A Georgia man pleaded guilty today to conspiracy and filing a false personal tax return related to his participation in the promotion and sale of abusive syndicated conservation easement tax shelters.
According to court documents and statements made in court, Herbert Lewis was a CPA and return preparer at an Atlanta-based accounting firm. Beginning at least in 2014 and through at least 2019, Lewis promoted and sold tax deductions to his wealthy clients in the form of units in illegal syndicated conservation easement tax shelters organized and created by co-defendants Jack Fisher, James Sinnott, and others. For their involvement in the scheme, Fisher and Sinnott were sentenced in January to 25 and 23 years in prison respectively.
According to the superseding indictment, the scheme entailed the creation of partnerships that would purchase land and land-owning companies and then donate conservation easements over that land or the land itself. Appraisers would allegedly generate fraudulent and inflated appraisals of the conservation easements that frequently valued the easements at amounts at least ten times higher than the price actually paid by the partnership for the land or land-owning company – often just months prior to the appraisals. As charged, these partnerships claimed a charitable contribution tax deduction based on the inflated value of the conservation easement, resulting in a fraudulent tax deduction flowing to clients who purchased units in the partnership.
Lewis knew that contrary to law, these transactions lacked economic substance; his wealthy clients participated only to obtain a tax deduction, receiving only a tax benefit for their participation. For example, a client who purchased units had a “vote” ostensibly on what to do with the land owned by the partnership. However, Lewis knew that this “vote” was merely for optics as the land invariably would be donated largely as a conservation easement.
In some cases, Lewis instructed his clients to falsely backdate documents such as subscription agreements and checks related to partnerships to make it appear they had joined before donating conservation easements necessary for claiming tax benefits. In 2019 alone, Lewis assisted 15 clients with claiming false deductions on their 2018 returns. In total, he helped prepare tax returns claiming nearly $14 million in false deductions based on backdated documents, causing a nearly $5 million tax loss to IRS.
Lewis earned over $1 million in commissions from promoting these illegal shelters but concealed this income by not fully reporting it on his personal returns. Instead, he fraudulently reported commission income as income on nominee entities' returns under his children’s names.
Lewis is scheduled for sentencing on Oct. 16 and faces up to five years in prison for conspiracy charges and three years for filing false tax returns. He also faces supervised release periods, restitution obligations, and monetary penalties. A federal district court judge will determine any sentence after considering U.S. Sentencing Guidelines among other statutory factors.
To date, besides Fisher's and Sinnott's convictions noted above, eight additional defendants have pleaded guilty related to this scheme: appraiser Walter Douglas “Terry” Roberts; CPAs Stein Agee; Corey Agee; Ralph Anderson; James Benkoil; Victor Smith; William Tomasello; CPA/Attorney Randall Lenz.
Acting Deputy Assistant Attorney General Stuart M. Goldberg of Justice Department’s Tax Division; U.S. Attorney Ryan K. Buchanan for Northern District of Georgia; IRS Criminal Investigation Chief Guy Ficco announced this development while thanking U.S Attorney Dena J King from Western District North Carolina for her office’s assistance.
IRS Criminal Investigation along with U.S Postal Inspection Service investigated this case while Trial Attorneys Richard M Rolwing Parker Tobin Jessica Kraft Grace Albinson Nicholas J Schilling Jr., from Justice Department’s Tax Division along with Assistant US Attorney Christopher Huber Deputy Chief Complex Frauds Section Northern District Georgia are prosecuting it.
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