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Tax-shelter trial of former Sidley Austin partner to start
Jury selection begins Tuesday in the trial of former Sidley Austin partner Raymond J. "R.J." Ruble, who faces criminal charges in connection with the sale of bogus tax shelters designed to help wealthy individuals avoid paying billions of dollars in taxes.
The trial of Ruble and three others will resurrect an embarrassing episode that the Chicago law firm has tried to move past.
In May, Sidley agreed to pay a $39.4 million penalty to the Internal Revenue Service to avoid criminal prosecution in the scandal linked to the once-popular shelters. While Sidley apologized for its conduct, it blamed its tax-shelter problems on Ruble, who was expelled from the partnership in 2003.
Ruble provided opinion letters vouching for the shelters sold by the giant accounting firm KPMG. Federal prosecutors charge that Ruble was not giving independent advice to clients because he was involved in the development of the tax-avoidance schemes.
Ruble began his tax-shelter work while he was at New York's Brown & Wood, which merged with Sidley in 2001. Prior to the merger, Sidley and Brown & Wood agreed that Ruble would terminate his individual tax-shelter practice, according to Sidley.
But instead, the Chicago firm has said, Ruble "circumvented that agreement" and secretly continued to provide opinion letters and to accept millions of dollars in "side payments" from a tax-shelter promoter.
Federal prosecutors cited Sidley's limited involvement in the tax fraud as one of the reasons it decided not to pursue charges against the firm. But Ruble was not protected by the settlement.
Ruble's defense took a hit last month when one of the five defendants pleaded guilty and agreed to cooperate against the others. His lawyer, Jack Hoffinger, would not comment on the case other than to say his client is going to trial. Sidley also declined comment.
Two of the defendants worked at Presidio Advisory Services, which prosecutors allege earned fees by helping KPMG sell the shelters. The fourth defendant is a former KPMG tax partner. Opening statements are scheduled to begin Oct. 16.
Thirteen other former KPMG executives had their charges dismissed in July after a federal judge found that prosecutors had violated their constitutional rights by pressuring KPMG to cut off their legal fees.
KPMG has admitted to fraudulent conduct in the design and marketing of certain tax shelters and agreed to pay a $456 million penalty as part of a deferred-prosecution agreement, which enables the firm to avoid criminal indictment.
Last year, KPMG and Sidley agreed to pay $154 million to investors who bought the shelters.
ON THE MOVE: Bell, Boyd & Lloyd suffered a setback when Michael Sennett, one of its top lawyers, left to join the Chicago office of Jones Day.
Sennett has a broad-based antitrust practice, representing clients such as health-care giant Baxter International Inc. and German conglomerate Bosch. He chaired Bell Boyd's antitrust and trade-regulation department and also served on the firm's management and executive committees.
Also leaving Bell Boyd for Jones Day are antitrust lawyers William Dolan, Paula Render and Pamela Taylor.
The departures leave Bell Boyd's antitrust group with 16 lawyers, including Scott Mendel, who will chair the department.