Michael Kerekes,former attorney and partner at accounting firm BDO Seidman pleaded guilty
Michael Kerekes,former attorney and partner at accounting firm BDO Seidman pleaded guilty on Friday to conspiring with others in a scheme that allowed clients to evade more than $200 million in taxes a former partner in the accounting firm's Los Angeles office, entered his plea before U.S. District Judge Harold Baer in Manhattan, admitting "I knew what I was doing was against the law."
He is cooperating with a larger government investigation into tax shelters, federal prosecutors said at the court hearing.Kerekes, who worked with the firm from 1998 to 2008, pleaded guilty to one count of conspiracy and one count of tax evasion.He faces up to five years in prison on each count when he is sentenced in March 2010.In a statement, Chicago-headquartered BDO Seidman said Kerekes was a member of a group of partners within the firm that marketed tax shelter products. It said the group was dissolved several years ago."BDO Seidman has cooperated fully with the government's tax shelter investigation and will continue to do so," the statement said. "The firm does not intend to comment further on this matter."
According to court documents, one tax shelter known as the "short sale" was designed, marketed and carried out by the firm and the now-shuttered law firm Jenkens & Gilchrist with the assistance of an unidentified foreign bank. A second tax shelter was known as the "short options strategy" or SOS.In court papers, prosecutors labeled the bank "Bank A," an entity with U.S. headquarters in New York.Jenkens & Gilchrist shut down in 2007 after admitting it promoted fraudulent tax shelters.Both shelters were based on transactions solely aimed at generating huge tax losses, resulting "in massive tax evasion" by clients, prosecutors said in the court documents. They said that the transactions generated more than $1 billion of false tax losses, causing the evasion of more than $200 million in client taxes.
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What about government miscreants who illegally confiscate honest citizens’ income while being tax cheats themselves? I find it depressing that Mike Hamersley gets to confiscate honest citizens’ income while he himself by his own definition is a tax cheat. Misprison, it is a crime not to report a crime. Any U.S. citizen who knows of another who has committed a crime and does not report it to the authorities, is guilty of Misprison and could be subjected to years in prison for the commission of such crime. Therefore I must hereby notify all legal authorities that Mike Hamersley a high level Government official in the bankrupt state of California at the FTB (who is nationally known as a tax shelter fighting crusader) is guilty of tax evasion and conspiracy to commit tax evasion as (he defines it); guilty of theft of honest services; conspiracy to defraud creditors; possibly perjury to the Senate and other government agencies: and violation of 7216, disclosure of confidential taxpayer information to third parties. It is indeed a rather long list.
Hamersley testified to the Senate in 2003 that tax fraud involves devising transactions which allow for tax losses and “hiding the true facts from the IRS”. The transcripts are available for all to see. Hamersley also restated the same in his lawsuit against KPMG in 2003 (which is a public document).
As one example of Hamersley’s fraud, Hamersley while at KPMG gave advice to a client that tens of millions of tax losses could obtain with a 20% to 30% of success upon IRS audit if the IRS discovered the true facts of the transaction. Presumably, if the IRS did not discover the true facts of the transaction, a higher chance of success upon audit by the IRS would obtain. Hamersley was advising on a series of preplanned asset and stock transfers which involved separating assets from liabilities inside a company, transferring the assets to a foreign company and selling the stock of yet another company to the client’s lawyer for a dollar, all to achieve tens of millions in tax losses and defraud the creditors of the company from which the assets were being stripped. Hamersley’s participation in all these crimes is confirmed in an email by him dated May 24, 2000 prepared by him while working as a tax expert at KPMG.
Hamersley also further participated in hiding the true facts of the transaction from the IRS and the creditors by reviewing and approving documents prepared in June of 2000 which gave effect to the transaction back to 19999 (which based on Hamersley’s definition of tax evasion, is a classic case of backdating a fraudulent tax shelter).
In fact, the transaction approved by Hamersley is very similar to the one he claimed in his lawsuit against KPMG involving XYZ corporation (which we all now know was Occidental Petroleum) as tax fraud.
This of course creates an interesting conundrum for Hamersley, as it is likely he will claim his tax shelters were not fraudulent (not with standing his email which describes the possibility and chances of success upon IRS audit if the IRS discovers the true facts), however, if that is so, then his description of tax fraud to the Senate, other government officials, taxpayers whom he now confiscates income from and all the people he gave speeches to and articles he wrote for are being lied to. In which case, Hamersley is guilty of lying to the Senate and other government officials, perjury; outright theft of income from those taxpayer’s whom he is now confiscating income; theft of honest services from the FTB and those who he gave speeches to or wrote articles for on tax fraud; and most incredibly, conspiracy to defraud creditors by participating in a convoluted scheme to separate valuable assets from liabilities for profit at the creditors expense.
Further, Hamersley by giving a so called substantial authority opinion to his client committed outright conspiracy to commit tax evasion under his own definition because his own email discusses the possibility of the IRS determining the true facts and according to Hamersley if a tax is due and owing and you lie to the IRS in any way, that is tax fraud.
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