Posted on 10/10/2005 11:04:41 PM PDT by Map Kernow
Harriet Miers' Texas law firm, Locke Liddell, was investigated by the Senate Permanent Subcommittee on Investigations for agreeing to write favorable tax opinions for clients regarding Ernst & Young tax schemes that are now under criminal investigation.
In August 2005, accounting firm KPMG LLP agreed to pay $465 million in fines and cooperate with federal authorities to avoid criminal prosecutions for popular tax schemes that were aggressively marketed in 1999-2000. Rival accounting firm Ernst & Young, or E&Y, remains even today under federal grand jury examination for similar slick tax avoidance schemes, often marketed in conjunction with banks, during the same period of time. Law firms such as Locke Liddell provided the missing link in the marketing package, a legal tax opinion written for the client prospects affirming that the deal was legitimate and would survive IRS scrutiny. Unfortunately, the IRS and federal prosecutors have chosen to disagree.
On Feb. 8, 2005, the Senate Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs issued a report titled, "The Role of Professional Firms in the U.S. Tax Shelter Industry" [a .pdf document]. Pages 86-92 of the report discuss a Locke Liddell letter the firm was willing to write for E&Y in 1999 to be used in marketing a slick tax avoidance scheme E&Y had designed known as CDS, standing for "Contingent Deferred Swap." E&Y had been approached with the idea by a company known as the Private Capital Management Group which was developing CDS transactions for PricewaterhouseCoopers. According to the Senate's report, the Locke Liddell letter came in handy because E&Y's own tax professionals would not issue a report that the CDS scheme met the requirements of federal tax law or could be expected to survive either a legal challenge or an IRS audit.
The Senate Investigations Subcommittee, headed by Sen. Norm Coleman, R-Minn., with ranking minority member Sen. Carl Levin, D-Mich., was established to put an end to abusive tax shelters, such as the CDS marketed by E&Y, whose only significant purpose was "the avoidance or evasion of federal, state or local tax in a manner not intended by the law." A wide variety of abusive tax shelters were marketed by major-name accounting firms and banks to their high net-worth clients. Getting a legal opinion from a firm like Locke Liddell was often the final reassurance clients needed before they invested large sums in the expectation that they could avoid hundreds of thousands or even millions of dollars in state and federal taxes.
The Senate report notes that the Locke Liddell letter was received skeptically by E&Y's own legal experts. Moreover, the Senate report quotes at length from an attorney e-mail that was strongly critical of what the Senate report characterized as "E&Y's weak legal analysis." The client's legal adviser e-mailed E&Y:
I have reviewed the materials you provided to me, and from all indications the transaction appears to be a classic "sham" tax shelter that would be successfully challenged on audit by IRS. The transaction apparently has little, if any, economic significance outside the tremendous tax breaks promised to the investors and is apparently highly tax-motivated, as opposed to being a bona fida transaction that people would invest in regardless of the tax breaks. The concept of a packaged tax shelter sold to investors who need specific tax breaks is under attack by the IRS and courts.
The lawyer sending the e-mail warned E&Y that "IRS has a huge project under way to ferret out these types of tax shelters and will aggressively litigate them." Further, the e-mail raised what should have been a red flag by noting that the opinion of the Locke Liddell lawyers had failed to address relevant case law, including an important U.S. Supreme Court case. The Senate report noted that this September 1999 e-mail "provides additional evidence that E&Y knew CDS had technical problems and could qualify as an abusive tax shelter. Despite this knowledge, E&Y made the decision to continue selling CDS in 1999 and 2000." Locke Liddell also decided not to withdraw the supporting letter written on law firm stationary to reassure prospective clients.
The deal was lucrative for E&Y and Locke Liddell. The Senate report noted that from 1999 until 2001, E&Y sold 70 CDS transactions involving 132 taxpayers, obtaining for E&Y fees of more than $27.8 million. According to E&Y, an average CDS transaction for a high net-worth client involved a $20 million tax loss. Locke Liddell averaged a fee of $50,000 per transaction, resulting in some $3.5 million in fees to the law firm in the years 1999-2000, while Harriet Miers was co-managing partner. Unfortunately, the Senate Permanent Subcommittee on Investigations chose to single these transactions out as particularly abusive, detailing the lengths to which the Locke Liddell lawyers stretched the law to reassure clients who ended up in tax audits no one could defend.
