Current, Former E&Y Partners Indicted On Tax Shelters

The four took part in VIPER, a group set up by E&Y in 1998 to develop tax shelters.
Stephen TaubMay 30, 2007

Two current and two former partners of Ernst & Young–one a former branch chief of the Internal Revenue Service–have been indicted for tax fraud conspiracy and related crimes involving tax shelters promoted by the big Four accounting firm.

The defendants “concocted and marketed tax shelter transactions based on false and fraudulent factual scenarios,” according to an indictment unsealed Wednesday by Michael Garcia, the U.S. Attorney for the Southern District of New York. The shelters were to be used by wealthy individuals with taxable income of generally more than $10 or $20 million to eliminate or reduce their federal taxes.

The indictment charged the four individuals with eight separate counts, including conspiracy to defraud the Internal Revenue Service, tax evasion, making false statements to the IRS, and impeding and impairing the lawful functioning of the IRS. The four worked in a group set up by E&Y in 1998 to develop tax shelters that was first named VIPER (Value Ideas Produce Extraordinary Results), and later renamed SISG (Strategic Individual Solutions Group).

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The four who were named were Robert Coplan, a former E&Y tax partner who was the leader of the VIPER/SISG group, and the former National Director of E&Y’s Center for Wealth Planning; Martin Nissenbaum, who was a member of the VIPER/SISG group; Richard Shapiro, who was a member of the VIPER/SISG group; and Brian Vaughn, a former member of the VIPER/SISG group and a former E&Y tax partner.

Before joining E&Y, Coplan worked as a branch chief in the legislation and regulations division of the IRS. Nissenbaum and Shapiro are current partners of the firm who are now on administrative leave, according to the Associated Press.

Nissenbaum pleaded not guilty to the charges, according to his attorney, Brian Linder, of Clayman & Rosenberg in New York. “We are very disappointed that the government has brought these charges, as we have provided them over the past year with evidence that Mr. Nissenbaum did not engage in any unlawful activity,” Linder said in a statement, adding that Nissenbaum expects to be acquitted “of these unwarranted charges.”

Shapiro’s lawyer, John J. Tigue Jr., of Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer in New York, also expressed Shapiro’s disappointment at the charges, claiming that they involve “the prosecution of an innocent man.” Declaring in a statement that the defendant “intends to vigorously defend himself against these baseless charges,” Tigue stated that Shapiro has for five years cooperated with every government entity investigating Ernst & Young’s tax-shelter activities.

Attorneys for Coplan and Vaughn could not be reached at presstime.

Garcia alleged that from 1998 through 2004, the four men and others took part in a scheme to defraud the IRS by designing, marketing, implementing, and defending fraudulent tax shelters. The individuals then sought to deceive the IRS about the bona fides of those shelters and the circumstances under which the shelters were marketed and sold to clients, the U.S. Attorney added in his announcement. Garcia added that the investigation is continuing.