Source: United States Department of Justice Criminal Division
Two accountants were each sentenced today to 20 months in prison for their roles in the promotion and sale of abusive syndicated conservation easement tax shelters.
According to court documents and statements made in court, Victor Smith was a CPA and founding partner of an Atlanta-based accounting firm. Beginning at least in 2014 and through at least 2019, Smith promoted and sold tax deductions to his wealthy clients in the form of units in illegal syndicated conservation easement tax shelters organized and created by co-defendants Jack Fisher, James Sinnott and others. Smith, along with his firm, sold approximately $14 million in false tax deductions to their clients, causing a tax loss to the IRS of about $4.8 million. He earned $491,400 in commissions from Fisher and Sinnott for his role in the scheme.
William Tomasello was a CPA at another accounting firm who, at least in 2015 and through at least 2019, also promoted and sold units to his wealthy clients in these same syndicated conservation easement tax shelters. Tomasello sold approximately $8.5 million in false deductions, causing a tax loss of about $2.3 million. He earned approximately $525,072 in commissions.
The scheme entailed the creation of partnerships that would purchase land and land-owning companies and then donate conservation easements over that land or the land itself. Appraisers would value the land and the partnerships would then claim a charitable contribution tax deduction based on the appraised value of the conservation easement, resulting in tax deductions flowing to the wealthy clients who purchased units in the partnership. Many of these clients joined the tax shelters after the donation of the interest in land and after the close of the relevant tax year.
Smith and Tomasello both knew that, contrary to law, these syndicated conservation easement tax shelters lacked economic substance and that their wealthy clients participated in these sham investments only to obtain a tax deduction and received only a tax benefit for their participation in the tax shelters. For example, a client who purchased units in a partnership had to “vote” ostensibly on what to do with the partnership’s land. However, Smith and Tomasello knew that the “vote” held by the partnerships each year was just optics and that the land invariably would be donated largely as a conservation easement. Smith and Tomasello also knowingly instructed and caused their clients to falsely backdate documents — such as subscription agreements and checks — related to the illegal tax shelters.
In addition to their prison sentences, U.S. District Court Judge Timothy C. Batten Sr. for the Northern District of Georgia ordered Smith to serve two years of supervised release and to pay $4,878,990.90 in restitution. Judge Batten ordered Tomasello to serve three years of supervised release, to perform 120 hours of community service and to pay $2,386,816.04 in restitution.
Seven additional defendants have previously pleaded guilty to criminal conduct related to the syndicated conservation easement tax shelter scheme of Fisher and Sinnott (who were convicted after trial). These other defendants include appraiser Walter Douglas “Terry” Roberts, accountant Stein Agee, CPA Corey Agee, CPA Ralph Anderson, CPA James Benkoil, CPA Herbert Lewis and CPA and Attorney Randall Lenz.
Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, U.S. Attorney Ryan K. Buchanan for the Northern District of Georgia and IRS Criminal Investigation Chief Guy Ficco made the announcement. They also thanked U.S. Attorney Dena J. King for the Western District of North Carolina for her office’s assistance.
IRS Criminal Investigation and the U.S. Postal Inspection Service investigated the case.
Trial Attorneys Richard M. Rolwing, Parker Tobin, Jessica Kraft and Nicholas J. Schilling Jr. of the Tax Division and Assistant U.S. Attorney Christopher Huber, Deputy Chief of the Complex Frauds Section, for the Northern District of Georgia prosecuted the case.