Former Jenkens & Gilchrist tax lawyer Donna Guerin folded her cards Sept. 13 and pleaded guilty to helping wealthy clients cheat the Internal Revenue Service out of hundreds of millions of dollars through illegal tax shelters.
Just three months after Southern District Judge William Pauley granted a new trial to Guerin and two codefendants because of juror misconduct, Guerin admitted to issuing opinion letters intended to protect clients from IRS scrutiny by attesting that the complex transactions at issue had economic substance.
“I knew in my heart then and I acknowledge to your honor today that many of our clients were only interested in reducing their tax liability,” Guerin said, with her attorney, Mark Rotert of Stetler, Duffy & Rotert in Chicago, by her side.
Guerin, 52, pleaded guilty to one count of conspiracy and one substantive count of tax evasion pursuant to a plea agreement with the government. While both counts carry a maximum of five years in prison, she will likely receive less when she is sentenced by Pauley on Jan. 11. Guerin will also forfeit $1.6 million.
In 1995, Guerin, a DePaul University College of Law graduate, was working with colleague Paul Daugerdas at now-defunct Altheimer & Gray in Chicago, specializing in tax. Dissatisfied with his compensation at Altheimer & Gray, Daugerdas in 1998 moved to the newly opened Chicago office of Jenkens & Gilchrist, taking Guerin and another colleague with him.
Jenkens & Gilchrist had alliances until 2005 with BDO Seidman and other firms. Jenkins’ lawyers issued opinion letters on a complex series of transactions to shelter money from the IRS, including swaps of foreign currencies that posed little or no risk for the client.
The transactions “didn’t have a legitimate business purpose,” Southern District Assistant U.S. Attorney Nanette Davis told the court yesterday. “There were no reasonable opportunities of earning a profit given the huge fees being charged by J&G,” she said, thus leaving the clients with no tax liabilities.
At the close of a 10-week trial in May 2011, a jury that had deliberated for nine days delivered guilty verdicts against Guerin, Daugerdas, former BDO Seidman CEO Denis Field and banker David Parse, formerly of Deutsche Bank Alex.Brown. The jury acquitted former Deutche Bank Alex.Brown banker Raymond Brubaker (NYLJ, May 25, 2011).
But it came to light that Juror #1 in the case, Catherine Conrad, had lied to the court during voir dire and failed to disclose that she was an attorney suspended from practice who had a drinking problem, a criminal record and a convicted felon for a husband.
Pauley held a February 2012 hearing at which he took testimony from Conrad and several lawyers in the case. In June, he granted a retrial for Guerin, Daugerdas and Field, finding that Conrad had made “a calculated, criminal decision to get on the jury” through “breathtaking” lies and that she had shown actual bias against the defendants (NYLJ, June 5).
But the judge declined to grant a new trial for Parse after he found that his lawyers—Susan Brune, Laurie Edelstein and Theresa Trzaskoma of Brune & Richard—had actionable intelligence during the trial that Conrad was the suspended lawyer.
Even if the defense lawyers did not have actual knowledge, the judge said, they could have made sure of Conrad’s true identity through reasonable diligence, and he faulted the lawyers for failing to raise their concerns with the court.
Parse, now represented by Paul Shechtman of Zuckerman Spaeder, now claims the failure constituted ineffective assistance of counsel.
“Plainly such neglect was outside the range of the professional assistance one expects from an effective advocate,” Shechtman wrote in an August memorandum arguing for a retrial.
In a memo filed in opposition on Sept. 4, Davis and fellow prosecutors Stanley Okula and Jason Hernandez argue that Shechtman failed to show ineffective assistance. Parse, they say, was not prejudiced by his lawyers’ actions or failure to act.
“Armed with the knowledge that juror Catherine Conrad was a New York attorney who had been suspended from practice for alcohol-related issues, attorneys for David Parse decided to keep that knowledge from the Court—and keep Catherine Conrad on the jury—in an effort to obtain acquittals for their client,” the prosecutors write.
The prosecutors state that the “strategy succeeded in part, as Parse was acquitted of the conspiracy charge and certain tax evasion counts.”
“Now Parse wants to retain the benefits of his trial counsel’s strategic maneuvering (the acquittals) while simultaneously seeking to overturn the two counts of conviction that resulted from their strategic choice,” they write.
Parse is scheduled to be sentenced by Pauley on Oct. 26.
Guerin’s guilty plea leaves only Daugerdas and Field facing retrial, which is scheduled to begin April 8, 2013.
Guerin admitted that the conspiracy involving tax shelters boosted by the Jenkens & Gilchrist opinion letters led to aggregate tax loss revenues in excess of $400 million.
The single count of tax evasion was for one client who avoided $8 million in taxes in 2000.
In the plea agreement Guerin signed with the government, the parties agree that the stipulated guidelines range is 10 years in prison, but Guerin is free to argue for a lower sentence. She is barred by the agreement from filing a direct appeal or a collateral challenge to her guilty plea and she is barred from seeking a modification from whatever prison sentence is ordered by Pauley.
Guerin is now in the process of selling her Illinois home to satisfy the $1.6 million forfeiture.
“Do you understand what you were doing was wrong and illegal?” Pauley asked her yesterday.
Guerin, who was disbarred in Illinois by consent in 2011, hesitated and then gave the judge her answer.
“Your honor, I came to that understanding over time,” she said. “I can’t say that was true from the outset.”
@|Mark Hamblett can be contacted at email@example.com.