| FAIRFIELD, Conn.
FAIRFIELD, Conn. Aug 17 A federal appeals
court has upheld a ruling against a former senior tax lawyer at
Grant Thornton LLP and Coopers & Lybrand that banned him from
selling bogus tax shelters costing the United States government
up to $800 million in unpaid taxes.
A three-judge panel for the 8th U.S. Circuit Court of
Appeals on Tuesday rejected an appeal filed by A. Blair Stover
Jr., who had sought to overturn a Missouri federal court
decision in August 2010 barring him from promoting three tax
schemes deemed abusive by the Internal Revenue Service.
The Justice Department, which sued Stover in 2008 over the
shelters, later hailed the 2010 victory as one of its leading
efforts to crack down on the tax-shelter industry.
Stover had appealed the initial ruling, citing technical
readings of IRS language, but the appeals panel found he had
distorted and misread the language.
Stover worked at Coopers & Lybrand, the former national
accounting firm now part of PricewaterhouseCoopers, in Kansas
City, Mo., in the early 1990s, where he wrote requests for IRS
rulings and researched and drafted opinions and memoranda on
In 1993, he joined Grant Thornton, a national accounting
firm, where he rose to senior tax manager and principal in the
Kansas City office. In 2001, he left Grant Thornton to become
an equity party and "rainmaker," according to court papers, at
Kruse Mennillo LLP, a small accounting firm which he has since
The three tax shelters, known as Parallel C, ESOP/S and
Roth/S, had a common thread. For each, Stover would form a
management company to sell services to an existing operating
company owned by a client. He then falsely told his clients
that fees paid by the operating company to the management
company were deductible from the operating company's income.
Stover also told clients that income from the management
company could be almost entirely deferred through
employee-stock option plans, Roth savings plans and accounting
moves involving accrual methods.
In its decision upholding the ruling, the appeals court
wrote that "these schemes would soon pose numerous tax law
problems. It is undisputed that the management companies did
not provide any management services to the operating companies
... In some cases the management company had no employees or
bank accounts, and the management fees were recorded only on
The judges also wrote that "there is a wealth of record
evidence that Stover's clients purchased his tax arrangements
in large degree because of the tax advantages he promoted. He
promised to reduce his clients' taxable income by hundreds of
thousands of dollars."
Court papers show the IRS estimated the three shelters to
have cost the U.S. Treasury from $100 million to $800 million
in taxes. A single IRS agent spent 3,000 man-hours, or more
than a year's normal work, unraveling just two of the deals,
court papers said.
The case is United States Court of Appeals for the Eighth
Circuit, No. 10-3012. United States of America v. A. Blair
(Editing by Howard Goller, Bernard Orr)