[private]International law firm Freshfields Bruckhaus Deringer is advising Swiss Reinsurance Company Ltd. (“Swiss Re”), one of the world’s leading and most diversified reinsurers, in the sale of Conning & Company (“Conning”), a leading global provider of expert solutions and services to the insurance market. Aquiline Capital Partners LLC (“Aquiline”), a New York-based private equity firm investing in the financial services sector, is the acquirer.
The sale, under undisclosed terms, will include Conning’s US and European businesses. Conning has approximately US$70 billion of general account assets under management and US$100 billion of total assets under contract and is currently the largest independent insurance asset manager and the third largest insurance general account manager globally.
The Freshfields team was led by corporate partner Julian Pritchard (New York), and included corporate associates Damien Moynagh, Nicholas McVeigh, Richard Burrows and Tony Salerno (all New York). Tax advice was provided by tax partner, Greg May (New York), and associates Angela Sellman (New York) and Susie Brain (London).[/private]
[private]Lev L. Dassin, the Acting U.S. Attorney for the Southern District of New York, Doug Shulman, the Commissioner of the Internal Revenue Service (IRS), and John A. DiCicco, the Acting Assistant Attorney General for the Tax Division of the Department of Justice, announced today the filing of an Indictment charging seven individuals — three former shareholders of the Jenkens & Gilchrist law firm (J&G), the former Chief Executive Officer and a former tax partner from the BDO Seidman accounting firm (BDO), and two former bankers from a foreign bank with headquarters in New York (Bank A) — with tax fraud conspiracy and related crimes arising out of tax shelters promoted by J&G, BDO, and the bank.
According to the indictment filed today in Manhattan federal court, the defendants and their co-conspirators designed, marketed, and implemented fraudulent tax shelters used by wealthy individuals with multimillion-dollar taxable income in order to eliminate or reduce the taxes they would have to pay the IRS.
The Indictment charges the seven individuals in 27 separate counts, including conspiracy to defraud the IRS, tax evasion, and impeding and impairing the lawful functioning of the IRS.
The seven individuals charged in the Indictment are:
o Paul M. Daugerdas, 58, of Wilmette, Ill., a lawyer, was the former head of J&G’s Chicago office and its tax practice. Daugerdas is a certified public accountant who previously served as a tax partner at Arthur Andersen LLP and head of the tax department at the Chicago law firm Altheimer & Gray (A&G).
o Erwin Mayer, 45, of Winnetka, Ill., a lawyer, was a shareholder at J&G’s Chicago office in its tax practice. Mayer is an accountant who previously served as a tax partner in A&G’s Chicago office.
o Donna Guerin, 48, of Elmhurst, Ill., a lawyer, was a shareholder at J&G’s Chicago office in its tax practice. Guerin is a certified public accountant who previously served as a tax partner in A&G’s Chicago office.
o Denis Field, 51, of Naples, Fla., is the former Chief Executive Officer and Chairman of the Board of BDO Seidman, former head of its national tax practice, and one of three heads of BDO’s “Tax Solutions Group,” which handled all aspects of BDO’s tax shelter practice. Field is a certified public accountant and an attorney, with an LLM in taxation.
o Robert Greisman, 48, of Deerfield, Ill. was a tax partner in BDO’s Chicago office and a member of BDO’s Tax Solutions Group. GReisman is a certified public accountant and an attorney.
o Raymond Craig Brubaker, 53, of Plano, Texas, is a former investment representative at Bank A’s Dallas office. Brubaker, who is a certified public accountant and an attorney, previously served as a tax partner in Arthur Andersen’s Dallas office.
o David Parse, 47, of Elmhurst, Ill., is a former investment representative at Bank A’s Chicago office. Parse is a certified public accountant.
As alleged in the Indictment:
From 1994 through 2004, the seven defendants and others participated in a scheme to defraud the IRS by designing, marketing, implementing and defending fraudulent tax shelters. The conspirators sought to deceive the IRS about the bona fides of those shelters and the circumstances under which the shelters were marketed and implemented.
