Notes

Introduction

1. John D. McKinnon, “Written Off: How New Tax Shelter Promised Big Savings but Finally Fell Apart—For PricewaterhouseCoopers, Complex Plan Proved an Embarrassment—the Old Paper-Clip Trick,” Wall Street Journal, August 21, 2000, A1.

2. Ibid.

3. Janet Novack and Laura Sanders, “The Hustling of X Rated Tax Shelters,” Forbes, December 14, 1998.

4. See U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry: The Role of Accountants, Lawyers, and Financial Professionals, hearings, November 18 and 20, 2003 (Washington, D.C.: Government Printing Office, 2004), 4 vols.

5. Ibid., vol. 1, 255.

6. Ibid., 147.

7. Sheldon D. Pollack and Jay A. Soled, “Tax Professionals Behaving Badly,” 105 Tax Notes 201 (October 11, 2004).

8. “Selected Exhibits Relating to BDO Seidman Enforcement Action,” 2002 TNT 136-8 (July 16, 2002).

9. See Upjohn v. United States, 449 U.S. 383 (1981).

10. Robert W. Gordon and William H. Simon, “The Redemption of Professionalism?,” in Lawyers’ Ideals/Lawyers’ Practices: Transformations in the American Legal Profession, ed. Robert L. Nelson, David M. Trubek, and Rayman L. Solomon (Ithaca: Cornell University Press, 1992), 230–231; Christine Parker and Tanina Rostain, “Law Firms, Global Capital, and the Sociological Imagination,” Fordham Law Review 80 (2011–2012): 2347.

Chapter 1

1. “Practices and Procedures of the Internal Revenue Service,” hearings before the Senate Finance Committee, 105th Cong. 190 (September 23, 24, and 25, 1997), 2.

2. “IRS Oversight,” hearings before the Senate Finance Committee, 105th Cong. 598 (April 28, 29, 30, and May 1, 1998), 7.

3. See Ryan J. Donmoyer, “Inspector General Deems IRS Witness Allegations ‘Unfounded,’” 1998 TNT 80-1 (April 27, 1998).

4. John D. McKinnon, “Highly Publicized Horror Story That Led to Curbs on IRS Quietly Unravels in Virginia Civil Court,” Wall Street Journal, December 9, 1999, A28; Ryan J. Donmoyer, “News Analysis: ‘Jackbooted IRS Thugs’ Face Bigger Weapons Than They Carry,” 1998 TNT 90-4 (May 11, 1998).

5. Barbara Kirchheimer, “Business-Related Portions of Contract Could Change,” 1995 TNT 30-1 (February 14, 1995).

6. Sheldon D. Pollack, Refinancing America: The Republican Antitax Agenda (Albany: SUNY Press, 2002), 83.

7. Internal Revenue Service, “IT Modernization Vision and Strategy” (October 2006), 5, available at http://www.irs.gov/pub/irs-news/mvs-10-06.pdf (accessed December 12, 2013).

8. General Accounting Office (GAO), “IRS Does Not Adequately Manage Its Operating Funds” (February 1994), reprinted in 1994 TNT 28-80. In 2004, the General Accounting Office’s name was changed to the Government Accountability Office.

9. GAO, “IRS Results of Fiscal Year 1998 Financial Statement Audit” (1998), 1.

10. GAO, “Report to the Commissioner of Internal Revenue, Custodial Financial Weaknesses,” General Accounting Office (1999), 2, available at www.gao.gov/assets/230/227768.pdf.

11. Ibid.

12. Isaac William Martin, The Permanent Tax Revolt: How the Property Tax Transformed American Politics (Stanford: Stanford University Press, 2008), 2.

13. Ibid., 12.

14. Ibid., 15.

15. Thomas Byrne Edsall and Mary D. Edsall, Chain Reaction (New York: W. Norton, 1991), 131.

16. Ibid., 116–131.

17. Jacob S. Hacker and Paul Pierson, “Tax Politics and the Struggle over Activist Government,” in The Transformation of American Politics: Activist Government and the Rise of Conservatism, ed. Paul Pierson and Theda Skocpol (Princeton: Princeton University Press, 2007), 256, 262.

18. Romain Huret, A Republic without Taxpayers? Tax Resisters in the United States from the Civil War to the Present (Cambridge, Mass.: Harvard University Press, forthcoming 2014), 279 (manuscript on file with authors).

19. Hacker and Pierson, “Tax Politics,” 263–265.

20. Contract with America (1994), http://www.nationalcenter.org/Contract withAmerica.html (accessed September 19, 2013).

21. David Cay Johnston, “Behind I.R.S. Hearings, a G.O.P. Plan to End Tax Code,” New York Times, May 4, 1998, A16.

22. See Michael J. Graetz, Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States (New Haven: Yale University Press, 2008), 39.

23. Alison Mitchell, “Leaders of G.O.P. Seek to Overhaul Federal Tax Code,” New York Times, September 28, 1997, 36–37.

24. http://www.atr.org/userfiles/Congressional_pledge(1).pdf (accessed October 9, 2013).

25. In 1997, only 16 percent of individual returns were electronically filed. By 2000, it was finally above 25 percent. See Tracey Anderson, Mark Fox, and Bill N. Schwartz, “History and Trends in E-filing: A Survey of CPA Practitioners,” CPA Journal Online, http://www.nysscpa.org/cpajournal/2005/1005/essentials/p66.htm (accessed September 19, 2013).

26. See Carol Steinberg, “Raking In Taxes Is Hard Work for the I.R.S., Too,” New York Times, April 16, 2000.

27. David Cay Johnston, Perfectly Legal (New York: Portfolio, 2003), 157–158; David Cay Johnston, “Computers Clogged, I.R.S. Seeks to Hire Outside Processors,” New York Times, January 31, 1997. See also Steinberg, “Raking In Taxes.”

28. David Cay Johnston, “Your Taxes: Some New Tricks to Help Filers Avoid an Old Audit Trap,” New York Times, February 25, 1996, A1.

29. Charles O. Rossotti, Many Unhappy Returns: One Man’s Quest to Turn Around the Most Unpopular Organization in America (Boston: Harvard Business Review Press, 2005), 3.

30. Johnston, Perfectly Legal, 158; David C. Johnston, “End of the I.R.S. Pipeline: Tax Returns of ’90s Meet I.R.S. Technology of ’60s,” New York Times, April 15, 1995, 31.

31. Johnston, Perfectly Legal, 158–159; Johnston, “Computers Clogged.”

32. Johnston, “End of the I.R.S. Pipeline.”

33. Johnston, Perfectly Legal, 160.

34. David Cay Johnston, “I.R.S. Puts Off Plan for Detailed Audits of Random Returns,” New York Times, October 24, 1995, 1.

35. Johnston, “Your Taxes: Some New Tricks,” 26.

36. Johnston, Perfectly Legal, 160–161.

37. Johnston, “I.R.S. Puts Off Plan.”

38. GAO, “IRS’ Partnership Compliance Activities Could Be Improved” (June 1995), 6. http://www.gpo.gov/fdsys/pkg/gaoreports-ggd-95-151/pdf/gaoreports -ggd-95-151.pdf (accessed October 9, 2013).

39. Johnston, Perfectly Legal, 177–178.

40. Ryan J. Donmoyer, “Executive Brain Drain Leaves IRS Searching for Leadership,” 1995 TNT 163-1 (August 21, 1995).

41. Johnston, Perfectly Legal, 151, 132.

42. GAO, “Tax Administration: IRS’ Partnership Compliance Activities Could Be Improved”; GAO, “Tax Administration: Tax Requirements of Small Businesses” (August 1999), www.gpo.gov/fdsys/pkg/GAOREPORTS-GGD-99-133/html/GAOREPORTS-GGD-99-133.htm (accessed October 9, 2013).

43. Department of the Treasury, “The Problem of Corporate Tax Shelters: Discussion, Analysis, and Legislative Proposals” (July 1999), www.treasury.gov/resource-center/tax-policy/Documents/CTSwhite.pdf (accessed October 9, 2013).

44. Ibid.

45. Johnston, Perfectly Legal, 166–168.

46. “IRS Oversight,” hearings before the Senate Finance Committee, 1.

47. Rossotti, Many Unhappy Returns, 7–13.

48. Senator Frank Murkowski quoted in Johnston, Perfectly Legal, 14.

49. Rossotti, Many Unhappy Returns, 12–13.

50. “Infernal Revenue Disservice,” Newsweek, October 13, 1997, www.highbeam .com/doc/1G1-19856453.html (accessed October 9, 2013).

51. The Honorable William H. Webster, Review of the Internal Revenue Service’s Criminal Investigation Division, April 1999, available at 1999 TNT 71-40.

52. Johnston, Perfectly Legal, 148.

53. Ibid.

54. Ibid., 148–149.

55. Richard W. Stevenson, “Senate Votes 97–0 to Overhaul I.R.S. after Complaints,” New York Times, May 8, 1998, A1.

56. U.S. Code, Title 26, §7525(a)(1). Communications regarding tax shelters, however, were not protected by the statutory privilege; see ibid., §7525(b)(2).

57. Robert Manning and David F. Windish, “The IRS Restructuring and Reform Act: An Explanation,” 1998 TNT 128-104 (July 6, 1998).

58. “Report of the Joint Committee on Taxation Relating to the Internal Revenue Service as Required by the IRS Reform and Restructuring Act of 1998,” 1999 TNT 99-23 (May 24, 1999).

59. Rossotti, Many Unhappy Returns, 2.

60. Ibid., 15.

61. David Cay Johnston, “Senate Panel Applauds Changes at I.R.S.,” New York Times, April 15, 1999, C8.

62. Archie Ingersoll, “IRS Campaign Stresses Warm, Cuddly Side,” Wall Street Journal, August 1, 2000, B2.

63. George Guttman, “The Interplay of Enforcement and Voluntary Compliance,” 1999 TNT 118-9 (June 18, 1999).

64. Amy Hamilton, “Rossotti Gives Risky Speech on State of IRS Reform,” 1999 TNT 146-3 (July 29, 1999).

65. Amy Hamilton, “Lawmakers Track IRS Reform One Year Later,” 1999 TNT 141-2 (July 22, 1999).

66. Manning and Windish, “The IRS Restructuring and Reform Act.”

67. David Cay Johnston, “White House Seeks to Ease Rules Put on I.R.S. Workers,” New York Times, February 12, 2002, C4.

68. Johnston, Perfectly Legal, 175.

69. David Cay Johnston, “I.R.S. Workers Face More Investigations by Treasury Agents,” New York Times, November 18, 1999, A1.

70. Johnston, “White House Seeks to Ease Rules”; David Cay Johnston, “Court Is Asked to Block False Complaints Against I.R.S.,” New York Times, December 9, 2003, C4.

71. Ibid.

72. Hamilton, “Lawmakers Track IRS Reform.”

73. Johnston, Perfectly Legal, 152.

74. Ibid.

75. Ibid., 151.

76. Ibid., 151–152; David Cay Johnston, “Job Fears Push I.R.S. Workers to Relax Effort,” New York Times, May 18, 1999, A1; McKinnon, “Highly Publicized Horror Story,” A28.

77. Karen Hube, “The Aftermath—Return to Sender: The IRS Is Auditing Fewer People These Days but Trying to Guess the Red Flags Isn’t Easy,” Wall Street Journal, February 28, 2000, R19.

78. “Report of the Joint Committee on Taxation Relating to the Internal Revenue Service as Required by the IRS Reform and Restructuring Act of 1998,” 2000 TNT 84-67 (May 3, 2000).

79. David Cay Johnston, “I.R.S. More Likely to Audit the Poor and Not the Rich,” New York Times, April 16, 2000, 11.

Chapter 2

1. Michael J. Graetz, Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States (New Haven: Yale University Press, 2008), 116.

2. Knetsch v. United States, 364 U.S. 361 (1960).

3. In 1954 the Code was amended to exclude prospectively the deduction of any indebtedness incurred to purchase “a single premium life insurance, endowment, or annuity contract.”

4. Knetsch v. United States, 364 U.S. at 362; 364 U.S. at 366 (quoting Gilbert v. Commissioner, 248 F.2d 399, 411 (dissenting opinion)).

5. Ibid.

6. 293 U.S. 465, 470 (1935).

7. 293 U.S. 465, 469 (1935).

