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1025 Westchester Avenue, Suite 305
White Plains, NY 10604
Phone: 914-682-9777
Fax: 914-428-3199
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While represented by prior counsel, a husband and wife were convicted of tax fraud and bank fraud, and the husband was sentenced to serve a term of imprisonment. Mr. Scharf then was retained. Mr. Scharf filed a motion to vacate the husband's sentence on grounds that his Sentencing Guidelines were determined erroneously due to an incorrect tax loss computation. The Court agreed and resentenced the husband to a lesser term.
While the motion to vacate sentence in the preceding case was pending, the same clients were being investigated by the IRS, the FBI, and the United States Attorney's Office for committing an unrelated alleged $10 million securities fraud, for laundering the proceeds thereof, and for evading the income taxes thereon. The government threatened the couple with twenty-year prison sentences based on their prior convictions and the amount of monetary loss to the victims of the alleged fraud. As lead counsel, Mr. Scharf engaged in lengthy meetings with the Los Angeles United States Attorney's Office, the IRS, and the FBI, and made extensive written submissions. As a result of Mr. Scharf's written and face-to-face presentations, no charges were brought against Mr. Scharf's clients.
A businessman was accused of assisting his corporation to understate gross receipts by $1,000,000. Mr. Scharf represented him at trial. The jury deadlocked 6 to 6. The businessman was not retried, and the indictment was dismissed.
While represented by prior counsel, a lawyer was convicted of multiple counts of conspiracy, mail fraud, willfully aiding and assisting in the preparation of other persons' materially false income tax returns, and willfully subscribing his and his wife's materially false income tax returns. The charges arose from fraudulent tax shelters. Subsequently, the lawyer and his wife retained Mr. Scharf to represent them in the civil tax fraud proceedings arising out of the same events that were involved in the criminal case. In the civil tax case, the government claimed that the clients owed $1,000,000 in taxes and fraud penalties. The government filed a motion for summary judgment as to fraud, contending that the husband's criminal conviction prevents both taxpayers from denying fraud in the civil tax case. Mr. Scharf opposed the motion. He argued that aspects of the multiple-count conviction made it impossible to conclude that the fraud charged in the civil case was implicit from the guilty verdict in the criminal case. The Court agreed with Mr. Scharf, and denied the government's motion to use the tax fraud criminal conviction to prove civil tax fraud. Mr. Scharf then persuaded the IRS lawyers that they could not prove fraud now that they would not be permitted to rely upon the husband's criminal conviction. The IRS lawyers agreed to a settlement in which the IRS conceded that there was no fraud despite the criminal conviction, that the client had no unreported income, and that the wife was an innocent spouse. As a result, no taxes or penalties ever were collected, and the clients avoided the cost of going through a trial.
A couple was accused of civil tax fraud for failing to report substantial income. At trial, Mr. Scharf successfully opposed the IRS' effort to prove fraud. Mr. Scharf then persuaded the court that a shorter statute of limitations applied because the IRS failed to prove fraud. Since the IRS failed to act within the shorter statute of limitations, the couple won a windfall and did not have to pay income taxes on their unreported income.
While represented by prior counsel, a businessman and his wife were convicted of over 100 counts of racketeering, mail fraud, wire fraud, and income tax evasion. The businessman was sentenced to prison and to pay a large fine and a large RICO forfeiture. After he served his jail sentence, he and his wife retained Mr. Scharf to represent them in the subsequent civil tax fraud case. While preparing for the tax case, Mr. Scharf determined that the criminal forfeiture and the fine were computed erroneously and that the clients overpaid the forfeiture and fine by more than $150,000. Mr. Scharf persuaded the court to order the government to refund the overpayments. However, before the government made the refund payments, the IRS assessed taxes, interest, and penalties, amounting to more than $5,800,000, and levied against the refund. When negotiations to remove the assessments and levies broke down, Mr. Scharf filed a separate lawsuit seeking to have the tax assessments and levies declared illegal. Only after Mr. Scharf sued did the government agree that the tax assessments and levies were erroneous and should be removed. Mr. Scharf then filed a motion for costs and attorney's fees. The Court awarded Mr. Scharf's clients costs and attorney's fees based on a determination that the position of the United States in making the assessments and levies was not substantially justified. The clients then received the refund of the overpaid fine and RICO forfeiture, as well as their costs and attorney's fees.
The IRS then brought a new civil tax case against the above clients for the $5,800,000 of taxes, interest, and penalties they allegedly owed. Mr. Scharf successfully opposed the IRS lawyers' motion in the Tax Court in which they argued that the taxpayers' convictions in the earlier criminal case, including tax evasion, prevent them from denying fraud in the civil case. Mr. Scharf's successful opposition to the motion was based on a challenge to the legal rationale and the reliability of the earlier criminal convictions. Although the Tax Court lacked power to set aside the criminal convictions in the District Court, it did have the power to exclude evidence of those convictions in the Tax Court civil trial. Mr. Scharf then persuaded the IRS lawyers that they could not prove fraud in the civil tax case now that they would not be permitted to rely upon the convictions in the criminal case. This enabled Mr. Scharf to obtain a settlement in which the IRS stipulated that the wife, who had substantial assets, was an innocent spouse and that she owed no taxes, notwithstanding her criminal conviction. The husband was judgment proof. No part of the $5,800,000 in taxes, penalties, and interest ever was collected. The taxpayers also avoided the cost of going to trial.
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