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In only a few short months, “Jenkens & Gilchrist” has become synonymous with “tax shelter.” It seems that in every news article about the boom in questionable tax shelters, and in every editorial deploring the phenomenon, Dallas-based Jenkens is front and center. Other firms are supporting players or, more often, absent altogether. That’s probably just fine with R.J. Ruble of Sidley Austin Brown & Wood in New York. Ruble, no doubt, can do without the distraction. As the lead figure in Sidley’s extensive tax shelter practice, he’s busy fighting off civil suits and worrying about the combined forces of the Internal Revenue Service and the U.S. Department of Justice. The government is investigating several firms in addition to Jenkens, according to a source at the IRS. Whether or not Sidley is among them — the government won’t say, and a Sidley spokesperson would say only that the firm won’t comment on “pending litigation” — the firm has managed to keep a low profile in the face of some very high-profile litigation. Ruble and Sidley are codefendants, along with Jenkens and its lead tax shelter lawyer, partner Paul Daugerdas, in a suit brought by an aggrieved shelter buyer. The firm also faces a wave of lawsuits by people who bought shelters from KPMG L.L.P., shelters for which Sidley wrote opinions blessing the transactions. Those people, who now face audits, assessments, and possible penalties by the IRS, claim the shelter was “bogus,” and that Sidley knew or should have known it. IRS and Justice Department investigations of other firms are likely to follow the Jenkens template. That firm was served with a series of summonses that seek to identify clients who bought shelters, and to check Jenkens’ compliance with IRS rules that require shelter promoters to register their products and maintain records about their use. When Jenkens refused to answer the summonses, citing attorney-client privilege, the government brought an enforcement action that attracted nationwide media coverage. A rare glimpse into the secretive tax shelter business came in June, when an internal KPMG e-mail was made public. The March 1998 e-mail was written by Jeff Stein, a lawyer and the current No. 2 man at KPMG. It identifies Ruble as a member of a “working group” charged with creating a new shelter — OPIS — to replace an older shelter — FLIP — that was being sold by KPMG. The change was needed because FLIP was a potential “tax disaster,” wrote Stein. The reason? All tax transactions need “economic substance” — something other than saving taxes — and FLIP didn’t have enough, according to Stein. Because a shelter user had to buy a stock warrant in a Cayman Islands company that “was really illusory and stood out more like a sore thumb, since no one in his right mind would pay such an exorbitant price for such a warrant,” according to Stein, the IRS was not likely to miss it. KPMG says all of its tax-planning services are legit. But, says Sheldon Pollack, a professor of business law and an expert on tax shelters at the University of Delaware, “The e-mail reveals so much about how these guys put together their ‘products’ with an eye toward avoiding detection by the IRS.” Pollack seems to take a certain delight in the machinations being revealed, in the spectacle of the working group straining “to add some tiny bit of ‘economic substance’ and ‘business purpose’ to the whole phony arrangement.” Of course, by the time the e-mail was written, Ruble had already authored opinion letters saying that FLIP was “more likely than not” to survive a challenge by the IRS. In addition to FLIP and OPIS, Ruble worked with KPMG on a shelter called BLIPS. (All tax shelters need catchy acronyms.) As of June 2002, according to the IRS, 186 people had saved $4.4 billion in taxes from BLIPS transactions, and another 57 people had saved $1.4 billion from FLIP and OPIS. It’s not known whether Ruble was the lawyer on all of those deals. So how has Sidley avoided notoriety so far? It doesn’t seem to be because of its media strategies. Sidley’s Ruble and Jenkens’ Daugerdas have adopted the same public persona — silence. Their firms have tried to keep a similarly low profile. Jenkens, obviously, doesn’t have the answer. “Ask the journalists who have covered the story,” suggests a firm spokesman.

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