8. Leandra Lederman, “W(h)ither Economic Substance?,” Iowa Law Review 389 (2010): 95.

9. United Parcel Service of America, Inc. v. Commissioner, 254 F.3d 1014, 1019 (11th Cir. 2001).

10. Horn v. Commissioner, 968 F.2d 1229, 1230 (D.C. Cir. 1992).

11. Bail Bonds by Marvin Nelson, Inc. v. Commissioner, 820 F.2d 1543, 1549 (9th Cir. 1987).

12. David Weisbach, “Formalism in the Tax Law,” University of Chicago Law Review 66 (1999): 867–868.

13. Ibid., 868.

14. Ibid., 869.

15. Ibid., 863 (footnote omitted).

16. Ibid., 864 (footnote omitted).

17. Ibid., 869.

18. Ibid., 869–871.

19. Ibid., 871.

20. Kristin E. Hickman and Claire Hill, “Concepts, Categories, and Compliance in the Regulatory State,” Minnesota Law Review 94 (2010): 1151–1154.

21. Joseph Bankman, “The Tax Shelter Battle,” in The Crisis in Tax Administration, ed. Henry J. Aaron and Joel Slemrod (Washington, D.C.: Brookings Institution Press, 2004), 9, 12.

22. Ibid.

23. James S. Eustice, “Abusive Corporate Tax Shelters: Old ‘Brine’ in New Bottles,” Tax Law Review 55, no. 2 (2002): 141.

24. Daniel N. Shaviro, “The Story of Knetsch v. United States and Judicial Doctrines Combating Tax Avoidance,” in Tax Stories: An In-Depth Look at Ten Leading Federal Income Tax Cases, ed. Paul L. Caron (New York: Foundation Press, 2002), 327.

25. Ibid., 369.

26. Michael Doran, “Tax Penalties and Tax Compliance,” Harvard Journal on Legislation 46 (2009): 142.

27. Ibid.

28. See, e.g., IRS Form 1040, U.S. Individual Income Tax Return 2 (2012).

29. “Substantial Understatement of Income Tax,” Treasury Reg. §1.6662-4(d).

30. “Definitions and Special Rules,” U.S. Code, Title 26, §6664(d).

31. “Imposition of Accuracy-Related Penalty on Underpayments,” U.S. Code, Title 26, §6662(a) (1999).

32. Shaviro, “The Story of Knetsch v. United States.”

33. Ibid., 316.

34. Weisbach, “Formalism in the Tax Law,” 220–221.

35. Gregory v. Helvering, 293 U.S. 465, 469 (1935).

36. Lederman, “W(h)ither Economic Substance?,” 4.

37. Shaviro, “The Story of Knetsch v. United States,” 369; David Weisbach, “Ten Truths about Tax Shelters,” Tax Law Review 55 (2002): 222–225.

38. Interview with former government official.

39. Henry Ordower, “The Culture of Tax Avoidance,” Saint Louis University Law Review 55 (2010): 53.

40. Ibid., 66.

41. Alan Murray and Jeffrey Birnbaum, Showdown at Gucci Gulch: Lawmakers, Lobbyists, and the Unlikely Triumph of Tax Reform (New York: Random House, 1988), 10.

42. Ordower, “The Culture of Tax Avoidance,” 57.

43. Ibid., 70.

44. Dennis J. Ventry, Jr., “Tax Shelter Opinions Threatened the Tax System in the 1970s,” 2006 TNT 99-30 (May 23, 2006).

45. George K. Yin, “Getting Serious about Corporate Tax Shelters: Taking a Lesson from History,” SMU Law Review 54 (2001): 213.

46. Ventry, “Tax Shelter Opinions.”

47. A subchapter S corporation is one with 100 shareholders or fewer whose profits and losses pass through to shareholders rather than being recorded on a tax return of the corporation. “S Corporation Defined,” U.S. Code, Title 26, §1361.

48. Yin, “Getting Serious about Corporate Tax Shelters,” 210–211.

49. Ibid., 211.

50. “Passive Activity Losses and Credits Limited,” U.S. Code, Title 26, §469.

51. “Deductions Limited to Amount at Risk,” U.S. Code, Title 26, §465.

52. Yin, “Getting Serious about Corporate Tax Shelters,” 212.

Chapter 3

1. Robert B. Reich, Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (New York: Vintage Press, 2007), 51.

2. L. G. Thomas, “The Two Faces of Competition: Dynamic Resourcefulness and the Hypercompetitive Shift,” Organization Science 7 (May–June 1996): 221.

3. Ibid.

4. Ibid.

5. Reich, Supercapitalism, 30.

6. Ibid., 30, 60.

7. Ibid., 64.

8. Richard A. D’Aveni, Hypercompetition (New York: Free Press, 1994); L. G. Thomas and Richard A. D’Aveni, “The Changing Nature of Competition in the U.S. Manufacturing Sector, 1950–2002,” Strategic Organization 7 (2009): 387.

9. D’Aveni, Hypercompetition, 217–218.

10. Reich, Supercapitalism, 51.

11. Ibid., 52.

12. Ibid., 65.

13. Diego Comin and Thomas Philippon, “The Rise in Firm-Level Volatility: Causes and Consequences,” Working Paper 11388, National Bureau of Economic Research (May 2005), http://www.nber.org/papers/w11388.pdf (accessed December 18, 2013); Thomas, “The Two Faces of Competition,” 225.

14. Neil Fligstein, The Transformation of Corporate Control (Cambridge, Mass.: Harvard University Press, 1990), 215.

15. Ibid., 239.

16. Ibid.

17. Edward D. Kleinbard, “Corporate Tax Shelters and Corporate Tax Management,” Tax Executive 51 (1999): 238.

18. John R. Robinson, Stephanie Sikes, and Connie D. Weaver, “Performance Measurement of Corporate Tax Departments,” Accounting Review 85 (2010): 1062.

19. Joel Slemrod, “The Economics of Corporate Tax Selfishness,” Working Paper 10858, National Bureau of Economic Research (September 2004), 11.

20. Tracy Hollingsworth, Manufacturers Alliance/MAPI Survey of Corporate Tax Departments, 4th ed. (Arlington, Va.: Manufacturers Alliance/MAPI, 2002, copy on file with author), 67–68.

21. Clark, Martire & Bartolomeo, “A Study of Fortune 1000 Tax Directors,” prepared for KPMG (December 2000).

22. Kleinbard, “Corporate Tax Shelters,” 238.

23. The World Top Incomes Database, http://topincomes.g-mond.parisschoolofeconomics.eu (accessed September 25, 2013).

24. Ibid.

25. Ibid.

26. Ibid.

27. Lucian Bebchuk and Jesse Fried, Pay without Performance: The Unfulfilled Promise of Executive Compensation (Cambridge, Mass.: Harvard University Press, 2004), 1.

28. Carola Frydman and Raven E. Saks, “Historical Trends in Executive Compensation 1936–2003,” http://eh.net/eha/system/files/eha-meeting-2006/pdf/session_2c_frydman_and_saks.pdf (accessed September 25, 2013).

29. Roger Lowenstein, Origins of the Crash: The Great Bubble and Its Undoing (New York: Penguin, 2004), 113.

30. Ibid., 124.

31. John Cassidy, Dot.con: How America Lost Its Mind and Money in the Internet Era: The Greatest Story Ever Sold (New York: HarperCollins, 2002), 85–86.

32. Ibid., 196–197.

33. Ibid., 244.

34. Ibid., 220.

35. Ibid., 120.

36. William M. Sullivan, Work and Integrity: The Crisis and Promise of Professionalism in America (San Francisco: Jossey-Bass, 2005); Eliot Freidson, Professionalism: The Third Logic (Chicago: University of Chicago Press, 2001).

37. Marc Galanter and William Henderson, “The Elastic Tournament: A Second Transformation of the Big Law Firm,” Stanford Law Review 60 (2008).

38. Charles W. Wootton and Carel M. Wolk, “The Development of ‘The Big Eight’ Accounting Firms in the United States, 1900 to 1990,” Accounting Historians Journal 1, no. 4 (1992): 16–17.

39. Michael Chatfield, A History of Accounting Thought, rev. ed. (New York: Krieger Publishing, 1977), 207–208.

40. Wootton and Wolk, “The Development of ‘The Big Eight,’” 19.

41. Ibid., 7.

42. Paul D. Montagna, Certified Public Accounting: A Sociological View of a Profession in Change (Houston: Scholars Book Co., 1974).

43. Richard Susskind, The End of Lawyers? Rethinking the Nature of Legal Services (New York: Oxford University Press, 2009), 29.

44. Gary J. Previts and Barbara D. Merino, A History of Accountancy in the United States: The Cultural Significance of Accounting (Columbus: Ohio State University Press, 1998), 338–340.

45. Erwin O. Smigel, The Wall Street Lawyer: Professional Organization Man? (Glencoe, Ill.: Free Press, 1964); Montagna, Certified Public Accounting, 212.

46. Ibid.

47. United States v. Simon, 425 F.2d 796 (2d Cir. 1969), cert. denied, 397 U.S. 1006 (1970) (“Continental Vending”); Susan E. Squires et al., Inside Arthur Andersen: Shifting Values, Unexpected Consequences (Upper Saddle River, N.J.: Financial Times Prentice Hall, 2003), 68.

48. Squires et al., Inside Arthur Andersen, 69–70.

49. Montagna, Certified Public Accounting.

50. Ibid.; Stephen A. Zeff, “How Accounting Firms Got Where They Are Today,” Accounting Horizons 17 (2003): 267.

51. Arthur Levitt, Jr., Take on the Street: What Wall Street and Corporate America Don’t Want You to Know (New York: Pantheon Books, 2002).

52. Squires et al., Inside Arthur Andersen.

53. John Phillips and Richard C. Sansing, “Contingent Fees and Tax Compliance,” Accounting Review 73 (1998): 2.

54. AICPA Code of Conduct Rulings 24 and 25, http://www.aicpa.org/Research/Standards/CodeofConduct/Pages/et_391.aspx (accessed October 8, 2013).

55. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry: The Role of Accountants, Lawyers, and Financial Professionals, hearings, November 18 and 20, 2003 (Washington, D.C.: Government Printing Office, 2004), www.gpo.gov/fdsys/pkg/CHRG.../pdf/CHRG-108shrg91043.pdf (accessed October 7, 2013).

56. John T. Lanning, “KPMG Recruiting Pitch: Practice Tax,” Legal Times (September 6, 1999); Geanne Rosenberg, “Big Five Pays Top Dollar for Tax Partners—Especially KPMG,” National Law Journal (November 6, 2000).

57. Bowman’s Accounting Report 14 (March 2000): 2; Minority Staff Report, “Four KPMG Case Studies: FLIP, OPIS, BLIPS, and SC2,” in Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, vol. 1, 166–167.

58. Ronald Gilson and Robert Mnookin, “Sharing among the Human Capitalists: An Economic Inquiry into the Corporate Law Firm and How Partners Split Profits,” Stanford Law Review 37 (1985): 313.

59. Milton C. Regan, Jr., Eat What You Kill: The Fall of a Wall Street Lawyer (Ann Arbor: University of Michigan Press, 2005), 24–26.

60. Ibid., 27–29.

61. Jerome Carlin, Lawyers’ Ethics: A Survey of the New York City Bar (New York: Russell Sage, 1966).

62. Tanina Rostain, “Self-Regulatory Authority, Markets and the Ideology of Professionalism,” in The Oxford Handbook of Regulation, ed. Robert Baldwin et al. (Oxford: Oxford University Press, 2010), 182–184.

63. Carlin, Lawyers’ Ethics.

64. Robert L. Nelson, Partners with Power: The Social Transformation of the Large Law Firm (Berkeley: University of California Press, 1988).

65. Michael Hatfield, “Legal Ethics and Federal Taxes, 1945–1965: Patriotism, Duties, and Advice,” Florida Tax Review 12 (2012): 55.

66. American Bar Association Standing Committee on Ethics and Professional Responsibility, Formal Opinion 314 (1965), Westlaw: ABA Formal Op. 314

67. ABA Section of Taxation, “Proposed Revision to Formal Opinion 314,” reprinted in Bernard Wolfman and James Holden, Ethical Problems in Federal Taxation, 2nd ed. (Charlottesville: Michie, 1985), 71.

68. Seymour Mintz in “What Is Good Tax Practice: A Panel Discussion,” New York University, Proceedings of the 31st Institute on Federal Taxation (1963), 24.

69. Randolph W. Thrower, “Preserving the Integrity of the Federal Tax System,” New York University, Proceedings of the 33rd Institute on Federal Taxation (1975), 707, 708.

70. Henry Sellin, “Professional Responsibility of the Tax Practitioner,” Taxes 52 (1974): 585.

71. Ibid., 606.

72. Randolph Paul, “The Responsibilities of the Tax Adviser,” Harvard Law Review 63 (1950): 385.

73. Ibid., 384.

74. Sellin, “Professional Responsibility of the Tax Practitioner,” 608.

75. “Does not the citizen owe his government and his neighbors the duty of paying his share of taxes as required by law?” Jerome Hellerstein, “Ethical Problems in Office Counseling,” Tax Law Review 8 (1952–1953): 9.

