PREET BHARARA, the United States Attorney for the
Southern District of New York, VICTOR S.O. SONG, the Chief of the
Criminal Investigation Division of the Internal Revenue Service
(“IRS”), and JOHN A. DiCICCO, the Acting Assistant Attorney
General for the Tax Division of the Department of Justice,
announced today that RICHARD SHAPIRO and BRIAN VAUGHN, former
partners of the accounting firm Ernst & Young (“E&Y”), were
sentenced today to 28 and 20 months in prison by United States
District Judge SIDNEY H. STEIN in Manhattan federal court.
On May 7, 2009, following a ten-week jury trial,
SHAPIRO and VAUGHN, along with ROBERT COPLAN and MARTIN
NISSENBAUM, also former partners of E&Y, were found guilty on all
counts, including one count of conspiracy relating to four tax
shelters, and two counts of tax evasion relating to clients who
used a tax shelter transaction known as “CDS Add-on”, and other
charges relating to the design, marketing, and implementation of
tax shelters sold by E&Y. VAUGHN was also found guilty of one
count of making false statements to the IRS. According to the
evidence at trial:
SHAPIRO, VAUGHN, COPLAN, and NISSENBAUM, as members of
E&Y’s national individual tax shelter group, led an effort to
design and market tax shelter transactions used by wealthy
individuals to eliminate, reduce, or defer tax liabilities on
annual income that generally exceeded $10 or $20 million.
The defendants and their co-conspirators — which
included tax, accounting, and financial industry professionals
and law firms — worked to design, implement, and defend the tax
shelter transactions in ways intended to conceal the true facts
and circumstances of the transactions from the IRS.
SHAPIRO, 60, of Rye Brook, New York, was sentenced to
28 months in prison and two years of supervised release. In
addition, Judge STEIN ordered SHAPIRO to pay a fine in the amount
of $100,000. SHAPIRO is a lawyer, a former E&Y tax partner, and
was a member of the tax shelter group.
BRIAN VAUGHN, 42, of Calhoun, Louisiana, was sentenced
to 20 months in prison and two years of supervised release.
VAUGHN is a Certified Public Accountant, a former E&Y tax
partner, and was a member of the tax shelter group.
COPLAN and NISSENBAUM were sentenced yesterday by Judge
STEIN to three years and 30 months in prison, respectively.
Mr. BHARARA praised the work of the Criminal
Investigation Division of the IRS and the Department of Justice
Tax Division in assisting in the investigation and prosecution of
This case is being handled by the Office’s Complex
Frauds Unit. Assistant United States Attorneys MARK LANPHER and
RICHARD TARLOWE, and Special Assistant United States Attorney
JOHN E. SULLIVAN from the Tax Division of the Department of
Justice, are in charge of the prosecution.