Law Firm to Pay $81.55 Million to Settle Tax Shelter Claims

The national law firm of Jenkens & Gilchrist, PC, has agreed to pay $81.55 million in a class action settlement to resolve claims against the firm related to its tax shelter work. This week's settlement concludes negotiations that took over 14 months to complete and represents two significant modifications to the initial settlement, reached in April 2004.


Advertisement


AccountingWEB is pleased to bring you tools that can help systematize the accounting department of a small company, corporate business or a public accounting firm. Over 200 accounting department policy templates, written in Microsoft Word format by PolicySoft, are available individually or in groups for immediate download.


Accounts Payable General Accounting Department
Accounts Receivable General Ledger
Credit & Collections Payroll
Fixed Assets Shipping & Receiving



The $81.55 million settlement represents a $6.55 million increase from the initial settlement. In addition, under the terms of the final settlement, Jenkens & Gilchrist has agreed to settle with the Class even though a number of individuals elected to opt out of the settlement. Under the initial settlement, Jenkens & Gilchrist retained the right to terminate the settlement if any Class Member elected to opt out of the settlement. Thus, the law firm's decision to finalize the settlement with the existence of opt outs represents a significant concession.

According to lead counsel David Deary, a partner with Deary Montgomery DeFeo & Canada, LLP, the terms of the final settlement result in more money for the Class and less Class Members participating in the settlement. On April 28, 2004, Jenkens & Gilchrist initially agreed to pay $75 million to the Class. A New York federal court preliminarily approved the $75 million settlement on May 14, 2004.

According to Mr. Deary, the $81.55 million settlement with Jenkens is a major victory for the class of plaintiffs. "This settlement provides Class Members with a substantial recovery from Jenkens & Gilchrist in light of the law firm's circumstances," says Mr. Deary. According to Mr. Deary, the Jenkens & Gilchrist settlement has provided his clients and Class Members with crucial information on the role other accounting firms, law firms, and investment firms played in promoting, selling, and implementing tax strategies to the Class Members. Mr. Deary says, "The information we received from Jenkens & Gilchrist as part of the settlement has undoubtedly strengthened our clients' claims against others who were integral players in the scheme. As a result of this settlement, our clients possess a tremendous amount of ammunition against the other defendants. Our clients' claims against the other defendants are now backed by very powerful, irrefutable evidence. This information can't be measured by any amount of money."

The initial settlement reached with Jenkens & Gilchrist in April 2004, was well received by Class Members. Over 90% of Class Members elected to participate in the settlement. As of today, a substantial number of Class Members who initially elected to opt out of the class settlement have retracted their opt out status, and are now electing to participate in the settlement. Mr. Deary states, "It is clear that Class Members believe this settlement is in their best interest and support the settlement."

Today's settlement stems from two class action suits filed by Mr. Deary and his trial team in federal courts in New York. Mr. Deary and his trial team currently represent approximately 300 individuals and have filed 18 lawsuits across the country, seeking hundreds of millions of dollars from numerous well-known accounting firms, law firms, and investment firms, who designed, promoted, sold, and implemented "bogus" tax shelters to their long- time trusting clients. Mr. Deary and his team's clients will continue to vigorously pursue claims against, among others, accounting giants Ernst & Young, BDO Seidman, Grant Thornton, and KPMG, banking giant Bank One, law firms Sidley Austin Brown & Wood and Pryor Cashman Sherman & Flynn, financial firms Lincoln Financial and American Express, and investment firms such as the German-based worldwide investment banking firm Deutsche Bank, and others.

"Our clients are now focused squarely on a substantial number of other major players who have significant exposure and deeper pockets than Jenkens & Gilchrist," says co- class counsel Joe Whatley.

According to Ernest Cory, co-class counsel, "Slowly but surely our clients' trusted advisors will be forced to accept responsibility and be held accountable. We will not stop until we win." Today's settlement is set for a final hearing on January 24, 2005.

Source: Deary Montgomery DeFeo & Canada, LLP

You may like these other stories...

Amidst the dark clouds hovering over the IRS this year—ranging from the lingering Tea Party scandal to other improprieties to damaging budget cuts—at least there's a ray of sunshine in a new report from the...
SEC, Big Four Chinese affiliates make progress in talks over audit documentsMichael Rapoport of the Wall Street Journal reported that the US Securities and Exchange Commission (SEC) and the Chinese affiliates of the Big Four...
Koskinen warns filing season could be most complicated yetImplementation of the Foreign Account Tax Compliance Act and the Affordable Care Act, combined with a tight budget and the possibility of Congress passing a late...

Already a member? log in here.

Upcoming CPE Webinars

Oct 30Many Excel users have a love-hate relationship with workbook links.
Nov 5Join CPA thought leader and peer reviewer Rob Cameron and learn ways to improve the outcome of your peer reviews while maximizing the value of your engagement workflow.
Nov 12This webcast presents basic principles of revenue recognition, including new ASU 2014-09 for the contract method. Also, CPAs in industries who want a refresher on revenue accounting standards will benefit.
Nov 18In this session Excel expert David Ringstrom, CPA tackles what to do when bad things happen to good spreadsheets.