76. Merle Miller, “A Taxpayer’s Duty to His Fellow Taxpayers,” NYU Annual Institute on Federal Taxation 19 (1961): 2.

77. H. Brian Holland in “What Is Good Tax Practice,” 34.

78. Merle Miller, “Morality in Tax Planning,” NYU Annual Institute on Federal Taxation 10 (1952): 1081, 1083.

79. Peter Canellos, “A Tax Practitioner’s Perspective on Substance, Form, and Business Purpose in Structuring Business Transactions and in Tax Shelters,” SMU Law Review 54 (2001): 52, 55. While this article was published in 2001, it is an especially good expression of the perspective of the traditional elite tax bar.

80. Ibid., 53 (footnote omitted).

81. Ibid., 56; George Cooper, “The Avoidance Dynamic: A Tale of Tax Planning, Tax Ethics, and Tax Reform,” Columbia Law Review 80 (1980): 1581 (distinguishing between two types of advice: “(1) advice on how best from a tax standpoint to carry out a non-tax-motivated transaction that the client has already determined to pursue, and (2) advice on how to save taxes as an end in itself, without any particular transactional objectives in mind”).

82. Cooper, “The Avoidance Dynamic,” 1582.

83. Tanina Rostain, “Sheltering Lawyers: The Organized Bar and the Tax Shelter Industry,” Yale Journal on Regulation 23 (2006): 114.

84. Ibid.

85. Canellos, “A Tax Practitioner’s Perspective,” 55.

86. Ibid., 49.

87. Jacob Rabkin, remarks in “Ethical Problems of Tax Practitioners,” Tax Law Review 8 (1952): 28–29.

88. Cooper, “The Avoidance Dynamic.”

89. Ibid., 1567.

90. Ibid., 1578.

91. Ibid.; Frederic Corneel, “Guidelines for Tax Practice Second,” Tax Law Review 43 (1989–1990): 313.

92. “Inside the DuPont Legal Model,” New Legal Review (May 11, 2010), http://www.cpaglobal.com/newlegalreview/4377/inside_dupont_legal_model (accessed October 8, 2013).

93. Joel Henning, “Strategic Planning,” in Hildebrandt Handbook of Law Firm Management (New York: Hildebrandt International, 2012), chapter 1.

94. David Maister, Managing the Professional Service Firm (New York: Simon and Schuster, 1993).

95. Nelson, Partners with Power, 224.

96. Ibid.

97. David Jargiello and Phyllis Gardner, “Free Agent Dysfunction: Management Realpolitik for U.S. Law Firms” (August 16, 2010), 17, http://www.jargiellolaw .com/White_Paper_Series_-_Free_Agent_Dysfunction_-_Print_v3.2_-_COPY.pdf (accessed October 8, 2013).

98. Joseph Bankman, “The Business Purpose Doctrine and the Sociology of Tax,” SMU Law Review 54 (2001): 154.

99. Rostain, “Sheltering Lawyers,” 89 n. 50.

100. John Lanning, “A Tug-of-War over New Law Students,” Legal Times (September 6, 1999), S42.

101. “E&Y First of Big Five in U.S. Market to Ally with Law Firm,” Journal of Accountancy (January 2000).

102. Richard Lavoie, “Subverting the Rule of Law: The Judiciary’s Role in Fostering Unethical Behavior,” University of Colorado Law Review 75 (2004): 147–148.

103. Bankman, “The Business Purpose Doctrine and the Sociology of Tax,” 151.

104. Ibid.

105. Ibid., 152.

Chapter 4

1. Mike Brewster, Unaccountable: How Accounting Firms Forfeited the Public Trust (Hoboken, N.J.: John Wiley & Sons, 2003), 112.

2. Michael Chatfield and Richard Vangermeersch, The History of Accounting: An International Encyclopedia (New York: Garland Publishing, 1996), 75; U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry: The Role of Accountants, Lawyers, and Financial Professionals, hearings, November 18 and 20, 2003, vol. 1 (Washington, D.C.: Government Printing Office, 2004), 166.

3. Brewster, Unaccountable, 176.

4. Bowman’s Accounting Report 14 (March 2000): 2. In 2000, KPMG separately incorporated its management consulting services group and sold off a 20 percent interest. Randall S. Thomas et al., “Megafirms,” North Carolina Law Review 80 (2001): 166.

5. Jacoboni v. KPMG, et al., Case No. 6:02-CV-510-On1-22DAB, Richard (Larry) DeLap deposition (July 18, 2003), 203–204, SCDOR-License-029053. (Sources with SCDOR numbers refer to documents obtained by the South Carolina Department of Revenue in connection with an investigation into possible violations of South Carolina revenue regulations. These documents were obtained through a state Freedom of Information Act request.)

6. Ibid.

7. Jacoboni v. KPMG, Gregg W. Ritchie deposition (June 16, 2003), 31, SCDOR-License-026649.

8. Perez, et al., v. KPMG, et al., C2593-02-A, District Court, 92nd Judicial District, Hidalgo County, Robert A. Pfaff deposition (October 7, 2003), 15–16, SCDOR-License-026581.

9. Calvin Johnson, “Tales from the KPMG Skunk Works: The Basis-Shift or Defective-Redemption Shelter,” 2005 TNT 142-30 (July 2005).

10. Perez, et al., v. KPMG, et al., Pfaff deposition (October 7, 2003), 15–16, SCDOR-License-026581.

11. Johnson, “Tales from the KPMG Skunk Works.”

12. Geraldine Fabrikant, “The MCA Sale: The Deal; Seagram Puts the Finishing Touches on Its $5.7 Billion Acquisition of MCA,” New York Times, April 10, 1995.

13. Lee A. Sheppard, “Can Seagram Bail Out of Dupont without Capital Gain,” 1995 TNT 75-4 (April 18, 1995); Lee A. Sheppard, “Attention K Mart Shoppers: Tax Shelters in Aisle 6,” 1998 TNT 182-6 (September 21, 1998).

14. Perez, et al., v. KPMG, et al., John Larson deposition (October 1, 2003), 19–21, SCDOR-License-026455.

15. Ibid., at 66, SCDOR-License-026473.

16. Treasury Regulation 1.302-2(c).

17. Johnson, “Tales from the KPMG Skunk Works.” Our discussion draws heavily from this article.

18. Ibid., 439.

19. R. J. Ruble, “The Professional Responsibilities of a Tax Lawyer in the Context of Corporate Tax Shelters,” Practicing Law Institute, Tax Law and Estate Planning Course Handbook Series, Tax Law and Practice, PLI Order No. J0-001E (October–November 1999).

20. United States v. John Larson, Robert Pfaff, and Raymond J. Ruble, 05 CR 888 (LAK) (S.D.N.Y.), government exhibit FO-99.

21. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” report, April 13, 2005, 50. This report updates the Permanent Subcommittee on Investigations’ original report (see note 2 above) to reflect developments and new information that had emerged since it conducted hearings on the tax shelter industry in 2003.

22. Perez, et al., v. KPMG, et al., Larson deposition (October 1, 2003), 38.

23. Ibid., Jeffrey Eischeid deposition, exhibit 41, SCDOR-License-027049.

24. Complaint in Jacoboni v. KPMG, et al., Case No. 6:02-CV-510-On1-22DAB, reprinted in “Justice Releases Petitions, Exhibits Relating to KPMG Enforcement Actions,” 2002 TNT 159-23, part 1 of 2 (August 16, 2002).

25. Jacoboni v. KPMG, DeLap deposition (July 18, 2003), 35–36, SCDOR-License-029011.

26. Ibid., 38-41, SCDOR-License-029012.

27. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, testimony of Richard (Larry) DeLap, vol. 1, 45.

28. ACM Partnership v. Commissioner, T.C. Memo 1997-115, aff’d in part and rev’d in part, 157 F.3d 231 (3d Cir. 1998).

29. Perez, et al., v. KPMG, et al., DeLap deposition (August 28, 2003), 35–36, SCDOR-License-029011; ibid., Eischeid deposition, exhibit 39, SCDOR-License-027043.

30. Ibid., plaintiff’s exhibit 47, SCDOR-License-027071.

31. Ibid., plaintiff’s exhibit 57, SCDOR-License-027104.

32. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, vol. 1, 167; and exhibit 97t, vol. 3, 2068–2069.

33. Ibid., exhibit 97z, vol. 3, 2121–2130.

34. Ibid., exhibit 97a, vol. 3, 1951–1956.

35. John Lanning, “A Tug-of-War over New Law Students,” Legal Times (September 6, 1999); Geanne Rosenberg, “Big Five Pays Top Dollar for Tax Partners—Especially KPMG,” National Law Journal, November 6, 2000, B8.

36. ABA Journal, July 1998.

37. Lanning, “A Tug-of-War over New Law Students.”

38. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 97jj, vol. 3, 2174–2179; exhibit 97ll, vol. 3, 9–2209; exhibit 97nn, vol. 3, 2210–2220.

39. Ibid., exhibit 97kk, vol. 3, 2180–2188.

40. Jacoboni v. KPMG, et al., DeLap deposition (August 28, 2003), 45–46, SCDOR-License-029019.

41. Jacoboni v. KPMG, et al., Ritchie deposition (June 16, 2003), 118, SCDOR-License-026671.

42. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 137, vol. 3, 2735–2744.

43. Ibid., 2740.

44. Ibid., 2735–2744.

45. Ibid.

46. Jacoboni v. KPMG, et al., Ritchie deposition (June 16, 2003), 85–86, SCDOR-License-026662.

47. Ibid., 88; Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 38, vol. 1, 528.

48. Jacoboni v. KPMG, et al., Ritchie deposition (June 16, 2003), 31, SCDOR-License-026649.

49. Ibid., 119, SCDOR-License-026671.

50. Jacoboni v. KPMG, et al., Ritchie deposition (cont.) (November 16, 2003), exhibit 30, SCDOR-License-03025.

51. Ibid., 183–184, SCDOR-License-026687.

52. Ibid., exhibit 48, SCDOR-License-030297.

53. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 38, vol. 1, 528–531.

54. Jacoboni v. KPMG, et al., Ritchie deposition (June 16, 2003), 286, SCDOR-License-026713; Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibits 94i and 94j, vol. 2, 887–898.

55. Jacoboni v. KPMG, et al., Ritchie deposition (June 16, 2003), exhibit 1, SCDOR-License-030038.

56. Ibid.

57. Ibid., Robert Simon deposition (January 9, 2004), exhibit 20, SCDORLicense-030766.

58. Ibid., exhibit 144, SCDOR-License-029282.

59. KPMG Deferred Prosecution Agreement, 1:05-crim-00903-LAP, statement of facts, ¶6, http://www.justice.gov/usao/nys/pressreleases/August05/kpmgstatementoffacts.pdf (accessed September 28, 2013).

60. Jacoboni v. KPMG, et al., Ritchie deposition (November 12, 2003), 461, SCDOR-License-030806.

61. Ibid., Stein deposition (June 6, 2003), SCDOR-License-028865.

62. Ibid., Ritchie deposition, exhibit 45 (November 12, 2003) (emphasis in original), SCDOR-License-331772.

63. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 94k, vol. 2, 905–909.

64. Jacoboni v. KPMG, et al., Ritchie deposition, plaintiff’s exhibit 47 (November 12, 2003), SCDOR-License-331523.

65. Jacoboni v. KPMG, et al., Simon deposition, plaintiff’s exhibit 23 (January 9, 2004), SCDOR-License-331514.

66. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 94k, vol. 2, 905–909.

67. Ibid.

68. Jacoboni v. KPMG, et al., Ritchie deposition, plaintiff’s exhibit (November 12, 2003), 507, SCDOR-License-030220.

69. Ibid., plaintiff’s exhibit 47, 482–483, SCDOR-License-030214.

70. Ibid.

71. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 155, vol. 4, 3245–3247.

72. Ibid.

73. Jacoboni v. KPMG, et al., Ritchie deposition, exhibit 14 (July 18, 2003), SCDOR-License-030038.

74. Ibid., exhibit 18, SCDOR-License-030121.

75. Ibid. (capital letters in original).

76. Ibid., Ritchie deposition, plaintiff’s exhibit (November 12, 2003), 507, SCDOR-License-030220.

77. Ibid., Ritchie deposition, 461, SCDOR-License-030806.

78. Jacoboni v. KPMG, et al., DeLap deposition (July 18, 2003), 231, SCDOR-License-029060; Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 15, vol. 1, 452.

79. KPMG Deferred Prosecution Agreement, statement of facts, ¶6.

80. Lee A. Sheppard, “Dissecting Partnership Gambits for Rich People,” 2002 TNT 126-3 (July 1, 2002).

81. Ibid.

82. Sheppard, “Dissecting Partnership Gambits for Rich People”; Karen C. Burke and Grayson M. P. McCouch, “Cobra Strikes Back: Anatomy of a Tax Shelter,” Tax Lawyer 62 (2008); IRS Rev. Rul. 88-77 and IRS Rev. Rul. 95-26.

