This NY Times article reports that federal prosecutors are investigating three lawyers of Dallas-based Jenkens & Gilchrist ó Paul Daugerdas, Erwin Mayer and Donna Guerin ó in its widening investigation into questionable tax shelters. Messrs. Daugerdas and Mayer are apparently no longer with the firm, and although Ms. Guerin remains with the firm, she apparently is no longer a partner. Previous posts over the past couple of years on the tax shelter investigation are here, and previous posts Jenkens & Gilchrist’s involvement in the matter are here.
One particularly interesting snippet from the article is that sealed documents in one of the civil lawsuits against Jenkens & Gilchrist apparently reveals that Mr. Daugerdas earned $93 million in fees from 1999 through 2003 designing the tax shelters and providing accompanying opinion letters in support of them. Not surprisingly, that revenue generation made Mr. Daugerdas one of the wealthiest single participants in the tax shelter business. Indeed, the documents apparently establish that the Chicago-based tax practice that Mr. Daugerdas led in the late 1990’s generated $267 million in fees from its work on tax shelters. Of that amount, about a third went to Jenkens & Gilchrist, while the rest went to other partners, including $28 million to Mr. Mayer from 1999 through 2003 and $4 million to Ms. Guerin.
Although the Times article reports that Jenkens & Gilchrist itself is not a target of the investigation and is cooperating with prosecutors, there is little question that the investigation has taken a toll on the firm as it defends itself in more than a dozen lawsuits over its work on tax shelters. As the Times article notes “partners and clients have left the firm [and an] $82 million settlement between Jenkens & Gilchrist and about 1,100 wealthy investors who bought invalid tax shelters using its opinion letters is still awaiting court approval.”