Head of $1-Billion Tax Shelter Scheme Guilty

Tax shelter promoter Charles Agee Atkins and two others were convicted Thursday of a scheme that generated more than $1 billion in fictitious losses in what officials believe is the largest tax fraud case in U.S. history.

Several celebrities were involved in the transactions, including Michael Landon, the late Andy Warhol and Postmaster General Preston R. Tisch. They are not accused of wrongdoing but will have to deal with the Internal Revenue Service over paying back taxes.

Atkins, 33, William S. Hack, 62, and Ernest M. Grunebaum, 52, were convicted of conspiring to defraud the Internal Revenue Service, a crime that carries a maximum five-year sentence.

In addition, Atkins, of Amelia Island Plantation, Fla., was convicted of 27 other tax-related counts; Hack, of New York, was convicted of three and Grunebaum, of Chappaqua, N.Y., was convicted on 13 more counts. Grunebaum was acquitted on two counts.

Each of those counts is punishable by a maximum three-year prison term.

U.S. District Judge Morris E. Lasker scheduled sentencing of the three, who remain free on bond, for Feb. 10.

“We certainly will pursue an appeal,” said Atkins’ lawyer, James A. Moss. “We think there’s a substantial basis, through the appellate process, to vindicate Mr. Atkins.”

A 31-count federal indictment last March accused the three of creating more than $1.3 billion in fraudulent losses and interest expenses while trading in Treasury bill futures and other government securities.

Those losses generated more than $350 million in bogus tax deductions for a number of investors, including businessmen and celebrities.

According to the prosecutor, Assistant U.S. Atty. Stuart Abrams, IRS officials believed that the scheme was “the largest tax fraud case in U.S. history.”

Others taking part in limited partnership tax shelters that promised $4 in tax deductions for every $1 invested were actors Sidney Poitier and the late Lorne Greene, television producer Norman Lear and CBS President Laurence A. Tisch, the postmaster’s brother.

Commodities Deals Claimed

None of the investors were accused of criminal activity but they face IRS civil actions seeking payment of back taxes with interest.

Abrams said the guilty verdict will “substantially enhance” the IRS’ ability to collect civil penalties.

Atkins, 33, former chairman of the holding company of Southern California Savings and the son of former Ashland Oil Co. Chairman Orin E. Atkins, took Wall Street by storm in the early 1980s with a series of tax shelters and investment partnerships that attracted tens of millions of dollars.

But the government claimed his group of tax shelters, known collectively as the Securities Groups, engaged in “prearranged, rigged and fraudulent” transactions between 1978 and 1982 by secretly arranging not to make any money on them, thus ensuring big tax deductions for investors.

Part of the defense argument, however, was that the Securities Group was a commodities dealer and its actions were legal under the Tax Reform Act of 1986.

The defense said federal tax law was ambiguous during the time of the trading but the new law clarified that commodity dealers, before 1982, could take deductions without having to prove they were motivated by profit rather than tax avoidance.

But the judge instructed the jury that the tax law change “has no effect on transactions that are shams (with) no economic substance or purpose other than generating losses,” said Abrams after the verdict.

According to Abrams, Atkins faces a maximum sentence of 86 years in prison and fines of $145,000. He was convicted on a total of 28 counts. Hack faces a total of 14 years and $30,000 in fin1702043759years and $70,000 on 14 counts.