Lawfuel – The Law Newswire – MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced the decision not to seek criminal charges against the law firm Sidley Austin LLP
(“Sidley”), the investigation of which arose out of the fraudulent tax shelter and other activities of former Sidley Austin Brown & Wood (“SABW”) tax partner RAYMOND J. RUBLE. Mr. GARCIA explained that the decision not to bring criminal charges against Sidley was reached in accordance with the Department of Justice’s Principles of Federal Prosecution of Business Organizations. The decision was predicated on a number of factors, including:
• RUBLE carried out the major part of his alleged
fraud, including the provision of fraudulent cookie-cutter
opinion letters, and brought in a substantial part of the firm’s
revenues, while a partner at the law firm Brown & Wood (BW), the
New York-based firm that merged in May 2001 with the larger,
Chicago-based firm of Sidley & Austin, LLP (“S&A”), forming the
firm SABW (which has since changed its name to Sidley Austin).
• S&A (the pre-merger, Chicago-based entity) never
wrote opinion letters for mass-marketed tax shelters and
stipulated as a condition of the merger that RUBLE no longer
engage in the practice of writing such letters.
• While RUBLE did issue such opinions while at the
merged entity SABW, he did so largely by deception. The merged
firm had approved RUBLE’s request to issue after the merger a
small number of opinions to which he had committed before the
merger. The request was approved based on RUBLE’s claim that he
was ethically obligated to provide the opinions to which he had
committed, and the firm’s fear of lawsuits from his clients if
RUBLE did not do so. SABW approved RUBLE’s request without
independently determining the legitimacy of the “grandfathered”
transactions. It did implement procedures to monitor RUBLE and
other tax practitioners, including a policy that all tax opinions
were to be approved by a “second signer” who did not come from
the same pre-merger firm as the originator of the opinion, and a
policy that all tax opinions were to be posted in a firm
database. RUBLE failed to comply with those policies, and
misrepresented to the firm the number of opinions he was issuing.
• Once Sidley determined that RUBLE had been misleading
it, Sidley immediately notified the IRS and the Senate committee
investigating tax shelters that they should not rely on any
information provided by RUBLE, and fired RUBLE shortly
• Following its discovery of RUBLE’s deceptions, and
before the commencement of the criminal investigation, SABW
implemented a model — and, to the Government’s knowledge,
unprecedented — compliance program designed to provide rigorous
checks and oversight with respect to its tax opinion practice and
attorney obligations with respect to tax advice.
• SABW cooperated with the criminal investigation being
conducted by this Office and the IRS from its inception in
February 2004, by providing witnesses for interviews and
producing documents and various analyses of RUBLE’s activities.
• Sidley has acknowledged, through a public statement
of responsibility (copy attached), that its role with respect to
certain tax shelter transactions wrongly and fraudulently
deprived the U.S. Treasury of significant tax revenues.
• Sidley has entered into a Closing Agreement with the
IRS pursuant to which Sidley has paid a $39.4 million civil
penalty to the IRS to resolve the IRS’s tax shelter promoter
penalty audit of Sidley.
• Sidley has pledged to this Office, and to the IRS its
full cooperation in the ongoing criminal and civil tax shelter
investigations and litigation.
• Sidley has waived the statute of limitations for a
period of three years for offenses arising out of RUBLE’s
• Prosecution of Sidley might have significant
collateral consequences on partners, employees and clients of the
Under all these circumstances, the Government concluded
that the prosecution of RUBLE individually in United States v.
Stein, et al., S 05 Cr. 888 (LAK), for conspiracy to defraud the
IRS and various tax evasion offenses, sufficiently vindicates the
interests of law enforcement and the public. Mr. GARCIA added that the tax shelter investigations are continuing. The Stein case is pending trial. The charges in that case are merely accusations, and the defendants in that case are presumed innocent unless and until proven guilty. Assistant United States Attorneys STANLEY J. OKULA,
JR., JOHN HILLEBRECHT, MARGARET GARNETT, RITA GLAVIN and Special
Assistant United States Attorney KEVIN M. DOWNING are in charge
of this matter.