Thursday, March 23, 2023

Promoters of Abusive Conservation Easement Deductions Enjoined from Similar Conduct (3/23/23)

The Court entered Final Judments of Permanent Injunctions against promoters of abusive conservation easement tax shelters (a genre of bullshit tax shelters). The promoters enjoined are Ecovest Capital,   Ecovest Capital, Inc., Alan N. Solon, Robert M. McCullough, and Ralph R. Teal, Jr and Claud Clark III. The Final Judgments are (i) for Claud Clark III here; and (iii) for the remaining defendants here.  The Courtlistener docket entries with links to the pertinent documents most of the key documents in the proceeding are here. The terms summarized are:

(i)  enjoined from participating in any way in a plan or arrangement that involves a deduction for a qualified conservation contribution under 26 U.S.C. § 170(h)”,

(ii)  provide annual statements under penalty of perjury to the IRS and DOJ Tax for the next six years that they have not so participated,

(iii) contact all persons for whom appraisals were provided and all employees or other persons participating in the appraisals, provide them a copy of the Final Judgment of Permanent Injunction, and provide a list of such persons to DOJ Tax;

(iv)  prominently display on the website a copy of the Final Judgment of Permanent Injunction and

(v)  allow, through the Court’s retained jurisdiction, DOJ Tax to take civil discovery to monitor compliance.

I have not focused on the relief requested in the amended complaint (Doc 225 in the docket entries), but I did note that DOJ Tax sought disgorgement in Court V and Relief Sought ¶ m.  The Final Judgment of Permanent Injunction does not address disgorgement. Further in the complaint, the request for the injunction was to enjoin conduct subject to certain IRC penalty provisions (§ 6700, § 6695A, § 6694).  Those specific references are not included in the Final Judgment of Permanent Injunction but the description of the enjoined conduct probably covers conduct under the sections. There is no admission of liability for the penalties.

 A similar consent judgment was previously entered for Nancy Zak. (See Doc 271 and Doc 167 Attachment  1.) 

JAT Note:

1. By referring to the Final Judgments (linked above), you can quickly discern that there are a herd of lawyers involved. Claud Clark had two lawyers; the remaining defendants 10 lawyers (8 from Covington & Burling and 2 from Anderson Tate & Carr) and DOJ Tax has 5 lawyers. (I leave out the USA and AUSA which, from my experience, are listed as a formality and were likely not substantively involved). Focusing on C&B, I infer from what I know (or think I know) about C&B, those are very high-priced lawyers which seems like a bit of overkill to me.  (Back in the old days when I was with DOJ Tax trial section, I had one case where all depositions were attended by 3 or 4 lawyers for the taxpayer, with many of those depositions skipping around the country for testimony of distributors and retailers of the product manufactured by the taxpayer. DOJ Tax then had, mostly, a practice of one case, one DOJ Tax lawyer, regardless of how many lawyers the other side fielded for the melee. (Sort of like the Texas Rangers with one mob, one Ranger.) That case was resolved without trial because, after we won on summary judgment, the IRS issued a ruling that blew our case out of the water, thus causing the judge to overrule the summary judgment and the case quickly settled for a pittance, if anything. (It is a long story as to why the IRS issued such a ruling after we had won the case; actually the ruling was not directly on point, but distinguishing it was difficult.)

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