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Former Accounting Vice Chairman and Board Member in Accounting Fraud – One Billion in Tax Shelters – US Attorney

United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE CONTACT: U.S. ATTORNEY’S OFFICE
JUNE 3, 2009 YUSILL SCRIBNER,
REBEKAH CARMICHAEL,
JANICE OH
PUBLIC INFORMATION OFFICE
(212) 637-2600
IRS
JOSEPH FOY
PUBLIC INFORMATION OFFICE
(212) 436-1032
FORMER ACCOUNTING FIRM VICE CHAIRMAN AND BOARD MEMBER
PLEADS GUILTY TO TAX FRAUD RELATED TO TAX SHELTERS
CLAIMING OVER ONE BILLION DOLLARS
OF FRAUDULENT TAX LOSSES
LEV L. DASSIN, the Acting United States Attorney for
the Southern District of New York, PATRICIA J. HAYNES, the
Special Agent-in-Charge of the New York Field Office of the
Internal Revenue Service (“IRS”), Criminal Investigation
Division, and JOHN A. DiCICCO, the Acting Assistant Attorney
General for the Tax Division of the Department of Justice,
announced that CHARLES W. BEE, JR., a former Vice-Chairman and
board member at a major international accounting firm, pleaded
guilty today to a three-count felony Information charging him
with conspiracy to defraud the United States in connection with
tax shelter transactions involving clients of his firm and of the
law firm Jenkens & Gilchrist (“J&G”); tax evasion in connection
with a multimillion-dollar tax shelter that BEE helped sell to a
client of his firm; and to giving material false deposition
testimony regarding his firm’s tax shelter practice. According
to the Information and statements made during his guilty plea
proceeding before United States Magistrate Judge THEODORE KATZ in
Manhattan federal court:

From 1984 through October 2003, BEE, a Certified Public
Accountant, was a partner and became a director and Vice-Chairman
of accounting firm BDO Seidman. From 1998 through October 2000,
BEE along with the firm’s CEO, as well as New York-based partner
ADRIAN DICKER (who has previously pleaded guilty to similar tax
fraud charges) was one of the leaders of the Firm’s “Tax
Solutions Group” (“TSG”), the activities of which were devoted to
designing, marketing, and implementing high-fee tax strategies,
including tax shelters, for wealthy clients. BEE, together with
other TSG partners, designed, marketed, and implemented two
different types of tax shelters with the Chicago office of the
law firm Jenkens & Gilchrist and with an international bank in
New York.

BEE knew that the tax shelter transactions would be
allowed by the IRS only if there was a reasonable possibility of
a profit. BEE also knew that, given the costs and fees to the
clients, and the nature and duration of the transactions, the tax
shelters had no reasonable possibility of resulting in a profit.
In addition, BEE knew that the clients who purchased the tax
shelter had no non-tax business reasons for entering into the
transactions, and that the fees were set as a percentage of the
tax loss sought by the clients. To make it appear that the tax
shelter clients had the requisite business purpose and that there
was a possibility of profit, BEE and his co-conspirators reviewed
and approved the use of a legal opinion letter issued by J&G that
contained false and fraudulent representations purportedly made
by the clients about their motivations for entering into the
transactions. BEE and other TSG members also developed a
consulting agreement containing false and fraudulent statements
to disguise the fact that the fees clients would be charged by
BDO Seidman were solely for the tax shelters. Finally, BEE and
his co-conspirators caused the clients to file false and
fraudulent tax returns incorporating the supposed tax shelter
benefits. In total, the fraudulent tax shelters implemented by
BEE, BDO Seidman, J&G, and the financial institution that
assisted them, caused clients to report over $1 billion in false
and fraudulent tax losses, resulting in the evasion of over $200
million in taxes.

BEE also specifically admitted criminal responsibility
based on the sale by BDO of a tax shelter known as the “short
option” transaction to one client, who was charged fees of
approximately $133,000 by BDO Seidman and $201,000 by J&G. The
short option tax shelter purportedly generated losses sufficient
to offset the taxes due on $6.7 million the client had received
from a stock sale. In fact, the short option transaction had the
reasonable possibility only to net a profit of $67,000, thus
resulting in no potential profit to the client. The client
nonetheless filed tax returns with the IRS reporting false and
fraudulent losses purportedly generated from the short options
shelter, thereby evading a substantial amount of taxes that he
would otherwise have had to pay.

Finally, BEE admitted that in February 2005, while
under oath during a deposition in Jade Trading v. United States,
a Court of Federal Claims case involving a tax shelter sold by
BDO and another promoter, he knowingly made false material
statements concerning BDO’s tax shelter practice.

As part of his plea agreement, BEE agreed to forfeit
$20 million, representing the money BDO Seidman paid to BEE from
tax shelter fees. BEE also agreed, in partial satisfaction of
the forfeiture, to forfeit four residences, three located in Boca
Raton, Florida, and one in Saddle Brook, New Jersey. BEE also
agreed to forfeit a 40-foot Coachman Legend recreational vehicle.
BEE, 63, who resides in Fredericksburg, Virginia, and
Boca Raton, Florida, pleaded guilty to one count of conspiracy to
defraud the IRS, one count of tax evasion and one count of
perjury. He faces a maximum sentence of five years in prison on
each of Counts One, Two, and Three. On each count, he also faces
a maximum fine of the greatest of $250,000 or twice the gross
gain or gross loss from the offense. Restitution to the IRS can
be imposed on all the charges.

Co-conspirator MICHAEL KEREKES, a principal of BDO
Seidman and also a former member of BDO’s TSG and Tax Opinion
Committee, pleaded guilty on February 13, 2009, to related
conspiracy and tax evasion charges. Fellow co-conspirator ADRIAN
DICKER, a former Vice-Chairman of BDO Seidman and TSG member,
pleaded guilty on March 17, 2009, to conspiracy and evasion
charges as well.

BEE is expected to be sentenced on a date to be set by
United States District Judge DEBORAH A. BATTS.
Mr. DASSIN thanked the IRS and the Department of
Justice Tax Division for their efforts in this case. Mr. DASSIN
added that the investigation is continuing.
Assistant United States Attorney STANLEY OKULA and
Trial Attorney NANETTE L. DAVIS from the Department of Justice
Tax Division are in charge of the prosecution.
09-173 ###

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