Thursday, June 26, 2014
NEW YORK (AP) — A Chicago-area lawyer and accountant labeled by the government as history's most prolific and unrepentant tax cheat was sentenced Wednesday to 15 years in prison, and the judge bemoaned the "incredible greed" of some of America's wealthiest people for taking advantage of the tax shelters he peddled.
The lawyer, Paul M. Daugerdas, 63, was ordered to pay nearly a half-billion dollars in restitution and forfeit $164 million in cash and property, including a lakefront Wisconsin home, after he was convicted at trial last year of conspiracy, tax evasion and mail fraud. He must report to prison Sept. 18.
Daugerdas, of Wilmette, Illinois, did not speak at sentencing. Outside court, he said he was "profoundly disappointed" and it was a "sad day" for the criminal justice system.
Daugerdas earned more than $95 million as the architect of a fraud from 1994 to 2004 that relied on sophisticated and illegal tax shelters to shield some of the country's richest people from paying taxes on nearly $8 billion in gains, said U.S. District Judge William H. Pauley III. The government lost $1.6 billion in tax revenues as a result, including $32 million owed by Daugerdas, who used his tax shelters to claim he owed only $8,000 in taxes, prosecutors said.
"This case shows the astonishing lengths some super-wealthy Americans will go to avoid their obligation as citizens," the judge said. "Mr. Daugerdas was a tax shelter racketeer who tapped into the incredible greed of some of the super-wealthy who didn't want to contribute to the nation whose freedom made their huge financial successes possible."
He added that Daugerdas found "willing customers in a sordid crowd of real estate tycoons, tire magnates, software developers, many others. None of them cared one whit about lying to the government."
And he said the charismatic Daugerdas found it easy to corrupt attorneys, accountants and financial advisers as he involved some of the country's largest financial institutions and accounting firms.
"The success of the scheme depended on the unethical and criminal behavior of highly educated and highly compensated professionals," the judge said.
Prosecutors said Daugerdas helped create tax shelters for investors including the late sports entrepreneur Lamar Hunt, trust fund recipients, inventors, a grandson of the late industrialist Armand Hammer, real estate moguls and one of the earliest investors in Microsoft Corp.
Daugerdas was acquitted of nine charges, and the judge cited them in rejecting the 20-year term recommended by prosecutors, who called him the mastermind of the largest tax fraud in U.S. history.
Daugerdas is a former head of the Chicago office of a once prestigious Texas-based law firm, Jenkens & Gilchrist. The judge noted that the firm, with 600 attorneys and offices around the country, "collapsed under the weight of his criminal acts."
After Daugerdas was convicted three years ago, the judge ordered a new trial because a corrupt juror had spoiled the verdict. The judge scolded prosecutors for failing to bring criminal charges against the juror.