3 Charged in Phony Tax Shelter Scheme : Accused of Providing $500 Million in Fake Losses for Wealthy

From Reuters

Three men were charged today with operating a massive tax fraud scheme that provided more than $500 million in phony tax losses for such prominent businessmen as CBS Chairman Laurence Tisch and his brother, Preston, who is President Reagan's postmaster general.

A number of celebrities, including actors Sidney Poitier, Michael Landon and Lorne Greene, producer Norman Lear and the late Andy Warhol benefitted from the scheme, according to a 31-count indictment returned by a federal grand jury.

The celebrities were not named as defendants in the indictment, which accused Charles Agee Atkins and Ernest M. Grunebaum of unlawfully aiding in the preparation of false income tax returns filed by two limited partnerships, The Securities Group and The Securities Group 1980.

The indictment charged that those two defendants and William S. Hack created false tax deductions--based on about $1.1 billion in fraudulent trading losses in government securities--to be passed on to the limited partners.

Atkins, Hack and Grunebaum are all well-known promoters of tax shelters. Atkins was known as "the boy wonder" of tax shelter plans in the late 1970s and early 1980s.

The indictment said that between 1978 and 1983, the defendants conspired to defraud the government by arranging "rigged and fraudulent" transactions in government securities and false tax deductions based on phony trading losses and interest expenses.

More than $350 million in false deductions was passed on to partners in three tax shelters.

In addition, the defendants sold more than $200 million in phony trading losses and interest expenses to other entities and individuals to be used as tax deductions, the indictment said.

It said that while $1.1 billion in trading losses and interest expenses were generated by the scheme, they were offset by "fictitious gains."

None of the three men was charged with criminal acts.

But should they be convicted, their clients will be required to pay taxes they originally avoided through the shelter scheme, plus interest and possibly penalties.

Laurence Tisch was said by the indictment to have reported a net loss of $1.1 million while his brother, Preston, reported a loss of $480,000.

The indictment said Warhol reported a loss of $600,000; Lear, $1.5 million; Landon, $1 million; Greene, $330,000, and Poitier, $500,000.

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