83. Sheppard, “Dissection Partnership Gambits”; Burke and McCouch, “Cobra Strikes Back.”

84. Diversified Group Inc. v. Paul Daugerdas and Jenkens & Gilchrist, Raymond J. Ruble affidavit, exhibit P, in “Justice Releases Petition in Sidley Enforcement Action,” 2003 TNT 202-13 (October 20, 2003).

85. KPMG Deferred Prosecution Agreement, statement of facts, ¶20.

86. Ibid.

Chapter 5

1. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry: The Role of Accountants, Lawyers, and Financial Professionals, hearings, November 18 and 20, 2003 (Washington, D.C.: Government Printing Office, 2004), exhibit 98kk, vol. 3, 2341–2361.

2. Ibid., 2342–2343.

3. Ibid., exhibit 10, vol. 1, 428–438, 429.

4. Ibid., exhibit 98kk, vol. 3, 2341.

5. IRS Notice 2000-44, Internal Revenue Bulletin 2000-36 (August 14, 2000), 1.

6. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” report, April 13, 2005, 85.

7. Ibid., 88.

8. Karen C. Burke and Grayson M. P. McCouch, “Cobra Strikes Back: Anatomy of a Tax Shelter,” Tax Lawyer 62 (2008): 59.

9. See Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 73, vol. 1, 654.

10. Ibid.

11. Ibid.

12. Ibid., exhibit 95ii, vol. 2, 1405–1487.

13. Ibid., exhibit 85, vol. 1, 669.

14. Ibid.

15. Ibid., exhibit 174, vol. 1.

16. United States v. John Larson, Robert Pfaff, and Raymond J. Ruble, RS1 05 CR 888 (LAK) (November 13, 2008), transcript, 3079.

17. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 95l, vol. 2, 1267.

18. Ibid., exhibit 95m, vol. 2, 1268–1269.

19. Ibid.

20. United States v. Larson, 3100–3104.

21. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 95k, vol. 2, 1263.

22. Ibid., exhibit 95h, vol. 2, 1261.

23. Ibid., exhibit 95j.

24. Ibid.

25. Ibid.

26. Ibid.

27. Ibid., exhibit 95n, vol. 2, 1270.

28. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, vol. 1, 178.

29. United States v. Larson, 729–732.

30. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 95p, vol. 2, 1273.

31. United States v. Larson, 3175.

32. Ibid., 3176, 1432.

33. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 64, vol. 1, 622.

34. Ibid., exhibit 95q, vol. 2, 1283.

35. Ibid., exhibit 77, vol.1, 661.

36. Ibid., exhibit 65, vol. 1, 623, 626.

37. Ibid., exhibit 81, vol. 1, 665.

38. United States v. Larson, 3094–3097.

39. Jonathan D. Glater, “Former Banker Pleads Guilty in Tax Shelter Case,” New York Times, August 12, 2005, C1.

40. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 65, vol. 1, 623, 626.

41. Ibid., exhibit 12, vol. 1, 448.

42. Ibid., exhibit 65, vol. 1, 623, 626.

43. Amy Boardman and Carrie Johnson, “Accounting for Competition,” Legal Times, February 3, 1997.

44. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 155-fn 98, vol. 4, 3468.

45. Ibid., exhibit 65, vol. 1, 623, 625.

46. Ibid.

47. Ibid.

48. Ibid., exhibit 65, vol. 1, 623, 624.

49. Ibid.

50. Ibid., exhibit 39, vol. 1 532.

51. Ibid. (italics in original).

52. Ibid.

53. Ibid.

54. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 95dd, vol. 2, 1386.

55. Alan Murray and Jeffrey Birnbaum, Showdown at Gucci Gulf: Lawyers, Lobbyists, and the Unlikely Triumph of Tax Reform (New York: Random House, 1988), 213–220.

56. United States v. Larson, government exhibit B-129.

57. Ibid., government exhibit B-315.

58. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 82, vol. 1, 666.

59. Ibid., exhibit 13, vol. 1, 450.

60. United States v. Larson, government exhibit B-140.

61. Ibid.

62. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 110, vol. 1, 2657.

63. Ibid., exhibit 95oo, vol. 2, 72.

64. Ibid.

65. Ibid., exhibit 95pp, vol. 2, 1501.

66. Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 106–107.

67. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 95ss, vol. 2, 1507.

68. Ibid., exhibit 95ccc, vol. 2, 1526; Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 107–108.

69. United States v. Larson, testimony of Amir Makov, 3327.

70. Glater, “Former Banker Pleads Guilty.”

71. United States v. Larson, 3325; exhibit B-184.

72. Ibid., 3339.

73. Complaint in Allan Abrams, et al., v. KPMG (Superior Court of New Jersey, Law Division, Bergen County Docket # L-4191-05; United States v. Larson, 1821–1835.

74. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 30, vol. 1, 500.

75. KPMG Deferred Prosecution Agreement, 1:05-crim-00903-LAP, statement of facts, ¶6, http://www.justice.gov/usao/nys/pressreleases/August05/kpmgstatementoffacts.pdf (accessed September 28, 2013).

76. Ibid., exhibit 19, 460, 462.

77. IRS Notice 99-36, Internal Revenue Bulletin 1999-26 (June 14, 1999), 1.

78. Santa Clara Valley Housing Group Inc., and Kristen Bowes v. United States, C08-05-097 (LHK-HRL), deposition, exhibit 204, filed in support of United States’ Motion for Summary Adjudication of the Issues (April 21, 2011).

79. Ibid., exhibit 172.

80. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 155-fn 121, vol. 4, 3482, 3489.

81. Ibid., exhibit 6, vol. 1, 412.

82. Ibid., exhibit 59, vol. 1, 604, 607.

83. Ibid., exhibit 43, vol. 1, 545–554.

84. Ibid., exhibit 21, vol. 1, 464, 483–485.

85. Ibid., 485.

86. Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 201.

87. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 155-fn 163, vol. 4, 3596, 3599.

88. Ibid.

89. Ibid.

90. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, appendix B, Case Study of S-Corporation Charitable Contribution Strategy, vol. 1, 266.

91. Jonathan Weil, “IRS Puts Shelter Sold by KPMG on ‘Abusive List,’” Wall Street Journal, April 2, 2004, C6.

92. Jonathan Weil, “KPMG Shelter Shaved $1.7 Billion off Taxes of 29 Large Companies,” Wall Street Journal, June 16, 2004, A1.

93. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 38, vol. 1, 528.

94. Ibid.

95. Ibid., exhibit 89, vol. 1, 680–683.

96. Ibid., exhibit 147a, vol. 3, 2878, 2907–2909; Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 76.

97. KPMG Deferred Prosecution Agreement, statement of facts, ¶6.

Chapter 6

1. Janet Novack and Laura Saunders, “The Hustling of X-Rated Shelters,” Forbes, December 14, 1998.

2. United States v. Robert Coplan, et al., 07 CR 00453 (SHS), transcript, 1070.

3. Ibid., 541–542, 2135.

4. Ibid., 2139.

5. Ibid., 2117–2122

6. Ibid., 2126.

7. Ibid., government exhibit 2; transcript at 2142.

8. Ibid., 1789.

9. Ibid., 1798–1799.

10. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” report, April 13, 2005, 88.

11. Sala v. United States, 552 F.Supp. 2d 1167. (2008); Williams v. Brown & Wood, 841 N.Y.S. 2d 222 (2007).

12. Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 81–82.

13. United States v. Coplan, government exhibit 66 (emphasis in original).

14. Ibid.

15. Ibid.

16. Ibid., 2271.

17. Ibid.

18. Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 84.

19. Ibid, 82, 84.

20. United States v. Coplan, 2202–2203.

21. Ibid., government exhibit 19.

22. Ibid.

23. Email from Robert B. Coplan, October 22, 1999, re: Cobra Pricing (on file with authors).

24. Murfam Farms v. United States, 06-245T (before the U.S. Court of Federal Claims), April 22, 2010, transcript, 1825–1827.

25. Ibid., 1771; defendant’s exhibit D-959.

26. Ibid., defendant’s exhibit D-782.

27. Ibid.

28. Ibid., 1827; defendant’s exhibit D-802.

29. Ibid., 1841–1842.

30. Ibid., 1769–1775; defendant’s exhibit D-959.

31. Ibid., 1809–1810; defendant’s exhibit D-707.

32. Ibid., defendant’s exhibit D-754.

33. Ibid., defendant’s exhibit D-799.

34. Ibid., defendant’s exhibit D-595.

35. Ibid., defendant’s exhibit D-956.

36. United States v. Coplan, government exhibit 175.

37. Murfam Farms v. United States, 1741.

38. Ibid., defendant’s exhibit D-199.

39. Ibid.

40. Ibid.

41. Ibid., defendant’s exhibit D-956.

42. United States v. Coplan, government exhibit 107.

43. Ibid.

44. Ibid.

45. Ibid., government exhibit 111.

46. Murfam Farms v. United States, defendant’s exhibit D-808. The reference to “ACM” is to ACM Partnership v. Commissioner, 157 F.3d 231 (3d Cir. 1998), which struck down a tax shelter on the grounds of what was interpreted as a newly invigorated economic substance doctrine.

47. United States v. Coplan, government exhibit 879.

48. Ibid., 718–719.

49. Ibid.

50. Murfam Farms v. United States, defendant’s exhibit D-1017.

51. Ibid., defendant’s exhibit D-1018.

52. Ibid., defendant’s exhibit D-1017.

53. Ibid., defendant’s exhibit D-1023.

54. Ibid.

55. Ibid.

56. United States v. Coplan, government exhibit 206.

57. Ibid., 2430.

58. Ibid., 3734.

59. Ibid., 3997.

60. Lynnley Browning, “Four Men, but not Ernst & Young Are Charged in Tax Shelter Case,” New York Times, May 31, 2007.

61. United States v. Coplan, 2310; government exhibit 413.

62. Ibid.

63. Ibid., government exhibit 278.

64. Ibid., 1193–1201; government exhibit 859.

65. Ibid.

66. Ibid., government exhibits 534 and 535.

67. Ibid., 1226–1227; government exhibits 552 and 554.

68. Ibid., 1228.

69. Ibid., government exhibit 555.

70. Ibid., 1231–1232.

71. Ibid., 754.

72. Ibid., 755.

73. Ibid., 756.

74. United States v. Robert Coplan, et al., indictment 1:06-cv-00245-EJD.

75. Ibid.; Carlisle, et al. v. Curtis, Mallet-Prevost, et al., Case: 2:05-cv-00059 -DLB-JGW (E.D.Ky., March 3, 2005).

76. Candyce Martin 1999 Irrevocable Trust v. United States, No. C 08-5150 (PJH) (N.D.Calif., October 6, 2011) (order denying petition and entering findings of fact and conclusions of law).

77. Maguire Partners, United States of America’s Post-trial Proposed Findings of Act and Conclusions of Law (August 12, 2008).

78. Maguire Partners Master Invs., LLC v. United States, 2009 U.S. Dist., LEXIS 130704 (2009).

79. KPMG Production to South Carolina Department of Revenue, SCDORLicense-034808.

80. Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 89.

81. Candyce Martin 1999 Irrevocable Trust v. United States.

Chapter 7

1. United States v. Daugerdas, et al., 09 CR 581 (WHP) (S.D.N.Y. 2011), transcript, 4307.

2. Ibid., 6337.

3. Ibid., 4307.

4. Ibid., 4040.

5. Ibid., 6855–6856.

6. Ibid., government exhibit 301-12.

7. Ibid., 1199.

8. Ibid., 1586.

9. Ibid., 1240.

10. Ibid., 1218.

11. Jones v. BDO Complaint, 3:06-CV-115, Judge Echols (D.C.M.D. Tenn. March 27, 2007), §54.

12. United States v. Daugerdas, 1230.

13. Ibid., 1493–1494.

14. Ibid., 1217–1218; government exhibit 301-269.

15. “Selected Exhibits Relating to BDO Seidman Enforcement Actions,” 2002 TNT 136-8 (July 10, 2002), at 7.

