Financial Adviser Pleads Guilty in Tax Shelter Scheme

A financial adviser pleaded guilty to conspiracy to defraud the IRS and faces up to 5 years in prison for selling and participating in tax shelters marketed by a large national accounting firm. According to the indictment, the adviser’s firm marketed the shelter to clients and served as a general partner to sham investment funds designed solely to create tax benefits for the investor/clients through the use of swap transactions.

OUR TAKE: The US Attorney alleges that the adviser actually helped create and run the tax shelter trading vehicles rather than merely sell a structure created by a third party. However, this case should serve as a warning to advisers about the hazards of selling tax-driven products.