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A former New York banker pleaded guilty to federal conspiracy and fraud charges Thursday, admitting that he helped cheat the government out of hundreds of millions of dollars in tax revenues by promoting tax shelters for the rich. Domenick Degiorgio, 42, of Cold Spring Harbor, N.Y., pleaded guilty in U.S. District Court to conspiracy, a scheme to defraud his employer and tax evasion. He said he carried out the fraud while he worked at the Manhattan office of a German bank, Bayerische Hypo und Vereinsbank. The plea comes as federal prosecutors were negotiating a settlement with KPMG in which the New York-based accounting giant would avoid criminal charges for its role in selling the same type of tax shelters, according to a report Thursday in The New York Times. The Times said the talks were “fragile” and criminal charges were still possible. According to court papers and a government source close to the case, KPMG helped process the shelters for the German bank. A partner at KPMG allegedly sent an e-mail to a New York attorney who also was promoting the shelters saying he and the attorney had received a “get out of jail free card” by obtaining permission from others at the accounting firm for the German bank to proceed with a tax shelter known as BLIPS. A complaint filed in the Manhattan court said Degiorgio, with the approval of the bank’s senior management, committed the bank to participate in more than $3.3 billion worth of purported financing of tax shelter transactions. Those transactions, the complaint said, resulted in U.S. taxpayers claiming more than $1.3 billion of purported tax losses from transactions that were supported by fraudulent documents. The losses were used by the bank’s clients to offset gains on their tax returns, thereby lowering their tax bills. He told U.S. District Judge Barbara Jones that he helped prepare false documents to support sham transactions that would appear legitimate enough to shelter wealthy clients from taxes. He said he carried out the scheme while he worked as co-head of the bank’s financial engineering group from 1996 through 2003. He said some of the schemes to help wealthy clients “reduce their tax liability” included phony loan transactions that supposedly stretched for seven years but actually were short term transactions. “The money never left the bank,” he said. The transactions were known as Bond Linked Issue Premium Structure, or BLIPS, and were heavily promoted to clients between 1999 and 2001, he said. The government alleged that those transactions alone resulted in $1 billion in phony tax losses. Degiorgio said he personally benefited in part through an arrangement in which a client in California paid him several hundred thousand dollars on the side for his work. According to court papers, some unlawfully diverted money from the bank’s accounts to his personal accounts was used to pay personal expenses including construction on his Long Island area residence. “Did you know what you were doing was wrong and illegal?” the judge asked. “Yes I did,” he answered. Assistant U.S. Attorney Stan Okula told Jones that the fraud cost the Internal Revenue Service hundreds of millions of dollars in lost revenues. The charges carry a potential penalty of 45 years in prison, though Okula said sentencing guidelines would call for a range of 12 to 15 years. A sentencing date was not immediately set. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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