Lawyer-turned-witness ordered to prison for U.S. tax fraud

NEW YORK, July 30 Wed Jul 30, 2014 5:00pm EDT

NEW YORK, July 30 (Reuters) - A former partner at defunct law firm Jenkens & Gilchrist, whom prosecutors have called the most important cooperating witness in the largest criminal tax fraud case in U.S. history, was sentenced on Wednesday to six months in prison.

At a court hearing in New York, U.S. District Judge William Pauley also ordered Erwin Mayer, of suburban Chicago, to pay $220 million in restitution jointly with other co-conspirators for his part in the promotion of tax shelters the U.S. government said led to $1.63 billion in lost revenue.

Mayer, who pleaded guilty in 2010 to conspiracy and tax evasion charges and then became a witness in two trials, apologized for the fraud.

"I'm sorry. I'm deeply sorry for the choices I have made, the damage I have caused this country and the damage I have caused my profession," Mayer told the judge as his wife and other family members looked on.

Prosecutors said Mayer's testimony was key to securing the conviction last year of Paul Daugerdas, the former head of Jenkens & Gilchrist's Chicago office. Pauley in June sentenced Daugerdas to 15 years in prison, calling him "the apex of tax shelter racketeers."

Mayer was involved in the design, marketing and implementation of fraudulent tax shelters to wealthy clients from 1995 to 2004, prosecutors said.

After beginning his career at a different law firm, he joined Jenkens & Gilchrist in 1998 with Daugerdas and another partner, Donna Guerin, as tax-shelter work picked up, prosecutors said.

Mayer was eligible for five years in prison for each of the two counts he pleaded guilty to.

Defense lawyers and prosecutors urged leniency because of what they called his tireless cooperation over four years, including 17 days of trial testimony.

The judge said he wanted to strike a balance between punishing Mayer for a massive fraud that made him $28 million in fees and recognizing the help he gave prosecutors.

"If caught, one can't just give back the ill-gotten gains, strike an agreement with the government and move on," Pauley said, adding that Mayer and co-conspirators brought down a large law firm in Jenkens & Gilchrist.

The former Dallas-based, 600-lawyer firm dissolved in 2007 after agreeing to pay $76 million to the Internal Revenue Service for the tax fraud.

Other attorneys at the firm, as well as co-conspirators at Deutsche Bank AG and accounting firm BDO Seidman, helped carry out the fraud, prosecutors said.

In addition to Daugerdas and Mayer, seven people have been convicted at trial or pleaded guilty. They included Guerin, who last year was sentenced to eight years in prison after pleading guilty to tax fraud charges.

BDO USA, as the accounting firm is now known, agreed in 2012 to pay $50 million to resolve related claims. Deutsche Bank separately agreed in 2010 to pay $553.6 million as part of a non-prosecution agreement. (Editing by Andre Grenon)

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