As previously reported, in 1999 and 2000, while Harriet Miers was the firm's co-managing partner, Locke Liddell was also involved writing ill-advised legal opinions designed to advise prospective investors who were duped into investing some $70 million on schemes devised by two separate con artists, Russell Erxleben and Brian Russell Stearns, both clients of the firm. In 2000 and 2001, Locke Liddell settled for $30.5 million class action suits brought by defrauded investors whose legal petitions claimed that Locke Liddell attorneys had knowingly been involved in perpetrating both frauds.
Evidently, in the same years, Harriet Miers and her Locke Liddell firm were also involved in promoting tax avoidance schemes that now have come under federal investigation. In May 2004, the U.S. Attorney for the Southern District of New York initiated a federal grand jury investigation of E&Y "regarding its sale of tax shelters to corporations and wealthy individuals to escape or reduce federal taxes," as characterized by the Feb. 8, 2005, report of the Senate Permanent Subcommittee on Investigations. This criminal inquiry is still ongoing.
Supporters of Harriet Miers have suggested that her professional experience managing Locke Liddell compensates for her lack of judicial experience with constitutional law. Pursuing that argument, Miers' supporters now face the additional hurdles of demonstrating that Miers fully understood her responsibility as co-manager of the firm to oversee the firm's professional activities.
What emerges here for Harriet Miers to answer is what appears to be a pattern of negligence or irresponsibility at the helm. What the Senate Permanent Subcommittee on Investigations demonstrates is that on Harriet Miers' watch, attorneys for the firm earned huge fees by participating in schemes to defraud tax authorities on behalf of the super-rich. The firms active participation in the scams perpetrated by con artists Erxleben and Stearns, as previously reported by WND, established that Locke Liddell under Harriet Miers' management had participate in frauds to fleece investors at the low end of the scale, including many senior retirees who lost everything they had simply because they trusted Locke Liddell's advice.
Ping
Pass it on!
This is a lie.
You know it's a lie.
It's been posted AND debunked no less than three times already.
Keep it up though; then everybody will hate your extreme right wingers.
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
ping
In any event, you're correct...and don't expect the lies from WND to stop anytime soon. They're on a mission from God to stop the nomination and any lie told in that service is apparently a-okay.
Pass it on!
P!ss on it!
Could you point me to the debunking thread?
(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
"Extreme right wingers"? You guys really are starting to use DNC talking points! What's next---denouncing us as "heterosexists"? Now I know why Dem leader Harry Reid 'vetted' this nomination---it's not so much a Republican nomination as a Democrat one!
Admit it, Howlin---you always did like Clinton, didn't you? Specially when he sent commandos in to snatch Elian, hunh?
How old are you?
OK, one more post (I said I was stopping on another thread).
Unfortunately, it isn't just WND that is stooping to gutter tactics, and it will come back to haunt us (short version of my rant in the latest Fund thread "6 new allegations coming".
Here's one of them from two days ago and guess who it's by?
This same guy!
WND keeps repacking the same stories and putting them on the web as new stories.
Don't you wonder why?
http://www.freerepublic.com/focus/f-news/1499612/posts
I can't believe Jerome Corsi is pushing this bogus story, he is hurting the reputation of the Swift Boat Vets with this nonsense. I understand that he has doubts about the nominee, but he is trolling in the gutter with this one
Admit it, Howlin---you always did like Clinton,
That's all you're left with, stupid, dumbass remarks; you're trashing a good woman and I hope the whole world sees it.
Agree or disagree with Miers you have to agree this is a freak fest and the idiots on the right are showing the country what they really are about.
This is real good for the cause.
I hope Clinton wins in 2008 just so I don't have to be embaressed anymore !
He also came on FR under his REAL name and trashed the Catholic Church.
I think Corsi also wrote the WND piece claiming she had donated to Hillary Clinton's campaign as well, when in reality she had donated to a PAC which in turn made a donation to that campaign, among others.
It was quite dishonest of him.
I appreciated the work of the Swift Vets, but I don't appreciate the intentionally misleading information I've been seeing coming out of Corsi's camp on this issue.
The truth is what I've got; Joe Farah and his yellow journalism rag are liars.
Let him sue me.
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