and Levy declined to comment on questions regarding Anderson. Klusaritz, Ray, DeFeo, Hamilton, and Fitch did not return phone messages. In June 1997, court records show, Klusaritz filed a shareholder agreement with the SEC for Telco Communications, a Chantilly, Va.-based long-distance provider in which Gold & Appel, with Anderson as its signatory, owned a 25 percent stake. Less than a week later, Telco announced its sale to a rival for $1.1 billion. Gold & Appel, the Anderson-controlled offshore company, ultimately reaped about $90 million in cash as well as several million shares in the newly combined company. The indictment against Anderson charges him with failing to report more than $91 million in foreign earnings from Gold & Appel that year. An SEC filing a year before the sale states that Anderson “disclaims beneficial ownership” of Gold & Appel. OTHER PLAYERS Anderson retained other corporate lawyers, as well. From January 1997 to March 1998, Arent Fox partner Carter Strong filed more than a dozen forms with the SEC on behalf of Anderson-affiliated companies. A number of the filings detail Anderson’s relationship with the web of offshore companies the government says Anderson used to hide income. Strong declined to comment for this article. In response to several questions regarding the firm’s role advising Anderson and its level of cooperation with the government, an Arent Fox spokeswoman issued a statement saying that the firm was “not under any government investigation in regards to this matter” and declined to comment further. Additionally, lawyers in the London office of Mayer, Brown served as corporate secretaries for Esprit Telecom, a company whose board Anderson chaired for a time in the late 1990s. During that time, according to SEC filings, Anderson shifted control of his shares in Esprit to the Caribbean-registered Gold & Appel. In 1999, a year in which the government says Anderson failed to report more than $230 million in earnings, Esprit was sold to a larger competitor. On paper, the deal meant a $190 million payday for Gold & Appel. A spokeswoman for Mayer, Brown says the firm has cooperated with British investigators working in tandem with the U.S. Justice Department in the case, but she could not provide more details about the firm’s relationship with Anderson. DLA Piper Rudnick, Freshfields, and Clyde & Co., which have also turned over documents to investigators, declined to comment. British firms aren’t the only overseas practices with ties to Anderson. Court filings show that prosecutors also intend to use documents from two Panamanian firms that did business with Anderson. Both firms specialize in creating offshore companies, and both have connections to the highest echelons of Panamanian society. The first, Arias, Fabrega & Fabrega, was co-founded by a former Panamanian president, Harmodio Arias, whose brother and sister-in-law would also become Panamanian presidents. Anderson’s indictment says that Arias, Fabrega’s British Virgin Islands outpost set up Gold & Appel as an offshore company for Anderson. Rosa Restrepo, head of the firm’s British Virgin Islands office, did not respond to repeated messages for this article. A second Panamanian firm, Morgan & Morgan � a firm headed by Eduardo Morgan, a former ambassador to the United States � also did business with Anderson. The government alleges that Morgan & Morgan set up a second offshore company for Anderson, which was alternately a subsidiary and a parent company of Gold & Appel. In response to questions for this article, a firm spokesman issued a statement saying the firm was “already in contact through our U.S. lawyers with the U.S. Justice Department,” but declined further comment. THE TRIAL AHEAD In February, Anderson pleaded not guilty to 12 counts of fraud and tax evasion for allegedly concealing $450 million in assets from the IRS. Prosecutors in the case have said they’ll need at least 10 weeks to ready their case against Anderson. A trial before Judge Paul Friedman in the U.S. District Court for the District of Columbia likely won’t begin until January, at the earliest. Meanwhile, Anderson’s defense team has been working to get Anderson released from jail, where he is being held without bail. That struggle has proved fruitless so far, as the federal prosecutors in the case, Susan Menzer and Karen Kelley, have successfully used evidence gathered from Anderson’s apartment, including a book titled Poof! How to Disappear and Create a New Identity, to convince the judge that Anderson poses a flight risk. When the trial begins, it’s unclear whether any of the corporate or regulatory attorneys who advised Anderson during the 1990s will be called to the stand. What seems likely is that Anderson’s former legal advisers may play a critical role in a criminal case � something they couldn’t have imagined during the heady days of the telecom boom. “In the ’90s, the balance between suspicion and trust [of clients] was different than it is today,” says James Wareham, a white-collar litigator at Paul, Hastings, Janofsky & Walker. “The environment has changed for corporate America, and it’s changed for corporate lawyers.” Jason McLure can be contacted at [email protected].

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