Originally published on Forbes.com.
I thought I could escape COVID-19, which one way or another is all I have written about for the last six weeks, by going back to my routine of reviewing tax decisions that may be of interest. No luck.
What stands out are decisions about whether people serving time for tax connected crimes should be getting compassionate release, because of their vulnerability to COVID-19. Most recently up is a star among tax convicts – Paul Daugerdas.
Memory Lane
There was this time when prominent law firms and the most prestigious accounting firms were engaged in a raid on the Treasury through the marketing of bogus tax shelters. The story of the shenanigans was broken by my esteemed editor Janet Novack in 1998 in a piece titled the Hustling of X-Rated Tax Shelters. Paul Daugerdas stood out.
According to Tanina Rostain and Milton Regan in Confidence Games it was Daugerdas who conceived of offering the shelters to individuals. The Forbes gallery of 10 Notorious Tax Cheats credits Daugerdas with creating $7 billion in phony losses and personally making $95 million from the schemes.
In 2014, a jury in the Southern District of New York convicted Daugerdas of conspiracy to defraud the United States among other crimes. His inmate number is 62444-054 at the satellite camp adjacent to United States Penitentiary in Marion, IL with a projected release date of July 11, 2027.
He is 69 years old, a year older than me. Makes me grateful I stuck with affordable housing rather than the more “sophisticated” shelters being cooked up by the national firms.
COVID-19 Compassionate Release
Daugerdas is in some ways a poster boy for compassionate release because of the danger of COVID-19 exposure in prisons. Besides being 69, he suffers from “Type 2 diabetes, obesity, hypertension, and high cholesterol”.
That is not the only thing that matters. Judge William Pauley III also has to consider:
“(1) “the nature and circumstances of the offense and the history and characteristics of the defendant;” (2) “the need for the sentence imposed;” (3) “the kinds of sentences available;” (4) the Guidelines ranges; (5) “any pertinent policy statement;” (6) “the need to avoid unwarranted sentence disparities among defendants with similar records;” and (7) “the need to provide restitution to the victims of the offense.” “
A Class Of Its Own
Those latter factors put Daugerdas in the “throw away the key” category.
“The nature and circumstances of Daugerdas’s decade-long criminal conduct were unprecedented. He orchestrated the largest tax shelter fraud scheme in American history-one that recruited ultra-wealthy taxpayers and corrupted young professionals at every turn. Daugerdas netted over $95 million in illicit proceeds for his own benefit, and the United States Treasury lost more than $1 billion in tax revenue. When the scheme was uncovered, Jenkens & Gilchrist, P.C.-once a law firm of over 600 lawyers-collapsed.”
Personally I think of taking down a large law firm as a mitigating factor, but the Judge probably doesn’t look at it that way. He went on.
“Daugerdas’s criminal conduct was in a class of its own, and the conspiracy ensnared hundreds of individuals. While his applicable Guidelines range was life in prison based on the offense level, the statutory maximum for his crimes was 696 months of imprisonment. This Court sentenced Daugerdas principally to 180 months of imprisonment and imposed restitution of $371 million. To date, Daugerdas has served 37% of his custodial sentence. And he has not voluntarily paid a cent of restitution. Granting Daugerdas’s motion would do little to “promote respect for the law” or “provide just punishment for the offense.””
A Decision Worthy Of Solomon
Judge Pauley does not have the authority to order Bureau of Prisons to furlough Paul Daugerdas. Instead, he has strongly urged the agency to do so. If that is what is done, he will be going back to prison when the rest of us get to go out of our houses more regularly.
A Major Pro Bono Effort
There is a big push on to get prisoners out who are in danger from the pandemic. Attorney Peter Goldberger pointed me to the Compassionate Release Clearing House.
“FAMM, National Association of Criminal Defense Lawyers (“NACDL”), the Washington Lawyers’ Committee for Civil Rights and Urban Affairs, and other advocates, is currently recruiting attorneys, social workers, and medical professionals to work on compassionate release motions for those prisoners most vulnerable to COVID-19: the elderly and chronically ill. “
Many of the inmates will get more sympathy than Paul Daugerdas.
Other Coverage
Jack Townsend has updated an earlier post about compassionate release to cover the Daugardas motion. His discussion of the legal issues is, as you would expect, much deeper than mine.
Mr. Townsend also pointed to a post by Leslie Book about another high profile tax offender – Morris Zukerman – who was granted compassionate release. Mr. Book has an apt comment:
“With many well-heeled felons like Zukerman able to afford the costs of getting a motion for early release before a court, one hopes that the BOP takes a proactive approach with other inmates who do not have the same resources. While the pandemic should not necessarily amount to a get out of jail card for all felons, it should not amount to a pass for only those who can pay for their freedom.”
Hopefully, the pro bono attorneys at the Compassionate Release Clearing House will help avoid that from happening. As Winston Churchill said
“The mood and temper of the public in regard to the treatment of crime and criminals is one of the most unfailing tests of the civilization of any country.”