16. Ibid., 8.

17. Ibid.

18. Ibid.

19. Ibid., 11.

20. United States v. Daugerdas, 1100.

21. Ibid., government exhibit 301-216.

22. Ibid., 4087, Revenue Ruling 95-26.

23. Ibid., 1137.

24. Ibid., 1148.

25. Ibid., 1262.

26. Ibid., 1212.

27. Ibid., 6359.

28. Ibid., 6366.

29. Ibid., 1282; ibid., government exhibit 300-65.

30. Ibid., government exhibits 300-74 and 300-173.

31. Ibid., 6373.

32. Ibid., government exhibit 300-131.

33. Ibid., 1233–1234.

34. Ibid., 1234.

35. Ibid., 1235.

36. Ibid., 1244.

37. Ibid., 1246.

38. Ibid., 1252.

39. Ibid., 4401.

40. Ibid., 4091–4093; government exhibit 301-216.

41. Ibid., 4093.

42. Ibid., 6911–6913.

43. Ibid., 6912 (emphasis in original).

44. Ibid., government exhibit 300-117.

45. IRS Notice 2000-44, Internal Revenue Bulletin 2000-36 (August 14, 2000), 1, 4.

46. Ibid., 4–5.

47. Ibid., 5–6.

48. United States v. Daugerdas, 4117.

49. Ibid., 4112.

50. Memorandum from Michael Kerekes to David Dreier, Esq., Re: IRS notice and amended regulations, August 11, 2000 (on file with authors).

51. Ibid., 6387.

52. Ibid., 4517.

53. Ibid., 6384.

54. Ibid., government exhibit 301-81.

55. Ibid.

56. Ibid.

57. Ibid.

58. Ibid.

59. Ibid.

60. Ibid.

61. Ibid.

62. Ibid.

63. Ibid.

64. Ibid.

65. Ibid.

66. Ibid.

67. Ibid., government exhibit 301-292.

68. Ibid., government exhibit 301-83.

69. Ibid., 6384.

70. Ibid., 4176.

71. Ibid., 4181.

72. “Selected Exhibits Relating to BDO Seidman Enforcement Actions,” 2002 TNT 136-8 (July 16, 2002), at 1.

73. Ibid.

74. Ibid.

75. Ibid., 2.

76. Ibid.

77. Ibid.

78. Ibid., 4178.

79. Ibid., 6390.

80. Ibid., 1348.

81. Ibid.

82. Ibid., 1363.

83. Ibid., 6392.

84. United States v. Daugerdas, government exhibit 302-81.

85. Health Integrated E-Release, “Health Integrated Welcomes Denis Field, CPA, JD, LLM and David Friend, MD, MBA to Board of Directors,” May 29, 2007, http://www.ereleases.com/pr/health-integrated-welcomes-denis-field-cpa-jd-llm-and-david-friend-md-mba-to-board-of-directors-9972 (accessed October 8, 2013).

86. Caleb Newquist, “BDO’s Tax Shelter Team Was Known as the Wolf Pack,” Going Concern, March 8, 2011, http://goingconcern.com/2011/3/bdos-tax-shelter-team-was-known-as-the-wolf-pack (accessed October 8, 2013).

87. Vidya Devaiah, “Embattled Ex-Head of 5th Largest Accounting Firm Turns to Indian Legal Outsourcing,” Law without Borders, July 7, 2010, http://lawwithoutborders.typepad.com/legaloutsourcing/2010/07/denis-field-hires -indian-legal-outsourcing-company-embattled-exchairmanceo-of-fifth-largest-accounti.html (accessed October 8, 2013).

Chapter 8

1. Chris Klein, “A Texas Firm Leads Nation in Growth,” National Law Journal, January 12, 1998, A1, A11.

2. Ibid., 1.

3. Ibid., 11.

4. Ibid.

5. Ibid.

6. The book will continue to use the term “partner” to refer to the owners of the firm because this common term makes it easier to discuss comparisons with other firms, the vast majority of which are organized as partnerships.

7. Michael Granberry, “Directions Change, but the Highway Man Is Driven to Succeed,” Dallas Morning News (May 7, 2000).

8. “Merger Mania: The Texas Shuffle,” American Lawyer (July 1999).

9. Nathan Koppel, “Fatal Vision: How a Bid to Boost Profits Led to a Law Firm’s Demise,” Wall Street Journal, May 17, 2007.

10. Ibid.

11. United States v. Daugerdas, et al., 09 CR 581 (WHP) (S.D.N.Y. 2011), 2291.

12. United States v. Daugerdas, government exhibit 201-34.

13. Professional Services Agreement between Jenkens & Gilchrist, Texas Professional Corporation, and Jenkens & Gilchrist, Illinois Professional Corporation, December 20, 1999 (on file with authors).

14. Ibid.

15. Ibid., government exhibit 201-34.

16. Ibid.

17. Ibid.

18. Ibid., government exhibit 201-33.

19. Ibid., government exhibit 201-246.

20. Paul Braverman, “Helter Shelter,” American Lawyer, December 2003.

21. 34 T.C.M. (CCH) 727 (1975).

22. Letter from Grady P. Dickens, Scheef & Stone LLP to Paul Daugerdas, Jenkens & Gilchrist, PC, September 24, 1999 (on file with authors).

23. Internal Revenue Service, Notice 2000-44: “Tax Avoidance Using Artificially High Basis,” August 11, 2000 (on file with authors).

24. Letter from Donna M. Guerin, Jenkens & Gilchrist, PC, to shelter participant, September 13, 2000.

25. Camferdam, et al., v. Ernst & Young, et al., Plaintiffs’ Second Amended Complaint and Original Class Action Complaint, No. 02 Civ. 10100 (BSJ) (S.D.N.Y.).

26. United States v. Daugerdas, 30.

27. Ibid.

28. Ibid.

29. Ibid., 31.

30. Ibid., government exhibit 201-273, at 9.

31. Ibid., 10.

32. Ibid., 2357.

33. Ibid., 2494.

34. Ibid., 2363.

35. Ibid., 2358.

36. Enforcement Action, Johnson Second Declaration (March 9, 2004).

37. Unites States v. Daugerdas, 3663–3664.

38. Koppel, “Fatal Vision,” A1.

39. Email from Patrick O’Daniel to Donna M. Guerin, January 12, 2000 (on file with authors).

40. Ibid., 3570.

41. Ibid., 3572.

42. Ibid., 3577.

43. Koppel, “Fatal Vision.”

44. Memo from Paul Daugerdas to Jenkens & Gilchrist Board of Directors, May 28, 2001 (on file with authors).

45. Ibid., 2602.

46. The Diversified Group, Inc. v. Paul Daugerdas, 00 Civ. 0771 (SAS), February 2, 2000, complaint.

47. Ibid. at 3.

48. Ibid. at 4.

49. Ibid. at 4–5.

50. The Diversified Group, Inc. v. Paul Daugerdas, 139 F.Supp. 2d 445 (S.D.N.Y. 2001).

51. Indemnity agreement between Jenkens & Gilchrist Illinois; Paul M. Daugerdas and Paul M. Daugerdas, Chartered; and Jenkens & Gilchrist Texas (on file with authors).

52. Braverman, “Helter Shelter,” 71.

53. David Laney memorandum to Jenkens & Gilchrist Board (on file with authors).

54. Unites States v. Daugerdas, government exhibit 203-28.

Chapter 9

1. Those who were convicted were R. J. Ruble, Sidley Austin Brown & Wood; Dennis Evanson, Utah attorney; William Bradley, Louisiana attorney; Robert Pfaff, Presidio; John Larson, Presidio; Robert Coplan, Ernst & Young; and John Ohle, Bank One. Those who pled guilty are Donna Guerin, Jenkens & Gilchrist; Erwin Mayer, Jenkens & Gilchrist; Peter Cinquegrani, Arnold & Porter; Graham Taylor, San Francisco attorney; Jay Gordon, Greenberg Traurig; John Campbell, Miller Canfield; Matthew Krane, Los Angeles attorney; Adrian Dicker, BDO Seidman, Michael Kerekes, BDO Seidman; Robert Greisman, BDO Seidman; and Charles Wilk, Quellos.

The convictions of Martin Nissenbaum and Richard Shapiro of Ernst & Young were reversed on appeal. A new trial was granted after the convictions of Paul Daugerdas of Jenkens & Gilchrist and Denis Field of BDO Seidman. After the second trial Daugerdas was convicted and Field was acquitted. KPMG’s termination of coverage of attorneys’ fees resulted in dismissal of the indictments of Jeffrey Stein, Richard Smith, Philip Wiesner, Steven Gremminger, and Carl Hasting. Raymond Craig Brubaker, of Deutsche Bank was acquitted. Finally, David (Lippman) Smith of Private Capital Management Group and Bolton Capital Management is a fugitive from justice.

2. United States v. John Larson, Robert Pfaff, Raymond J. Ruble, and David Greenberg, RS1 05 CR 888 (LAK), 3065.

3. RLP Holdings v. Bayerische Hypo- und Vereinsbank, et al., Fulton County Superior Court, Georgia, Civil Action 2006CV127554 (December 12, 2006). Among the defendants named in the lawsuit are Ruble and Michael G. Wolfson of Sidley Austin Brown & Wood.

4. Summons Enforcement against Sidley Austin Brown & Wood (December 29, 2003), Kan Declaration, reprinted in 2003 TNT 202-2.

5. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry: The Role of Accountants, Lawyers, and Financial Professionals, hearings, November 18 and 20, 2003 (Washington, DC: Government Printing Office, 2004), exhibit 120, vol. 3, 2699.

6. Ibid.

7. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” report, April 13, 2005, 50.

8. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 120, vol. 3, 2699.

9. Ibid.

10. United States v. Larson, et al., government exhibit FO-99.

11. Summons Enforcement Action, exhibit D.

12. Ibid., exhibit E.

13. Ibid., exhibit G.

14. United States v. Larson, et al., government exhibit FO-116.

15. Ibid., government exhibit FO-116-002.

16. Ibid.

17. Summons Enforcement Action, Kan Declaration, §43.

18. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 118, vol. 3, 2693.

19. Ibid., exhibit 128, vol. 3, 2720.

20. Ibid., exhibit 118, vol. 3, 2693.

21. Ibid.

22. Ibid.

23. Ibid., exhibit 91, vol. 3, 857–864.

24. Ibid.

25. Ibid.

26. Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 104.

27. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, exhibit 131, vol. 3, 2723.

28. Ibid.

29. Ibid., exhibit 100d, vol. 3, 2544.

30. Ibid.

31. Ibid., exhibit 100g, vol. 3, 2548.

32. Ibid., exhibit 100i, vol. 3, 2551.

33. Ibid., exhibit 100c, vol. 3, 2546.

34. Ibid., exhibit 35, vol. 1, 522.

35. Ibid., exhibit 152, vol. 3, 3002.

36. Ibid., exhibit 100k, vol. 3, 2553–2556.

37. Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 106.

38. United States v. Larson, et al., Makov testimony, 3239–3242.

39. Ibid., 3242.

40. United States v. John Larson, Robert Pfaff, Raymond J. Ruble, and David Greenberg, RS1 05 CR 888 (LAK) (S.D.N.Y. 2008), indictment §52.

41. Justice Petition in Sidley Enforcement Action—Exhibit 25, Licensing Agreement, reprinted in 2004 TNT 2-37 (January 5, 2004).

42. International Air Leases, Inc. v. United States, US Bankr. Ct., ¶¶41–42 (S.D.Fla. August 27, 2003), reprinted in 2004 TNT 3-20.

43. Lukens Law Group v. Jones, et al., Case No. C 04 5357 WHA (N.D.Cal. February 7, 2005), first amended complaint, ¶43.

44. United States v. Larson, et al., government exhibit FO-531.

45. Ibid.

46. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, vol. 1, 83.

47. Summons Enforcement, exhibit M, reprinted in 2003 TNT 202-16 (October 20, 2003).

48. “Brown & Wood Opinion Letter on Investment Strategies Available,” 2003 TNT 238-54 (December 11, 2003).

49. United States v. Larson, et al., government exhibit B-389.

50. Ibid., government exhibit S-81.

51. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, testimony of Thomas Smith, vol. 1, 78.

52. United States v. Robert Coplan, et al., indictment 1:06-cv-00245-EJD.

53. Peter Lattman, “More Law Firms Touched by Tax Shelter Investigation,” Wall Street Journal Law Blog, July 3, 2007.

54. Coplan indictment at ¶24(f).

55. United States v. Robert Coplan, et al., 07 CR 00453 (SHS) (S.D.N.Y. 2009), transcript at 2194.

56. Joel Rosenblatt, “Locke, Lord Settles Lawsuit over Tax-Shelter Letters (Update 2),” Bloomberg News, July 2, 2009.

57. Ibid.

58. Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 87.

59. Ibid.

60. Jonathan Weisman, “Senators Question Tax Shelter Letters; Miers’s Law Firm Sold Documents Backing Arrangement the IRS Criticized,” Washington Post, October 27, 2005.

61. Ibid.

62. Fidelity International Currency Advisor A Fund, LLC v. United States, No. 4:05-cv-40151.

63. United States v. Coplan, et al., 1855, 1887–1889.

64. Ibid., 1788.

65. Ibid., 1789.

66. Ibid., 1849–1852, 1885.

67. Ibid., 1890.

68. U.S. Attorney for the Southern District of New York, “Attorney Pleads Guilty to Criminal Tax Fraud Related to Tax Shelters,” press release, September 11, 2008.

