LAWFUEL – First With Law News – MICHAEL J. GARCIA, United States Att…

LAWFUEL – First With Law News – MICHAEL J. GARCIA, United States Attorney for the Southern District of New York, announced that BELLE SIX, a former employee of Ernst & Young (“E&Y”), pleaded guilty earlier today to a one-count Information charging her with conspiracy to commit
tax fraud.

According to the Information filed in Manhattan
federal court and statements made during SIX’s guilty plea:
SIX was a member of E&Y’s VIPER group, which was formed
in 1998 to design, market, and implement tax shelters for E&Y’s
high-net-worth clients.

As a member of the VIPER group –- which used as its name an acronym for “Value Ideas Produce Extraordinary Results” — SIX participated with others in a scheme to deceive the IRS about the bona fides of their tax
shelters, and about the circumstances surrounding the marketing
of the shelters to E&Y’s clients.

SIX was involved primarily in sales and marketing while at E&Y, and later went to work for
entities that implemented shelters for E&Y clients.
Appearing this morning before United States Magistrate
Judge DEBORAH C. FREEMAN, SIX acknowledged that she and others
deliberately concealed information from the IRS, and submitted
false and fraudulent documentation to the IRS. SIX acknowledged
that over a period of several years, she and others participated
in marketing and implementing shelters called CDS (for
“Contingent Deferred Swap”) and CDS Add-On. She knew that in
order for these tax shelters to succeed in generating the
intended tax benefits, it was necessary for the clients to have
non-tax business motivations for entering into them, and for
carrying out the various steps that generated the tax benefits.
SIX admitted that the VIPER Group members developed non-tax
business reasons that could plausibly be advanced to justify the
shelters to the IRS, and included those reasons in transaction
documents, correspondence, and other materials that would go to
the IRS if the clients were audited, although the reasons were
not true. SIX acknowledged that she and her co-conspirators also
took steps to disguise the fact that all the steps of the
transactions were all pre-planned from the beginning, and that
they did so because they knew that fact would harm the clients’
tax positions.
Generally, the shelters E&Y marketed and implemented
were designed to appear as financial investments rather than tax
shelters, and the non-tax reasons the conspirators advanced
related to supposed investment objectives. SIX acknowledged that
she and her co-conspirators knew the clients entered into these
transactions because they wanted the tax results and not for
investment purposes.

During her plea, SIX explained that, as part of the
fraud, CDS clients formed partnerships that claimed to be
involved in the business of trading for profit. She acknowledged
that conducting trading activity for profit was essential to the
success of CDS, and that, in reality, the trading activity
undertaken by the CDS partnerships was not designed for that
purpose. SIX admitted during her plea that the CDS and CDS Add-
On shelters were vulnerable to IRS attack in certain other
respects as well, and that she and others submitted false and
fraudulent documents to the IRS in an effort to avoid having the
IRS learn of those vulnerabilities and disallow the clients’ tax
positions. In pleading guilty today, SIX also admitted lying to
the IRS under oath in 2004, when she was asked about CDS.
SIX, age 36, who resides in Dallas, Texas, faces a
maximum sentence of five years in prison on the conspiracy charge
to which she pled guilty.

As part of her plea agreement with the Government, SIX agreed to forfeit more than $13 million, representing after-tax compensation she received for her tax shelter work after leaving E&Y. In addition, SIX agreed not to be involved in organizing, marketing, promoting or selling tax
shelters or tax-advantaged transactions designed to avoid or
evade taxes, and not to be involved in tax return preparation.
A tentative sentencing date of September 19th was set.
Assistant United States Attorneys DEBORAH E. LANDIS and
JAIKUMAR RAMASWAMY are in charge of the prosecution.
07-149 ###

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