* Four partners convicted of helping the rich evade taxes
* 2nd Circuit reverses two convictions, upholds two others
* Fifth defendant's conviction upheld, but fine reduced
By Jonathan Stempel
NEW YORK, Nov 29 A federal appeals court on
Thursday threw out the convictions of two former Ernst & Young
LLP partners over illegal tax shelters the accounting
firm used to help wealthy people evade income taxes.
By a 2-1 vote, a panel of the 2nd U.S. Circuit Court of
Appeals in New York found a lack of evidence to support the
convictions of tax lawyers Martin Nissenbaum and Richard
The panel affirmed the related convictions of former
partners Robert Coplan, also a tax lawyer, and Brian Vaughn, an
accountant. It left intact the conviction of a fifth defendant,
investment adviser Charles Bolton, who pleaded guilty, but
ordered that his fine be reduced.
Nissenbaum had been sentenced to 30 months in prison,
Shapiro to 28 months, Coplan to 36 months, Vaughn to 20 months
and Bolton to 15 months. All remained free on bail during their
appeals. They were sentenced in 2010.
The defendants were charged over their alleged involvement
in five tax shelters sold or implemented by Ernst & Young
between 1999 and 2001.
Prosecutors said they cost the government $2 billion in
taxes by helping people with more than $10 million of taxable
income create paper losses, or be taxed at the capital gains
rate rather than the higher ordinary income rate.
These shelters were created by an Ernst & Young unit known
as VIPER, which stood for "value ideas produce extraordinary
Many wealthy people use tax shelters to reduce or defer tax
TAX EVASION AND CONSPIRACY
The partners had been convicted in May 2009 on tax evasion
and conspiracy charges after a 10-week jury trial. Coplan and
Nissenbaum were also convicted of obstructing the IRS, and
Coplan and Vaughn of making false statements to that agency.
Bolton pleaded guilty to a single conspiracy charge, but
challenged the length of his prison term. He and the government
agreed that his fine should be reduced from $3 million to no
more than the statutory maximum of $250,000.
Ernst & Young was not charged. It has said it cooperated
Circuit Judge Jose Cabranes wrote the majority opinion and
was joined by Circuit Judge Joseph McLaughlin. Circuit Judge
Amalya Kearse dissented in part, saying she would have upheld
Shapiro's conviction and most of Nissenbaum's.
Jerika Richardson, a spokeswoman for U.S. Attorney Preet
Bharara in New York, declined to comment.
Nathan Lewin, a lawyer for Nissenbaum, said he was gratified
that his client's conviction was reversed.
"We are thrilled that the court reached the right and just
result," said Alexandra Shapiro, a lawyer for Richard Shapiro,
in an email.
Dennis Riordan, a lawyer for Coplan; Robert Anderson, a
lawyer for Vaughn; and Marc Garber, a lawyer for Bolton, did not
immediately respond to requests for a comment or had no
Amy Call Well, an Ernst & Young spokeswoman, had no
In 2005, rival accounting firm KPMG LLP narrowly
avoided an indictment by reaching a $456 million deferred
prosecution agreement with the government in a separate criminal
tax shelter case.
The case is U.S. v. Coplan et al, 2nd U.S. Circuit Court of
Appeals, No. 10-583.