69. Lynnley Browning, “Lawyer Tied to Kickbacks Quits the Bar,” New York Times, November 16, 2006.

70. In the Matter of Jay I. Gordon, an Attorney, Respondent, Departmental Disciplinary Committee for the First Judicial Department, Petitioner, November 9, 2006.

71. Long-Term Capital Holdings v. United States, 330 F. Supp. 2d 122 (D.Conn. 2004).

72. Kara Scannell, “Nobel Winner Stiglitz Says Deals at LTCM Had No Economic Value,” Wall Street Journal, July 18, 2003, C14.

73. Roger Lowenstein, When Genius Failed (New York: Random House, 2001).

74. Long-Term Capital Holdings v. United States, 146.

75. Ibid.

76. Ibid., 151.

77. Ibid., 149.

78. Ibid.

Chapter 10

1. Interview with former IRS official.

2. “IRS Enforcement Drops Sharply,” 1999 TNT 69-3 (April 12, 1999). This article is the source of the figures in this paragraph.

3. See U.S. Code, Title 26, §6112 (1984) (amended in 2004); the legislation was the Deficit Reduction Act of 1984, PL 98-369.

4. 293 U.S. 495 (1935).

5. ACM Partnership v. Comm’r, 157 F.3d 231 (3d Cir. 1998).

6. Ibid. at 247.

7. Randall Smith, “Collection Drive: IRS Battles Colgate Over an Arcane Deal That Cut Its Tax Bill—Merrill-Designed Partnership Is Part of ‘Vibrant’ Genre: The Corporate Shelter—Paper Losses and Paper Gains,” Wall Street Journal, May 3, 1996, A1.

8. Janet Novack and Laura Saunders, “The Hustling of X-Rated Shelters,” Forbes, December 14, 1998.

9. This development is discussed in chapter 3.

10. Novack and Saunders, “The Hustling of X-Rated Shelters,” 3.

11. Ibid., 4.

12. Joseph Bankman, “The New Market in Corporate Tax Shelters,” Tax Notes 83 (June 21, 1999): 1775.

13. Ibid., 1776.

14. Ibid., 1782.

15. Ibid., 1784, 1785.

16. U.S. Department of the Treasury, The Problem of Corporate Tax Shelters: Discussion, Analysis, and Legislative Proposals, July 1999, http://www.treasury.gov/ resource-center/tax-policy/Documents/ctswhite.pdf (accessed October 6, 2013).

17. Ibid., i.

18. The Treasury report acknowledged that differences between accounting and tax income can result from factors other than reliance on tax shelters, such as the operation of accelerated depreciation rules. The difference nonetheless had been steadily increasing in the last several years. For instance, the ratio between book and tax income was 1.08 in 1990 and 1.86 in 1996, which was the highest since 1985; ibid., 32.

19. Ibid., 28–29.

20. Ibid., 28.

21. Revenue Provisions in President’s Fiscal Year 2000 Budget, Written Testimony of Ken Kies in Hearings before the Committee on Ways and Means, House of Representatives, One Hundred Sixth Congress, First Session, March 10, 1999, reprinted in 1999 TNT 47-69 (March 10, 1999).

22. Ibid.

23. Ibid., transcript, 227.

24. Ibid., 228.

25. Ibid.

26. Ibid., 73.

27. Ibid., 75.

28. Ibid., 77.

29. Ibid., 80.

30. “IRS Oversight,” hearings before the Senate Finance Committee (April 22, 1999), http://www.finance.senate.gov/library/hearings/download/?id=28acef51-4e7c-4389-b196-12ea9086ee19 (accessed October 6, 2013).

31. William V. Roth, The Power to Destroy (New York: Atlantic Monthly Press, 1999), 185–206.

32. William H. Webster, Review of the Internal Revenue Service’s Criminal Investigation Division (United States, Internal Revenue Service 1999), 3.

33. Ibid., 2.

34. Amy Hamilton, “IRS to Launch Corporate Tax Shelter Initiative,” 1999 TNT 207-4 (October 27, 1999).

35. Internal Revenue Service, “Matthews to Head Criminal Investigation,” 1999 TNT 230-13 (December 1, 1999).

36. Transcript of Hearings on Corporate Tax Shelters, before the Committee on Ways and Means, House of Representatives, One Hundred Sixth Congress, First Session, November 10, 1999, 102, reprinted in 1999 TNT 223-28 (November 19, 1999).

37. Ibid., 144.

38. Ibid., 145.

39. Ibid.

40. Ibid., 145–146.

41. “Doggett Release on Shutdown of ‘Boss’ Tax Shelter,” 1999 TNT 237-18 (December 10, 1999).

42. John McKinnon, “Written Off: How New Tax Shelter Promised Big Savings But Finally Fell Apart—For PricewaterhouseCoopers, Complex Plan Ultimately Proved an Embarrassment—The Old Paper-Clip Trick,” Wall Street Journal, August 21, 2000.

43. Ibid.

44. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry: The Role of Accountants, Lawyers, and Financial Professionals, hearings, November 18 and 20, 2003 (Washington, D.C.: Government Printing Office, 2004), vol. 1, 54.

45. Sala v. United States, No. 05-cv-00636-LTB-KLM (April 22, 2008).

46. “Kiss That Tax Shelter Goodbye?,” Business Week, November 14, 1999.

47. Interview with former Treasury official.

48. “Summers Speech on Tax Shelters,” 2000 TNT 40-34 (February 29, 2000).

49. Ibid.

50. “IRS Issues Temporary and Proposed Regs on Corporate Tax Shelter Registration,” 2000 TNT 40-19 (February 19, 2000).

51. “IRS Issues Temporary and Proposed Regs on Customer List Requirement,” 2000 TNT 40-18 (February 29, 2000).

52. IRS Bulletin No. 2000-12, “Disclosure Requirements for Corporate Tax Shelters,” March 20, 2000, at 835, 836–837.

53. IRS Notice 2000-44, “Tax Avoidance Using Artificially High Basis,” August 11, 2000.

54. Jacoboni v. KPMG, et al., Case No. 6:02-CV-510-On1-22DAB, Richard (Larry) DeLap deposition (July 18, 2003), 51.

55. Lee Shepard, “Should We Have Tax Shelter Legislation,” 2000 TNT 220-30 (November 13, 2000).

56. For a history of the U.S. corporate income tax and an account of the debate, see Steven A. Bank, From Sword to Shield: The Transformation of the Corporate Income Tax, 1861 to Present (New York: Oxford University Press, 2010).

57. Shepard, “Should We Have Tax Shelter Legislation.”

58. “Grassley-Baucus Release on Draft Tax Shelter Bill,” 2001 TNT 151-64 (August 6, 2001).

59. “IRS Publishes Proposed Circular 230 REGS,” 2001 TNT 14-120 (January 22, 2001).

60. “Senior Counsel Warns of Vigorous Enforcement of Tax Shelter Cases,” 2001 TNT 43-7 (March 5, 2001).

61. “IRS, Merrill Lynch Reach Settlement over Tax Shelter,” 2001 TNT 182-24 (August 30, 2001).

62. IES Industries Inc. v. United States, 253 F.3d 350 (8th Cir. 2001); United Parcel Service v. Commissioner, 254 F.3d 1014 (11th Cir. 2001).

63. Boca Investerings Partnership v. United States, 314 F.3d 625 (D.C. Cir. 2003).

64. Saba Partnership v. Commissioner, 273 F.3d 1135 (D.C. Cir. 2001); Compaq Computer Corp. Commissioner 277 F.3d. 778 (5th Cir. 2001).

65. “Kies Seeks Meeting with Treasury on Leasing Transaction,” 2001 TNT 139-37 (July 19, 2001).

66. “IRS Tax Shelter Analysis,” 2001 TNT 250-11 (December 18, 2001).

67. “IRS, Treasury Officials Promote Shelter Disclosure Initiative,” 2002 TNT 17-4 (January 25, 2000).

68. “Disclosure Initiative for Accuracy-Related Penalties Announced,” 2001 TNT 247-3 (December 24, 2001).

69. “ABA Tax Section Meeting: LMSB Official Reviews Corporate Tax Shelter Disclosure Initiative,” 2002 TNT 14-5 (January 22, 2002).

70. “IRS, Treasury Officials Promote Shelter Disclosure Initiative.”

71. “ABA Tax Section Meeting: LMSB Official Reviews.”

72. “Privilege Waiver Agreement for Shelter Disclosure,” 2002 TNT 37-66 (February 25, 2002).

73. “More Shelters Being Disclosed in Amnesty Initiative,” 2002 TNT 48-5 (March 12, 2001).

74. Ibid.

75. Ibid.

76. “Treasury’s Enforcement Proposals for Abusive Tax Avoidance Transactions,” 2002 TNT 55-28 (March 21, 2002).

77. Ibid., 92–93.

78. Ibid. The regulations also altered the definition of “reportable transaction” to consist of any transaction that met at least one of a list of criteria.

79. “Rossotti Testimony at Finance Committee Hearing on Tax Scams,” 2001 TNT 67-49 (April 6, 2001).

80. Ibid.

81. “Rossotti Testimony at Finance Committee Hearing on Fraudulent Tax Schemes,” 2002 TNT 71-30 (April 12, 2002).

82. “GAO Testimony at JCT Joint Review of IRS,” 2002 TNT 94-17 (May 15, 2002).

83. Ibid.

84. “JCT Reports on Progress in IRS Reform,” 2002 TNT 93-18 (May 14, 2002).

85. John D. McKinnon, “Bush Administration Appears to Ease Curbs on Tax Shelters,” Wall Street Journal, March 4, 2002.

86. Report of Investigation by the Special Investigative Committee of the Board of Directors of Enron Corp. February 1, 2002, http://i.cnn.net/cnn/2002/LAW/02/02/enron.report/powers.report.pdf (accessed October 9, 2013).

87. “Grassley Release on Enron Tax Shelters,” 2002 TNT 13-26 (January 18, 2002).

88. John McKinnon, “Former Critics of IRS in Congress Now Clamor for Tough Enforcement,” Wall Street Journal, April 8, 2002, A28.

89. “Finance Presses for Enron’s Opinion Letters,” 2002 TNT 123-5 (June 26, 2002).

90. McKinnon, “Former Critics of IRS in Congress Now Clamor for Tough Enforcement.”

91. Lee A. Sheppard, “Dissecting Partnership Gambits For Rich People,” 2002 TNT 126-3 (July 1, 2002); “Fishtail, Bacchus, Sundance, and Slapshot: Four Enron Transactions Funded and Facilitated by U.S. Financial Institutions,” S. Prt. 107-82 (107th Congress, January 2, 2003), http://www.gpo.gov/fdsys/pkg/CPRT -107SPRT83559/pdf/CPRT-107SPRT83559.pdf (accessed October 9, 2013); “Report of Investigation of Enron Corporation and Related Entities Regarding Federal Tax and Compensation Issues, and Policy Recommendations,” Joint Committee on Taxation Staff, http://www.jct.gov/s-3-03-vol1.pdf (accessed October 9, 2013).

92. “Corporate Tax Shelters: The Slippery Slope to Enron?,” 2002 TNT 58-26; see also Victor Fleischer, “Options Backdating, Tax Shelters, and Corporate Culture,” Virginia Tax Review 24 (2007): 103.

93. “Senate Panel Gives IRS Shelter Crackdown $ 10 Million Boost,” 2002 TNT 137-1 (July 17, 2002).

Chapter 11

1. John D. McKinnon, “Enron May Use IRS Amnesty Program to Seek Relief from Tax-Shelter Fines,” Wall Street Journal, February 28, 2002, A1.

2. “Examination of Books and Witness,” U.S. Code, Title 26, §7602(a).

3. Ibid., §7602(b).

4. Internal Revenue Service, IR-2002-82, June 27, 2002; U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” report, April 13, 2005, 100.

5. U.S. Petition to Enforce Summonses against Arthur Andersen (Civil Action No. 02C 6790), reprinted in 2002 TNT 186-14 (September 25, 2002).

6. Ibid.

7. “Poe Intervenors Assert Section 7525 Privilege,” reprinted in 2003 TNT 132-31 (July 10, 2003). Taxpayer brief in support of motion to intervene in Arthur Andersen Enforcement Action.

8. “Justice Department Petition Relating to BDO Seidman Enforcement Actions,” reprinted in 2002 TNT 136-6 (July 16, 2002).

9. Camferdam, et al., v. Ernst & Young, et al., complaint, sec. 5, reprinted in 2002 TNT 248-4 (December 26, 2002).

10. Lee A. Sheppard, “News Analysis: Dissecting the Compensatory Option Sale Shelter,” 2003 TNT 27-6 (February 10, 2003).