The defendants and their co-conspirators understood that if the IRS were to detect their clients’ use of these tax shelters and learn the true facts and circumstances surrounding the design, marketing, and implementation of the shelters, the IRS would aggressively challenge the claimed tax benefits. In that event, the IRS would seek to collect the unpaid taxes plus interest, and might also seek to impose substantial penalties upon the clients. Accordingly, the conspirators undertook to prevent the IRS from: (I) detecting their clients’ use of these shelters; (ii) understanding how the transactions operated to produce the tax results reported by the clients; (iii) learning that the shelters were marketed as cookie-cutter products that would eliminate or reduce large tax liabilities; (iv) learning that the clients were not seeking profit-making investment opportunities, but were instead seeking huge tax benefits for which they paid fees based on a percentage of the desired tax loss; and (v) learning that, from the outset, all the clients intended to complete a pre-planned series of steps that had been designed by the conspirators to lead to the specific tax benefits sought by the clients.
In order to maximize the appearance that the tax shelters were investments undertaken to generate profits, and to minimize the likelihood that the IRS would learn the transactions were actually designed to create tax losses and deductions, the defendants and their co-conspirators created and assisted in creating transactional documents and other materials that falsely and fraudulently described the clients’ motivations for entering into the tax shelters and for taking the various steps that would yield the tax benefits.
In order to encourage clients to participate in the shelters, and to shield the clients from substantial penalties that could be imposed if the IRS disallowed the claimed tax benefits, the defendants conspired to provide J&G’s clients with opinion letters which claimed the tax shelter losses or deductions would “more likely than not” survive IRS challenge. The defendants knew those opinions were based on false and fraudulent statements, and omitted material facts. By helping their clients obtain false and fraudulent opinion letters, with the understanding and intent that those opinion letters would be presented to the IRS if and when the clients were audited, the defendants sought to undermine the ability of the IRS to ascertain the clients’ tax liabilities and determine whether penalties should be imposed.
Among the alleged fraudulent tax shelter designed, marketed, and implemented by the defendants and their co-conspirators were “Short Sales,” “Short Options Strategy” (SOS), “Swaps,” and “HOMER.” The Short Sale tax shelter was marketed and sold from at least 1994 through at least 1999 to at least 290 wealthy individuals and generated at least $2.6 billion in false and fraudulent tax losses. The SOS tax shelter was marketed and sold from at least 1998 through at least 2000 to at least 550 wealthy individuals, and generated at least $3.9 billion in false and fraudulent tax losses. The Swaps tax shelter was marketed and sold in 2001 and 2002 to at least 55 wealthy individuals, and generated more than $420 million in false and fraudulent tax losses. The HOMER tax shelter was marketed and sold in 2001 to at least 36 wealthy individuals, and generated more than $400 million in false and fraudulent tax losses.
Defendants Daugerdas, Mayer, Brubaker, Parse, Field and Greisman also developed and utilized tax shelters for themselves in order to evade personal tax liabilities on the substantial income they were receiving from their design, marketing, and implementation of fraudulent tax shelters. In addition, J&G provided Brubaker and Parse with free opinion letters for their personal tax shelters, and provided discounted tax shelter opinion letters to other Bank A personnel.
Count One of the indictment charges all defendants with conspiracy to defraud the IRS and to evade taxes. In addition, each defendant except Parse is charged with multiple counts of tax evasion relating to the use of various tax shelters for specified clients. Each defendant is also charged with one count of corruptly endeavoring to obstruct and impede the internal revenue laws. The indictment also charges Daugerdas and Mayer with tax evasion based on their use of fraudulent tax shelters to eliminate or reduce their personal income tax liabilities between 1999 and 2001.
