Camferdam v Ernst & Young International, Inc.
Tax Shelter Users Reach $75 Million Settlement with Firms That Gave Bad Advice
The parties have reached a tentative $75 million settlement in several class actions filed against law firms Ernst & Young International, Inc., Jenkens & Gilchrist, PC, Sidley Austin Brown & Wood, LLP, BDO Seidman, LLP, Pasquale & Bowers, LLP, Dermody, Burk & Brown, and Deutsche Bank AG, on behalf of persons who purchased allegedly faulty tax shelters from the companies. The actions alleged that the firms gave tax advice that was not approved by the IRS, leaving the purchasers in trouble with the government. Persons eligible to take part in the settlement should contact attorneys for the class.
Paul Daugerdas is a partner at the Dallas-based firm of Jenkins & Gilchrist, and was, until recently, the head of the 50-lawyer Chicago branch. He is also, according to the IRS, responsible for organizing and selling "listed" or "potentially abusive" shelters used by many people. Those are IRS buzzwords for shelters that violate the tax code. IRS regulations require tax shelter promoters to register their tax avoidance schemes and to keep a list of taxpayers who use them. In the spring of 2002, the IRS served 22 summonses on Jenkens, trying to find out if the firm was liable for failing to comply with those regulations. In particular, the summonses sought information about listed transactions and the names of the clients.
The Internal Revenue Service continues to investigate shelter promoters, including accounting firms, banks and law firms. The U.S. Department of Justice has brought six enforcement actions, and is in courts around the country seeking the names of shelter users. Dockets are jammed with lawsuits by aggrieved taxpayers.
The settlement will not be effective until the court grants it final approval. The court has not yet scheduled a hearing on the matter.