11. Editorial, “Unbridled Greed,” New York Times, February 24, 2003, A16.

12. David Cay Johnston, “Wall St. Firms Are Faulted in Report on Enron’s Taxes,” New York Times, February 13, 2003.

13. “IRS Issues Final Regs on Tax Shelter Reporting, List Maintenance Rules,” 2003 TNT 40-10 (February 28, 2003).

14. “Chief Counsel Sees Work on Guidance and Shelters Pay Off,” 2003 TNT 47-2 (March 11, 2003).

15. Prepared Testimony of Commissioner of Internal Revenue Mark W. Everson before the Senate Finance Committee Hearing on Corporate Tax Shelters, October 21, 2003, 114, www.irs.gov/pub/irs-utl/sfc-oct19-03.pdf (accessed October 9, 2013); http://www.finance.senate.gov/imo/media/doc/102103etest.pdf (accessed October 6, 2013).

16. “Senate Confirms Everson as New IRS Commissioner,” 2003 TNT 86-7 (May 5, 2003).

17. “Everson Testimony at House Appropriations Panel Hearing on IRS Compliance Efforts,” reprinted in 2003 TNT 89-36 (May 8, 2003).

18. “Matthews Named IRS Deputy Commissioner for Services and Enforcement,” 2003 TNT 143-4 (July 25, 2003).

19. Ibid.

20. Internal Revenue Service, IR-2003-84, July 2, 2003, http://www.irs.gov/uac/IR-2003-84 (accessed October 6, 2013).

21. United States v. BDO Seidman, 337 F.3d 802 (7th Cir. 2003).

22. United States v. BDO Seidman, 2004 U.S. Dist. LEXIS 12145 (N.D.Ill. East. Div. 2004).

23. United States v. Arthur Andersen, 2003 U.S. Dist. LEXIS 14228 (N.D.Ill. 2003).

24. “Everson Says IRS Will Resort to Summons Enforcement Where Necessary,” 2003 TNT 181-30 (September 18, 2003).

25. “U.S. Petition to Enforce Summonses against Arthur Andersen.”

26. “Sidley Austin Says Expulsion of Partner Not Due to Shelter Opinions,” 2003 TNT 210-6 (October 30, 2003).

27. Ibid.

28. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry: The Role of Accountants, Lawyers, and Financial Professionals, hearings, November 18 and 20, 2003 (Washington, D.C.: Government Printing Office, 2004), vol. 1, 76.

29. Ibid., 77.

30. Ibid., 82.

31. Ibid., 83.

32. Ibid., 88.

33. “Responses to Supplemental Questions for the Record Submitted by Senator Carl Levin for Thomas R. Smith, Jr.,” ibid., exhibit 152, vol. 3, 2999.

34. Ibid., 3004.

35. Declaration of Richard E. Bosch, Justice Department Enforcement Petition, reprinted in 2003 TNT 201-18 (October 15, 2003).

36. United States v. Sidley Austin Brown & Wood, 2004 U.S. Dist. LEXIS 7355 (N.D.Ill. 2004).

37. ABA Section of Taxation Meeting: “IRS Office of Professional Responsibility Director Outlines Changes,” 2004 TNT 90-8 (May 10, 2004).

38. “IRS and Practitioners Wrestle over Son-of-Boss Settlement Offer,” 2004 TNT 91-2 (May 11, 2004).

39. “Strong Response to ‘Son of Boss’ Settlement Initiative,” Internal Revenue Service, IR-2004-87, July 1, 2004, http://www.irs.gov/uac/Strong-Response-to-“Son-of-Boss”-Settlement-Initiative (accessed October 6, 2013).

40. “Son-of-Boss Settlement Nets $ 3.2 Billion for IRS,” 2005 TNT 57-1 (March 25, 2005).

41. “Grand Jury Investigating Ernst & Young Tax Shelter Sales,” Accountingweb, May 25, 2004, http://www.accountingweb.com/topic/firm-news/grand-jury-investigating-ernst-young-tax-shelter-sales (accessed October 6, 2013).

42. Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” 87.

43. Long-Term Capital Holdings v. United States, 330 F. Supp. 2d 122 (D.Conn. 2004), reprinted in 2004 TNT 169-15 (August 31, 2004); aff’d in unpublished opinion, 2005 U.S. App. Lexis 20988 (2nd Cir. 2005).

44. Internal Revenue Service, Announcement 2005-80, reprinted in 2005 TNT 208-11 (October 28, 2005).

45. News analysis, “Two Minutes to Midnight: Settle Your Shelter Case,” 2006 TNT 34-4 (February 21, 2006).

46. U.S. Attorney’s Office, Southern District of New York, “Manhattan United States Attorney Announces Decision Not to Prosecute Sidley Austin LLP,” May 23, 2007.

47. “Sidley Austin to Pay $39.4 Million Tax Shelter Penalty,” 2007 TNT 101-3 (May 24, 2007).

48. “Court Approves Amended Settlement between Shelter Investors, KPMG (Marvin Simon Et Al. V. KPMG LLP et al.),” court order, reprinted at 2006 TNT 107-23 (June 5, 2006).

49. Lynnley Browning, “Four Men, but Not Ernst & Young, Are Charged in Tax Shelter Case,” New York Times, May 31, 2007.

50. Trial transcript in United States v. Coplan, et al. (07 CR 00453 (SHS)), 2108–2109.

51. Ibid., 2538.

52. Mark Hamblett, “Tax Lawyers’ Sentences Include ‘Explaining Dangers of Misleading IRS,’” New York Law Journal, January 22, 2010.

53. Non-prosecution agreement between Department of Justice and Ernst & Young (February 26, 2013), statement of facts, http://www.justice.gov/usao/nys/pressreleases/March13/EYNPAPR/EY%20NPA.pdf (accessed October 8, 2013).

54. Ibid.

55. “DOJ Says It Will Not Prosecute Deutsche Bank AG for Tax Crimes,” 2010 TNT 245-25 (December 22, 2010) (non-prosecution agreement).

56. Ibid., 7.

57. Ibid.

58. United States v. Daugerdas, et al., 09 CR 581 (WHP) (S.D.N.Y. 2011), transcript, 6385–6390.

59. Janet Novack, “BDO Admits Generating $6.5 Billion in Phony Tax Shelter Losses, Pays $50 Million,” Forbes, June 13, 2012.

60. Taylor at one time practiced at what were then Pillsbury, Madison, & Sutro; LeBouef, Lamb, Greene, & MacRae; Altheimer & Gray; and Seyfarth Shaw. There is no evidence that anyone else at these firms was aware of his involvement in promoting abusive tax shelters.

61. Indictment, United States v. Evanson, et al., Case 2:05-cr-00805-TC-DON (C.D.Utah), November 2, 2005; “Six Indicted for $20 Million Conspiracy to Defraud the U.S. Government,” Department of Justice press release, November 3, 2005.

62. “Former Arnold Porter Partner Gets Probation for Tax Scheme,” JD Journal, March 30, 2010, http://www.jdjournal.com/2010/03/30/former-arnold-porter-partner-gets-probation-for-tax-scheme/ (accessed October 6, 2013).

63. Mark Hamblett, “Former Arnold & Porter Partner Gets Probation in Tax Shelter Fraud Case,” Law.Com, March 31, 2010, http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1202447152661 (accessed October 6, 2013).

64. “Former Arnold & Porter Partner Disbarred in D.C.,” Legal Times, April 16, 2009, http://legaltimes.typepad.com/blt/2009/04/former-arnold-porter-partner-disbarred-in-dc.html.

65. Indictment, United States v. Jeffery Greenstein, et al., case no. CR08-0296RSM (W.D.Wash.), June 4, 2009, http://online.wsj.com/public/resources/documents/greensteinidictment.pdf.

66. Dennis J. Ventry, Jr., “Whistleblowers and Quitam for Tax,” Tax Lawyer 61 (2008): 357, 361.

67. IRS Whistleblower Office, 2012 Annual Report to Congress, reprinted in 2013 TNT 31-14 (February 14, 2013).

68. The doctrine is codified at U.S. Code, Title 26, §7701(o) (2012).

69. IRS, “Guidance for Examiners and Managers on the Codified Economic Substance Doctrine and Related Penalties,” http://www.irs.gov/Businesses/ Guidance-for-Examiners-and-Managers-on-the-Codified-Economic-Substance-Doctrine-and-Related-Penalties, July 15, 2011.

70. IRS Notice 2010-62, “Interim Guidance under the Codification of the Economic Substance Doctrine and Related Provisions in the Health Care and Education Reconciliation Act of 2010,” 5.

71. Scholars have taken different views of the value of codifying the economic substance doctrine. See Marvin A. Chirelstein and Lawrence A. Zelenak, “Tax Shelters and the Search for a Silver Bullet,” Columbia Law Review 105 (2005): 1839; Bret Wells, “How Codification Changes Decided Cases,” Florida Tax Review 10 (2011): 411.

72. U.S. Code, Title 26, §§6662(b)(6), 6662(i).

73. “New York State Bar Association Tax Section Applauds Some Anti-Corporate Tax Shelter Proposals, Rejects Others. Tax Section, Report on Corporate Tax Shelters,” 1999 TNT 82-29 (April 23, 1999), at sec. 10.

74. “Ernst & Young Analyzes Tax Transparency Dynamics,” 2006 TNT 69-10 (April 1, 2006).

75. Susan Cleary Morse, “The How and Why of the New Public Corporation Tax Shelter Compliance Norm,” Fordham Law Review 75 (2006–2007): 961.

76. Ibid., 964–973.

77. Financial Accounting Standards Board, FASB Interpretation No. 48: “Accounting for Uncertainty in Income Taxes,” June 2006, http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175820931560&blobheader=application/pdf (accessed October 6, 2013).

Chapter 12

1. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry: The Role of Accountants, Lawyers, and Financial Professionals, hearings, November 18 and 20, 2003 (Washington, D.C.: Government Printing Office, 2004), exhibit 98yy, vol. 3, 2388.

2. Ibid.

3. IRS Agent Declaration in Support of Justice Department’s KPMG Enforcement Actions, reprinted in 2002 TNT 136-10 (July 16, 2002).

4. Ibid.

5. Jacoboni v. KPMG, Case No. 6:02-CV-510 (M.D.Fla. April 29, 2002).

6. Frontline, “Tax Me if You Can,” PBS documentary, http://www.pbs.org/wgbh/pages/frontline/shows/tax/etc/script.html (accessed January 14, 2014).

7. Perez, et al., v. KPMG, et al., C2593-02-A, District Court, 92nd Judicial District, Hidalgo County (November 19, 2003).

8. Cassell Bryan-Low, “Lawsuits over Tax Shelters Suggest a Hard Sell by KPMG,” Wall Street Journal, May 21, 2003, C1.

9. Michael Hamersley, Written Testimony before the United States Senate Finance Committee, October 21, 2003, reprinted in 2003 TNT 204-35 (“Hamersley Senate Testimony”).

10. Frontline, “Tax Me if You Can.”

11. Michael Hamersley v. KPMG, LLP, et al., Case No. BC 297905, complaint, ¶9, Superior Court of the California (L.A. County), reprinted in 2003 TNT 124-5 (June 27, 2003).

12. Hamersley v. KPMG, complaint, ¶17.

13. Ibid., ¶18.

14. Ibid.

15. Ibid., ¶¶46, 50.

16. Hamersley v. KPMG, written testimony, 1–2, 8.

17. Hamersley v. KPMG, complaint, ¶¶58, 60, 62, 63.

18. “Tax Shelters: Who’s Buying, Who’s Selling, and What’s the Government Doing About It?,” Hearing before the Committee on Finance, United States Senate, 108th Cong., First Session (October 21, 2003), 128–129.

19. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, vol. 1, 18–19.

20. Ibid., 33, 32.

21. Ibid., 57.

22. Ibid., 39.

23. Ibid.

24. Ibid., 40.

25. Ibid., 44.

26. David Cay Johnston, “Changes at KPMG after Criticism of Its Tax Shelters,” New York Times, January 13, 2004, C1.

27. Permanent Subcommittee on Investigations, U.S. Tax Shelter Industry, vol. 1, 67.

28. Ibid., 145, appendix: “Four KPMG Case Studies: FLIP, OPIS, BLIPS, and SC2.”

29. Lynnley Browning, “How an Accounting Firm Went from Resistance to Resignation,” New York Times, August 28, 2005, 11.

30. Ibid.

31. Johnston, “Changes at KPMG.”

32. U.S. Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations, “The Role of Professional Firms in the U.S. Tax Shelter Industry,” report, April 13, 2005, 75–76.

33. Jonathan Weil, “KPMG Wins Dismissal of a Suit by Ex-Client Who Claimed Fraud,” Wall Street Journal, March 15, 2004, C5.