On the conspiracy charge, each defendant faces a maximum penalty of 5 years in prison; 3 years’ supervised release; a fine of the greatest of $250,000 or twice the gross gain to the defendant or twice the gross loss to the IRS; and restitution. Each count of tax evasion carries a maximum penalty of 5 years in prison; 3 years’ supervised release; a fine of the greatest of $250,000 or twice the gross gain to the defendant or twice the gross loss to the IRS; and costs of prosecution. Each defendant also faces a maximum penalty of 3 years in prison; 1 year’s supervised release; and a fine of the greatest of $250,000 or twice the gross gain to the defendant or twice the gross loss to the IRS on the charge of corruptly endeavoring to obstruct and impede the internal revenue laws.
Former BDO Seidman Vice Chairman and board member Charles W. Bee Jr., pleaded guilty on June 3, 2009, to related charges of conspiracy to defraud the IRS, tax evasion, and perjury. Michael Kerekes, another principal of BDO Seidman and also a former member of BDO’s TSG and Tax Opinion Committee, pleaded guilty on Feb. 13, 2009, to related conspiracy and tax evasion charges. Adrian Dicker, a former Vice Chairman of BDO Seidman and TSG member, also pleaded guilty on March 17, 2009, to related conspiracy and tax evasion charges.
“We are dedicated to holding accountable tax and financial professionals whose deceit and fraud cost this country millions in tax revenues,” said Lev L. Dassin, the Acting U.S. Attorney for the Southern District of New York. “The allegations contained in the Indictment reflect a brazen disregard for the law.”
“In today’s economic environment, it’s more important than ever that the American people feel confident that everyone is playing by the rules and paying the taxes they owe,” said Internal Revenue Service Commissioner Doug Shulman. “Taxpayers deserve our vigilance in the investigation and prosecution of allegations of fraud by unscrupulous tax and financial professionals who assist others in hiding income and evading the payment of their fair share of taxes.”
“Dishonest and fraudulent tax professionals, including accountants, attorneys, and bankers, should stand up and take note of today’s indictment,” said John A. DiCicco, the Acting Assistant Attorney General of the Justice Department’s Tax Division. “Professionals who sell and promote fraudulent tax shelters that help wealthy clients illegally evade taxes face serious felony charges and substantial prison time.”
Dassin thanked the IRS and the Department of Justice Tax Division for their efforts in this case.
Southern District of New York Assistant United States Attorney Stanley Okula and Department of Justice Tax Division Assistant Section Chief Nanette L. Davis are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.[/private]
[private]PepsiCo, Inc. has announced that Tessa Hilado has joined PepsiCo as senior vice president, finance and treasurer, reporting to Chief Financial Officer Richard Goodman. She replaces retired PepsiCo senior vice president and treasurer, Lionel L. Nowell, III.
In this role, Hilado will have global operating responsibility for the treasury organization, including capital markets, cash management, international treasury, pensions, risk management and insurance, as well as the tax organization.
Most recently, Hilado has been vice president and treasurer at Schering-Plough Corporation since May 2008, where she was responsible for strategic oversight and direction of the global treasury function, including cash management, domestic and international funding, capital planning, bank relations, pension funding and investments and risk management.
Previously, Hilado served as the assistant treasurer for General Motors (GM) Corporation, where she was responsible for global funding, cash management, securitizations, foreign exchange and commodities management and other strategic financial initiatives at the company. Hilado joined GM in 1990 and held a variety of roles with increasing responsibility, including chief financial officer, General Motors Acceptance Corporation Commercial Finance.
Hilado holds a Bachelor of Science in Management Engineering from Ateneo de Manila University, Manila, Philippines, and a Master of Business Administration from the University of Virginia, Darden Graduate School of Business.
“We are very pleased to welcome Tessa to PepsiCo’s finance leadership team,” said Goodman. “She brings nearly 20 years of expertise in key global finance positions. I’m confident that under her leadership, the PepsiCo Treasury function will be even more agile in responding to changes in the macro economic environment.”
