N.Y. energy investor gets five years, 10 months for $45 million tax scheme

NEW YORK (Reuters) - A New York energy investor was sentenced to five years and 10 months in prison on Tuesday after he pleaded guilty to engaging in a years-long scheme to avoid more than $45 million in income and other taxes.

FILE PHOTO: Manhattan businessman Morris Zukerman, accused of evading taxes, exits U.S Federal Court in the Manhattan borough of New York, U.S., June 27, 2016. REUTERS/Andrew Kelly/File Photo

Morris Zukerman, a former Morgan Stanley banker who later became chairman of investment firm M.E. Zukerman & Co, was sentenced by U.S. District Judge Analisa Torres in Manhattan federal court, according to federal prosecutors. He was also ordered to pay a $10 million fine.

Zukerman, 72, pleaded guilty to tax evasion and obstructing the Internal Revenue Service last June, a month after being indicted following a two-year grand jury investigation. As part of the plea deal, he agreed not to appeal any sentence less than 7-1/4 years.

A lawyer for Zukerman could not immediately be reached for comment.

Zukerman worked at Morgan Stanley from 1972 to 1988 and served as joint head of the investment bank’s energy group before launching M.E. Zukerman & Co, which focused on investing in energy, natural resources and agriculture companies.

Prosecutors said Zukerman schemed to evade paying taxes on income earned on the 2008 sale of an oil company he co-owned through an M.E. Zukerman subsidiary with a publicly traded company that resulted in his firm receiving $130 million.

While the company was not named in court papers, around that same time Zukerman’s company sold a Texas-based firm called Penreco that was co-owned with ConocoPhillips.

Zukerman then transferred the sale’s proceeds to a trust and various corporations, including one from which he directed $50 million be used to buy paintings by European artists from the 15th to 19th centuries, prosecutors said.

Zukerman frequently bought the paintings from galleries that were blocks away from his Manhattan home, but avoided paying New York sales taxes by having them shipped to his corporate addresses in Delaware and New Jersey and then immediately transported them back to New York, prosecutors said.

Zukerman also claimed $1 million in fraudulent charitable contribution deductions in connection with the purchase of property on Black Island off Maine’s coast, prosecutors said.

The case is U.S. v. Zukerman, U.S. District Court, Southern District of New York, No. 16-cr-194.

Reporting By Brendan Pierson in New York; Additional reporting by Nate Raymond in New York; Editing by Dan Grebler