34. IRS, Notice 2004-30, 2004-1 C.B. 828, 2004 IRB LEXIS 142, 2004-17 I.R.B. 828 (I.R.S. 2004).

35. “In the Crossfire: Prosecutors’ Tough New Tactics Turn Firms against Employees—as Sentencing Rules Stiffen, KPMG Axes Tax Partners, Won’t Pay Their Legal Costs—What ‘Cooperation’ Entails,” Wall Street Journal, June 4, 2004, A1.

36. United States v. Stein, 435 F.Supp.2d 330 (2006).

37. Ibid.

38. United States v. KPMG, initial report and recommendations, January 27, 2003 (D.D.C.), reprinted in 2003 TNT 52-18 (March 18, 2003).

39. United States v. KPMG, 316 F.Supp.2d 30 (D.D.C. 2004).

40. Ibid., 37.

41. Ibid., 38.

42. Ibid., 40.

43. Ibid.

44. Browning, “How an Accounting Firm Went from Resistance to Resignation”; Jonathan Weil, “KPMG’s Chief of Finance Quits as Probes Go On,” Wall Street Journal, July 7, 2004, A3.

45. Carrie Johnson and Brooke A. Masters, “KPMG Hires Federal Judge; Firm Facing Investigation, Civil Charges,” Washington Post, January 21, 2005, E1.

46. Ibid.

47. Browning, “How an Accounting Firm Went from Resistance to Resignation.”

48. Diya Gullapalli, “KPMG Ousts Executive, Partners; Steps Tied to Tax-Shelter Scrutiny,” Wall Street Journal, April 28, 2005, C2.

49. Deborah Solomon and Diya Gullapalli, “SEC Weighs a ‘Big Three’ World,” Wall Street Journal, June 22, 2005, C1.

50. Joseph Nocera, “Auditors: Too Few to Fail,” New York Times, June 25, 2005, C1.

51. Statement of David Kelley, quoted in Joseph L. Barloon Memorandum to KPMG March 3, 2005 Re: March 2, 2005 Meeting with SDNY, 3 (on file with authors).

52. Diya Gullapalli, “KPMG’s Flynn Takes the Helm at a Stormy Time,” Wall Street Journal, June 17, 2005, C1.

53. Department of Justice, U.S. Attorney’s Office, Southern District of New York, Re: KPMG—Deferred Prosecution Agreement, August 26, 2005, http://www.justice.gov/ usao/nys/pressreleases/August05/kpmgdpagmt.pdf (accessed 10/8/2013).

54. KPMG Statement of Facts, August 26, 2005, http://www.justice.gov/usao/nys/pressreleases/August05/kpmgstatementoffacts.pdf (accessed 10/8/2013).

55. Anonymous Memo to WSJ et al. re: KPMG and DOJ Investigation of Tax Shelter Activity: Is Anyone Interested in the Truth?, August 10, 2005 (on file with authors).

56. Jonathan Weil, “KPMG Tax Duo Tied to Shelters,” Wall Street Journal, August 10, 2005, C1.

57. “KPMG Shifts Tax Managers,” New York Times, September 13, 2005, C19 (Reuters).

58. “Banker Pleads Guilty to Fraud Charges for Blips Scheme,” 2005 TNT 155-1 (August 12, 2005).

59. See United States v. Stein, superseding indictment (October 2004), reprinted in 2005 TNT 200-14 (October 17, 2005).

60. United States v. Stein, 435 F.Supp.2d 330, 351 (S.D.N.Y. 2006); United States v. Stein, 486 F.3d 753 (2nd Cir. 2007).

61. United States v. Stein, 495 F.Supp.2d 390 (S.D.N.Y. 2007).

62. United States v. Stein, 541 F.3d 130 (2nd Cir. 2008).

63. John W. Darrah, “Court Order in Jenkens & Gilchrist Enforcement Action. (John Does),” 3 TNT 127-23 (July 2, 2003).

64. Sheryl Stratton, “Privilege Sidelines Shelter Actions, Gov’t Changes Tack,” 2003 TNT 140-7 (July 22, 2003).

65. Ibid.

66. Ibid.

67. Kathy Kristof, “IRS Demands List of Law Firm’s Tax-Shelter Clients,” Sun-Sentinel, July 1, 2003.

68. Justice Petition in Jenkens & Gilchrist Enforcement Action—Exhibit B, reprinted in 2003 TNT 127-36 (July 2, 2003).

69. United States v. Jenkens & Gilchrist, 2004 U.S. Dist. LEXIS 6919 (N.D.Ill. 2004).

70. United States v. Jenkens & Gilchrist, 2004 U.S. Dist. LEXIS 8645 (N.D.Ill. 2004).

71. Brenda Sapino Jeffreys and Miriam Rozen, “Taxing Times,” Texas Lawyer, March 15, 2004, 19.

72. Cassell Bryan-Low, “Moving the Market: Jenkens & Gilchrist Agrees to Pay $75 Million in Tax Shelter Case,” Wall Street Journal, March 8, 2004, C3.

73. Class Certification, Jenkens & Gilchrist Settlement Approved (Thomas Denney et al. v. Jenkens & Gilchrist et al.) (230 F.R.D. 317) (No. 03 Civ. 5460 (SAS)) (D.C.N.Y.), reprinted in 2005 TNT 34-11 (February 22, 2005).

74. “Law Firm to Settle Suits over Tax Advice,” Bloomberg News, January 4, 2005.

75. Denney, et al., v. Jenkens & Gilchrist, et al., No. 03-CV-5460 (SAS), Jenkens & Gilchrist’s Brief in Support of the Settlement, January 18, 2005, at 8.

76. Ibid., 9.

77. Ibid., 8.

78. Lynnley Browning, “Tax Shelter Inquiry Expands,” New York Times, January 25, 2006.

79. Paul Davies, David Reilly, and Nathan Koppel, “Law Firm’s Work on Tax Shelters Leads to Demise—Litigation, Penalty Fell Jenkens & Gilchrist; ‘An Orderly Transition,’” Wall Street Journal, March 30, 2007, A1.

80. “U.S. Enters Non-Prosecution with Jenkens & Gilchrist in Connection with Its Fraudulent Tax Shelter Activity,” press release, Department of Justice, U.S. Attorney’s Office, Southern District of New York, March 29, 2007, http://www.irs .gov/pub/irs-news/jenkins__gilchrist_np_pr.pdf (accessed October 8, 2013).

81. Jenkens & Gilchrist, Statement of Jenkens & Gilchrist re: Non-Prosecution Agreement, reprinted in 2007 TNT 62-50 (March 30, 2007).

82. “Jenkens & Gilchrist Admits It Is Subject to $76 Million IRS Penalty,” IR-2007-71, March 29, 2007, http://www.irs.gov/uac/Jenkens-&-Gilchrist-Admits -It-Is-Subject-to-$76-Million-IRS-Penalty (accessed October 8, 2013).

83. United States v. Daugerdas, et al., indictment, 09 CR (S.D.N.Y. 2009), at 9.

84. “Former Accounting Firm Partner Pleads Guilty to Tax Fraud, ” press release, U.S. Department of Justice, U.S. Attorney’s Office, Southern District of New York, July 9, 2009, http://www.justice.gov/usao/nys/pressreleases/July09/greismanrobertpleapr.pdf (accessed October 8, 2013); “Former Jenkens & Gilchrist Attorney Pleads Guilty in Manhattan Federal Court to Creating and Implementing Illegal Tax Shelters That Generated Billions of Dollars in Fraudulent Tax Losses,” press release, U.S. Department of Justice, U.S. Attorney’s Office, Southern District of New York, October 19, 2010, http://www.justice.gov/usao/nys/pressreleases/October10/mayererwinpleapr.pdf (accessed October 5, 2013).

85. United States v. Daugerdas, et al., 09 CR 581 (WHP) (S.D.N.Y. 2011), transcript, 2829.

86. The court denied Parse’s request for a new trial on the grounds that his attorneys had suspected, but failed to notify the court, that the juror was concealing the relevant information.

87. Elizabeth Chambliss and David B. Wilkins, “Promoting Effective Ethical Infrastructure in Large Law Firms: A Call for Research and Reporting,” Hofstra Law Review 30 (2002): 691; Ted Schneyer, “A Tale of Four Systems: Reflections on How Law Influences the ‘Ethical Infrastructure’ of Law Firms,” South Texas Law Review 39 (1998): 245.

Conclusion

1. John Darley, “How Organizations Socialize Individuals into Evildoing,” in Codes of Conduct: Behavior Research into Business Ethics, ed. D. M. Messick and A. E. Tenbrunsel (New York: Russell Sage Foundation, 1996), 13.

2. Christine Parker and Tanina Rostain, “Law Firms, Global Capital, and the Sociological Imagination,” Fordham Law Review 80 (2012): 2347.

3. Cheek v. United States, 498 U.S. 192 (1991).

4. Darley, “How Organizations Socialize Individuals,” 13.

5. Diane Vaughan, “The Dark Side of Organizations: Mistake, Misconduct and Disaster,” Annual Review of Sociology 25 (1999): 271–305.

6. Neil Fligstein, “Organizations: Theoretical Debates and the Scope of Organizational Theory,” in The Sage Handbook of Sociology, ed. Craig Calhoun, Chris Rojek, and Brian Turner (London: Sage Publications, 2005).

7. Vaughan, “The Dark Side of Organizations,” 289.

8. Ibid., 274.

9. Jacoboni v. KPMG, et al., Robert Simon deposition (January 9, 2004), exhibit 9, SCDOR-License-030607.

10. Dennis A. Gioia, “Pinto Fires and Personal Ethics: A Script Analysis of Missed Opportunities,” Journal of Business Ethics 11 (1992): 379.

11. Diane Vaughan, The Challenger Launch Decision: Risky Technology, Culture, and Deviance at NASA (Chicago: University of Chicago Press, 1996).

12. Sherry Turkle, Alone Together: Why We Expect More from Technology and Less from Each Other (New York: Basic Books, 2011).

13. Darley, “How Organizations Socialize Individuals,” 21

14. Memorandum from Michael Kerekes to David Dreier, Esq., Re: IRS notice and amended regulations, August 11, 2000 (on file with authors).

15. Lon L. Fuller and John D. Randall, “Professional Responsibility: Report of the Joint Conference,” American Bar Association Journal (1958): 1161 (emphasis in original).

16. Upjohn v. United States, 449 U.S. 383 (1981).

17. Benno Torgler, Tax Compliance and Tax Morale (Cheltenham: Edward Elgar Publishing, 2007); Erich Kirchler, The Economic Psychology of Tax Behavior (New York: Cambridge University Press, 2007).

18. Michael Wenzel, “Misperceptions of Social Norms about Tax Compliance: From Theory to Intervention,” Journal of Economic Psychology 26 (2005): 881.

19. Michael Wenzel, “Motivation or Rationalization: Causal Relations between Ethics, Norms, and Tax Compliance,” Journal of Economic Psychology 26 (2005): 387 (footnote omitted).

20. Daphna Lewinsohn-Zamir, “Consumer Preferences, Citizen Preferences, and the Provision of Public Goods,” Yale Law Journal 108 (1998): 379.

21. Ibid., 392.

22. Ibid. (footnote omitted).

23. Ibid., 393 (footnote omitted).

24. Tanina Rostain, “Ethics Lost: Limitations of Current Approaches to Lawyer Regulation,” Southern California Law Review (1997–1998): 3, 1336–1337.

25. Ted Schneyer, “From Self-Regulation to Bar Corporatism: What the S&L Crisis Means for the Regulation of Lawyers,” South Texas Law Review 35 (1994): 639.

26. Ibid., 673–674 (footnote omitted).

27. Treasury Department, “Rules Governing Authority to Practice,” Code of Federal Regulations, Title 31, Subtitle A, Part 10; Treasury Department Circular 230, 4-1600A C.B. (1921), 412.

28. Tanina Rostain, “Sheltering Lawyers: The Organized Tax Bar and the Tax Shelter Industry,” Yale Journal of Regulation 23 (2006): 77.

29. Dan K. Webb and Steven F. Molo, “Some Practical Considerations in Developing Effective Compliance Programs: A Framework for Meeting the Requirements of the Sentencing Guidelines,” Washington University Law Quarterly 71 (1993): 375.

30. Tahlia Gordon, Steven Mark, and Christine Parker, “Regulating Law Firm Ethics Management: An Empirical Assessment of the Regulation of Incorporated Legal Practices in NSW,” Journal of Law and Society 37, no. 3 (September 2010).

31. Non-Prosecution Agreement between Department of Justice and Ernst & Young (February 26, 2013), Statement of Facts, http://www.justice.gov/usao/nys/pressreleases/March13/EYNPAPR/EY%20NPA.pdf (accessed October 8, 2013).