Hilado will be based at the company’s headquarters in Purchase, N.Y. and will begin her new position on July 8, 2009.[/private]
About PepsiCo
PepsiCo (NYSE: PEP) is one of the world’s largest food and beverage companies, with 2008 annual revenues of more than $43 billion. The Company employs approximately 198,000 people worldwide, and its products are sold in approximately 200 countries.
Duke Energy has named Lynn J. Good group executive and chief financial officer to replace David L. Hauser, who is retiring from Duke to become chairman and chief executive officer of FairPoint Communications, Inc.
[private]
For the past 18 months, Good has been group executive and president of Duke’s commercial businesses. She previously served as senior vice president and treasurer. Before the merger of Duke Energy and Cinergy in April 2006, Good served as executive vice president and chief financial officer for Cinergy.
James E. Rogers, Duke chairman, president and chief executive officer, described Good as “a seasoned financial professional.” Rogers said, “After proving herself in a series of leading financial roles, Lynn welcomed the challenge to lead our commercial businesses. During that tenure, she applied excellent leadership and vision to those businesses and proved her ability to manage a significant profit and loss operation.”
Hauser, who joined Duke in 1973, will take the helm at FairPoint on July 1. The company is headquartered in Charlotte and owns and operates local exchange companies in 18 states, providing services such as local and long distance phone and broadband services. Hauser has served on FairPoint’s board of directors since 2005.
“During his 35-year career at Duke, David has demonstrated a unique blend of financial acumen, business savvy and focus on shareholder value,” Rogers said. “He has helped lead Duke through some of its most challenging times, most notably, the collapse of the energy markets following the Enron bankruptcy in late 2001.”
Before joining Cinergy in 2003, Good was a partner with Deloitte & Touche. She started her career at Arthur Andersen. Good serves on the board of directors of Hubbell, Inc. She is also a board member of the Bechtler Art Museum in Charlotte. She is a graduate of Miami University in Oxford, Ohio.
Good assumes her new role July 1. Rogers said a successor to lead Duke Energy’s commercial businesses will be named in the near future. In the interim, Good will continue to lead that business.[/private]
Duke Energy is the third largest electric power holding company in the United States, based on kilowatt-hour sales. Its regulated utility operations serve approximately 4 million customers located in five states – North Carolina, South Carolina, Indiana, Ohio and Kentucky — representing a population of approximately 11 million people. Duke Energy’s commercial power and international business segments operate diverse power generation assets in North America and Latin America, including a growing portfolio of renewable energy assets in the United States. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 500 company traded on the New York Stock Exchange under the symbol DUK. The company’s web address is www.duke-energy.com.
[private]PwC has announced the appointment of Andrew Dale who has joined the firm’s international and large corporate team in Birmingham as a corporate tax partner.
Andrew joins from Ernst & Young where he was a tax account leader for a number of Ernst & Young’s priority accounts in the international large corporate sector and responsible for a number of market and people initiatives. [/private]
[private]PricewaterhouseCoopers LLP has announced the appointment of Paul Davies, previously head of tax at Ernst & Young, as the tax industry leader for the firm’s retail and consumer group.
Barry Marshall, UK head of tax, PricewaterhouseCoopers LLP, said:
“Paul is well respected in the tax profession by businesses and the regulators alike. His wealth of experience will be a real asset to PwC as we continue to invest in our strategic priorities and build the long-term success of our business. We are delighted to have Paul on board.”
Paul Davies, tax partner, PricewaterhouseCoopers LLP, said:
“I am really excited to have joined PwC and to have the opportunity to lead the firm’s retail and consumer tax group. Having joined the leading tax practice in the UK and globally, I am already bowled over by the sheer breadth and depth of knowledge, expertise and experience available within the firm.
