A Los Angeles attorney has been sentenced to 32 months in prison and two years of supervised release for his role in a tax shelter scheme.
Matthew Krane, 56, was sentenced Friday by U.S. District Court Judge Ricardo S. Martinez on charges of tax evasion and making a false statement in a passport application. Krane agreed to forfeit $23.1 million to the U.S. Treasury in back taxes, and to return approximately $17.9 million in illegal fees to a former client, Haim Saban, who plans to donate the returned finds to charity.
Krane was indicted in June 2009, along with the former CEO of Quellos Group LLC, Jeffrey I. Greenstein, 48, and an attorney and principal of the investment firm, Charles H. Wilk, 52, in connection with a fraudulent tax shelter scheme. Krane pleaded guilty in December 2009 and agreed to cooperate with the government in its prosecution of Greenstein and Wilk (see L.A. Lawyer Pleads Guilty in Tax Shelter Scheme).
Subsequently, in January 2011, Wilk and Greenstein pleaded guilty, paid $7 million in penalties to the IRS, and were each sentenced to 50 months in prison in January 2011 (see Quellos Ex-Execs Sentenced for Offshore Tax Shelter Scam).
Greenstein and Wilk agreed to secretly split Quellos’ fees with Krane in exchange for Krane’s assistance in enrolling a wealthy client in the tax shelter scheme. The client, Saban, had more than $1 billion in capital gains in 2001, and Greenstein and Wilk promised Krane a cut of the fees if Saban purchased the tax shelter scheme.
Saban was never informed of the fee arrangement, or the illegal nature of the scheme. Between March 2001 and October 2001, the men drafted false fee agreements that made it appear that Saban was paying $46 million to Quellos to participate in the tax shelter strategy. In fact, nearly $36 million of that fee was actually diverted by Wilk and Greenstein to an offshore account controlled by Krane.
Krane failed to pay taxes on the income. In addition, when Krane learned of the criminal investigation of Quellos in February 2008, he applied for a passport in a false name, using a false Social Security number and California driver’s license number.
The Saban family issued a statement through their attorney regarding the funds that will be returned to them: “Cheryl and Haim Saban are gratified that through the efforts of the United States Attorney's Office, the IRS and their counsel, they have recovered the funds held in a foreign bank, and justice has been done. To show their appreciation they have decided to donate these funds to the Saban Foundation for use by the following charitable groups, among others: Childrens Hospital of Los Angeles, the Saban Free Clinic, Operation Homefront, and Para Los Ninos. The monies will help those most in need.”