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Abusive Tax Shelter Litigation

Abusive Tax Shelter Representation

One of Lewis & Roberts' key areas of experience is the representation of plaintiffs in abusive tax shelter cases (sometimes called tax and investment "strategies" or "products"). Since 2002, the firm has represented more than a hundred taxpayer clients across the United States in negotiations, arbitrations and litigation against tax shelter promoters. Lewis & Roberts is currently prosecuting a Son of BOSS tax shelter case in Chicago against the German bank, Deutsche Bank, AG, and the Illinois-based accounting firm, BDO Seidman LLP. Lewis & Roberts' client in that litigation is Raymond J. Lane, the former president of Oracle Corporation and chairman of the board at Hewlett-Packard. The Complaint in that case can be viewed below.


Starting in 1999, more than a dozen of the largest financial, legal and tax advisory firms in the United States began promoting a variety of tax shelters to taxpayers. The tax shelter transaction types are known by their acronyms: Son of BOSS, BLIPS, FLIP, OPIS, POPS, COBRA, FOCUS, COINS, SC2, CDS, SOS, and so on. The taxpayers who invested in these "products" were typically people who sold businesses, received stock options, or otherwise enjoyed large increases in their wealth. The firms promoting the tax shelters comprised some of the most trusted and familiar names in the United States. The accounting firms included KPMG, PricewaterhouseCoopers, Ernst & Young, BDO Seidman and RSM McGladrey. The banks included Deutsche Bank, UBS, HVB, and First Union. The law firms included Brown & Wood, Proskauer Rose, Jenkens & Gilchrist, Bryan Cave and Arnold & Porter. In many instances, hedge funds like Bricolage, Quellos Group and Presidio Advisors facilitated the transactions.

KPMG, BDO Seidman, Deutsche Bank, UBS and Others.

The promoters of Son of BOSS and other similar tax shelters encountered significant scrutiny from the United States government. The IRS investigated the firms that promoted the abusive tax shelters, and audited the taxpayers that invested in them. The United States Department of Justice commenced criminal prosecutions against or obtained criminal prosecution settlement agreements with KPMG, BDO Seidman, Deutsche Bank, UBS and others. The IRS assessed massive promoter penalties against other firms, such as Brown & Wood and PwC. The government alleged that the promoters of abusive tax shelters knew the transactions were illegal and were not in compliance with the United States tax code. The government also alleged that the transactions that made up the shelters were often bogus: derivative and swap investments with rigged or fixed outcomes, loans that did not meet the legal criteria to be called a loan, purportedly legitimate counter-parties who were paid pawns of the promoters and so on. Because of the bogus nature of the tax shelter transactions, or because they could not possibly yield a net profit, the government concluded the deals lacked "economic substance."

Fraudulent Transactions.

Investors in transactions such as Son of BOSS faced aggressive IRS audits and tax proceedings. The IRS almost always disallowed any favorable tax treatment claimed by the investor on tax returns. At this point, the taxpayer faced not only the prospect of back taxes owed, but also massive penalties and interest. In many cases, the interest and penalties exceeded the amount of the original tax owed. Investors, previously assured that the transactions were sound and legal, learned they were not. Perhaps worse, the investors learned that the professionals that advised them to invest in a Son of Boss-type strategy knew all along that the product was a fraud.

If you are an individual or company facing the consequences of a failed tax strategy or the purchaser of an abusive tax shelter, we can help you decide whether it is worthwhile to pursue a civil action against those who recommended it. At bottom, most tax shelter cases are about financial fraud. Because most variants of the Son of BOSS tax shelters involve complex derivative transactions, exotic loan structures, offshore corporate vehicles, tax indifferent non-resident aliens, and other uncommon features, litigating this type of case requires special expertise and litigation support. Many of the leading experts in accounting and finance in the United States have helped us unlock these "black-box" transactions, in order to obtain successful outcomes for clients.

Jim Roberts, a partner at Lewis & Roberts, is the lead attorney on abusive tax shelter cases at the firm. His work in this area has been discussed or featured in publications like the New York Times and the Wall Street Journal. 

Jim Roberts has negotiated and litigated some of the largest tax shelter cases in the United States. If you would like to see examples of court materials from these cases, we have attached the following materials:

    •    Complaint from Lane v. Deutsche Bank, AG, BDO Seidman LLP, et al.
    •    Briefs filed by plaintiff Lane in opposition to defendants' motions to dismiss: One, Two and Three
    •    Complaint from Keeter v. KPMG
    •    Complaint from Eberdt v. PricewaterhouseCoopers

Notable Cases

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