“The retail and consumer sector makes a significant contribution in taxes to UK government revenues. As well as having to manage their businesses in this increasingly tough economic climate, our clients in this sector have many complex tax changes to understand and contend with. I’m looking forward to my new role and the chance to broaden our client base further and to help more retail and consumer businesses navigate the UK’s complex tax rules.”[/private]
[private] The board of directors of Jackson Hewitt Tax Service Inc. has announced that Harry W. Buckley, former president and chief executive officer of H&R Block Tax Services, will join the company as president and CEO, effective immediately. Mr. Buckley also is a former member of the Jackson Hewitt board and a former chairman of a major Jackson Hewitt franchisee. His appointment is the latest in a series of actions undertaken by the board in an effort to improve Jackson Hewitt’s performance and enhance the value of the company for all of its shareholders.
Mr. Buckley succeeds Michael C. Yerington, who is leaving the company. Mr. Buckley will also join the Jackson Hewitt board as a director. Margaret Richardson, a former Commissioner of Internal Revenue who joined the Jackson Hewitt board in June 2004, will continue to serve as non-executive chair of the board.
On behalf of the board, Ms. Richardson said, “We are delighted that Harry Buckley, who is a seasoned tax preparation industry leader with a superior record of delivering value and who has strong credibility among our franchisees, has agreed to lead Jackson Hewitt forward as it develops and implements plans to enhance the value of the company for our shareholders, customers, employees, franchisees, and other constituencies.”
Other actions the board has taken in recent months include:
* The engagement of one of the world’s preeminent management consulting firms to assist in accelerating the turnaround of the company’s performance.
* The engagement of financial advisor Goldman, Sachs & Co. to assist the board in examining a range of strategic and financial alternatives for the company.
* The decision to have the board’s Governance Committee review the size and composition of the board, including a review of qualified candidates suggested by the company’s shareholders. And,
* The decision to recommend the redemption of the company’s shareholder rights plan in a vote at the company’s 2009 annual shareholders’ meeting.
“The Jackson Hewitt board has been working with a sense of great urgency to address the company’s performance,” Ms. Richardson said. “We have engaged a management consulting firm to assist the board in its evaluation of how best to accelerate the turnaround of the company’s performance. That work is well underway, which will help enable our new CEO to ‘hit the ground running’ in implementing performance-enhancing initiatives.
“While we recognize the challenges of executing any kind of transaction in the current environment, the board has also engaged Goldman Sachs to examine a range of strategic alternatives for Jackson Hewitt. The board will continue to explore all available means of enhancing value for our shareholders as we work closely with Harry and his management team to improve the company’s operational and financial performance.”
She concluded, “The activities undertaken by the board are being informed by our ongoing conversations with shareholders on the company’s strategic direction, performance and corporate governance matters.”
Mr. Buckley, 64, served as president and chief executive officer of H&R Block Tax Services, Inc., the world’s largest tax preparation service, from 1988 to 1995. He joined H&R Block in 1968 as a tax preparer and subsequently served in a variety of operational and marketing roles. In January 1997, he joined the Jackson Hewitt board, where he played an instrumental role in the sale of the company to Cendant Corporation in January 1998. In November 1998, he became chairman of a major Jackson Hewitt franchisee, Tax Services of America, and also became a consultant to the company. He retired in 2002.
Mr. Buckley said, “Jackson Hewitt has many strengths on which to build, including outstanding people, a well-established brand, committed franchisees, and a top-tier distribution network. I look forward to working closely with our board, employees and franchisees as we focus on achieving stronger performance going forward.”
[/private]
Jackson Hewitt Tax Service Inc. (NYSE: JTX), with approximately 6,600 franchised and company-owned offices throughout the United States during the 2009 tax season, is an industry leader providing full service individual federal and state income tax return preparation. Most offices are independently owned and operated. Jackson Hewitt is based in Parsippany, New Jersey.
Deloitte Touche Tohmatsu (DTT) member firms have assembled a multi-national team with deep knowledge of the approaches that tax authorities in key jurisdictions are likely to take in the transfer pricing of financial services transactions.
