Wilmette Man Convicted of Tax Evasion, Conspiracy

A Wilmette man who has been convicted of conspiracy, obstucting internal revenue laws and tax evasion will be sentenced with his co-defendents in October.

Paul M. Daugerdas, 60, formerly of the head of the Chicago office of Jenkens & Gilchrist law firm and a shareholder was facing charges related to illegal tax shelters he implemented to help clients fraudulently reduce their taxes, resulting in billions of dollars in tax losses. For each conspiracy and tax evasion charge, Daugerdas and his co-defendents could face five years in prison, three years of supervision and a fine for the conspiracy charge, and up to 20 years for each mail fraud charge. Daugerdas made $95 million in the scheme, the most of any of the other defendants.

Three other people were convicted of the charges, while another man pleaded guilty on Tuesday in federal court in Manhattan.

"The multi-billion dollar tax fraud scheme perpetrated by this corrupt group of attorneys, accountants, and bankers was stunning in scope, and today’s guilty verdicts are a just result," said Preet Bharara, Manhattan U.S. attorney in a press release Tuesday afternoon. "These privileged professionals wove an intricate web of deceit that spanned nearly a decade, enabling them to enrich themselves and their well-heeled clients to the tune of hundreds of millions of dollars. Surely there are many Americans who dread April 15th, but they put their checks in the mail nonetheless. These defendants thought they were above the law and found out the hard way that they were not..."

Daugerdas and other attorneys at Jenkens & Gilchrist created tax shelters to "allow high-net-worth clients to eliminate and reduce taxes on significant income or gains" between 1996 and 2004, according to a press release from the U.S. Attorney's Office for the Southern District of New York. The scheme required collaboration with brokers, accountants and marketing firms in the creation of bank accounts and other partnerships.

At least 290 clients participated in the "Short Sale" tax shelter from 1994 through at least 1999, resulting in more than $2.6 billion in fraudulent losses. Another shelter, available from 1998 through at least 2000, was sold to at least 550 clients. The fraudulent losses from that shelter are more than $3.9 billion. The "Swaps" shelter was sold to at least 55 individuals between 2001 and 2002 and resulted in $420 million in fraudulent losses. Based on each client's individual tax loss, Daugerdas and his conspirators received a percentage of the loss as a fee.