Thursday, May 24, 2007
National law firm Sidley Austin LLP avoided criminal charges for the work of one of its former tax partners, Raymond Ruble, who is one of the defendants in the KPMG tax shelter prosecution that is the subject of the Second Circuit's recent opinion. A press release issued by the U.S. Attorney's Office for the Southern District of New York (available below) discussed the reasons why, under the McNulty Memo, the decision was made not to charge the law firm:
- Ruble's activities were primarily while he was with Brown & Wood before it merged with Sidley in 2001, and only a few opinions were issued after the merger on Ruble's insistence that he had an ethical obligation to provide them. The government accuses Ruble of providing "cookie-cutter" opinions that did not properly reflect the legality of the tax shelter transactions.
- Sidley notified the IRS once it learned about the problems with Ruble's opinions and fired him shortly thereafter.
- The firm adopted a "model compliance program" after discovering the problem and cooperated in the criminal and IRS investigations.
- The collateral consequences of a criminal prosecution on employees, partners, and clients of the firm.
Sidley agreed to pay a $39.4 million civil penalty to the IRS for the opinions issued in the firm's name, and accepted responsibility for the violations (the firm's press release is available below). Going forward, the government can concentrate on the eighteen defendants charged in connection with the tax shelters, although as discussed in an earlier post (here) about the Second Circuit's decision on the KPMG attorney's fees issue, U.S. District Judge Lewis Kaplan could well dismiss the indictment of the former KPMG partners and employees because of constitutional violations by prosecutors. (ph)