Ellie Patsalos, London-based global tax financial services industry leader at Deloitte, comments: [private]“Financial service companies have struggled to develop transfer pricing policies that can be globally applied. The rules and guidance covering these sorts of transactions have not always been clear or consistent across countries.
“As well as presenting opportunities, transfer pricing is one of the most significant tax and FIN 48 compliance risks for multinational groups. Tax authorities around the world are investing heavily in developing new ways to challenge transfer pricing with more effective risk assessments, audits and litigation success. For multinationals, strong systems, up-to-date pricing models, access to experts and a global approach are at the heart of the best defences in this environment.”
With the addition of Andy Martyn to the UK firm, Deloitte has five of the most renowned experts on transfer pricing rules and regulations in the world. These five professionals have joined Deloitte from tax authorities in the UK, US, Japan, Singapore and Australia to strengthen the member firms’ globally integrated financial services transfer pricing team led by Rob Plunkett, a principal at Deloitte. They are:
Andy Martyn (UK) – Andy recently joined Deloitte UK from HM Revenue & Customs Business International where he was the Assistant Director responsible for International Financial Services. He brings with him a wealth of technical and commercial experience having, amongst other things in his 18 years with the authority, led negotiations on a number of the most significant FSI transfer pricing and advance pricing agreements (APAs) settlements and the 2007 rewrite of the independent agent tax rules governing hedge funds with UK investment managers.
Paul Epstein (USA) – Paul joined Deloitte LLP a year ago after nearly 12 years as the Senior Technical Reviewer in Branch 5 in the Internal Revenue Service’s Office of Associate Chief Counsel (International) and 23 years working on the international taxation of financial institutions and products. He is a leading authority in the global trading arena and was heavily involved in drafting both the US Proposed Global Dealing Regulations and the Organisation for Economic Co-operation and Development (OECD) Report on the Attribution of Profits to Permanent Establishments.
Masahiko Kobayashi (Japan) – Masahiko has 26 years experience as a tax official in various departments in the National Tax Agency (NTA), including the Tokyo Regional Taxation Bureau and the Ministry of Finance. He spent over 10 years working extensively in transfer pricing and APAs, including more than five years experience as a Deputy Director in the Office of Mutual Agreement Procedures, in the NTA. He also helped to draft the Japanese transfer pricing guidelines and has considerable experience of resolving global trading and Japanese permanent establishment disputes.
Jee Chang See (Singapore) – Jee Chang worked for the Inland Revenue Authority of Singapore for more than 10 years and was the Tax Director of the Tax Policy & International Tax Division. He was responsible for transfer pricing and APA negotiations, playing a key role in developing the Singapore transfer pricing guidelines that were issued in 2006. He was also involved in the negotiation of a number of double taxation agreements and competent authority issues.
David Grecian (Australia) – David joined Deloitte Australia after 35 years working for the Australian Taxation Office. He has extensive transfer pricing experience gained from casework, litigation, public rulings, compliance strategy and policy in the financial services sector. David is one of the most experienced and globally recognised figures in the transfer pricing arena after nearly 30 years of involvement at the OECD, where he was involved in the development of the OECD Transfer Pricing Guidelines and chaired the working party which produced the Attribution of Profits to Permanent Establishments report for banking, global trading and insurance.
Rob Plunkett, global financial services transfer pricing leader at Deloitte, says: “The implementation of globally consistent transfer pricing policies that span the major financial centres has been a strategic objective for many financial service companies. In practice, this has been difficult to achieve. However, with this team Deloitte can bring financial industry leading capabilities in multi-lateral APA negotiations, competent authority issues and interpretation of double taxation treaties, which can help make the strategic objective a reality.”
Patsalos adds: “As the financial landscape continues to change, Deloitte’s Global Financial Services network is committed to providing continued thought leadership, surveys and studies on the issues most important to global financial institutions. Deloitte’s aim is to help guide clients through these challenging times and provide them with insights useful in not only surviving the credit crisis, but essential for clients to continue thriving in a changing environment.”[/private]
