Oil investor Zukerman gets almost six years for tax evasion

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(Bloomberg) Oil industry investor Morris Zukerman was sentenced to 70 months in prison for evading $45 million in taxes, a scam that included a bogus $1 million charitable donation and fibs to his own accountants. He was also fined $10 million.

"I recognize and profoundly regret the criminal offenses I committed," Zukerman told U.S. District Judge Analisa Torres during the hearing in a Manhattan federal court room, reading from a prepared statement. "This is painful to acknowledge."

Zukerman’s schemes were even more robust than those uncovered by prosecutors. As his case moved toward sentencing, Zukerman, 72, filed amended tax returns showing that his undeclared income was more than $17 million higher than what the government alleged in its indictment, prompting prosecutors to argue that Zukerman doesn’t deserve leniency.

They sought a sentence of as long as 84 months.

"There are two words and two words alone that explain the conduct in this case: unmitigated greed," Special Assistant U.S. Attorney Stanley Okula said. "The defendant is in a financial position enjoyed by very few in this country. There was no economic need for him to do what he did."

Defense lawyers disagreed and said the revised tax returns demonstrated their client was being forthcoming. They sought a sentence with limited time, saying Zukerman’s advanced age raised health concerns and made recidivism unlikely.

‘Citizenship Award’

The judge appeared skeptical of defense arguments throughout the hearing, asking his defense lawyer at one point: "Do you think he should get a good citizenship award for paying his back taxes?" Though she declined to impose a prison term at the top of the guideline range, she raised Zuckerman’s fine far above the maximum guideline of $250,000.

Zukerman’s family members, who sat behind him during the hearing, wept as the sentence was imposed, and he hugged them afterward. He declined to comment as he left the courtroom.

In his guilty plea last year, Zukerman admitted claiming millions of dollars in bogus deductions, providing false information and documents and failing to report profits, including $28 million from the sale of a company.

Prosecutors said he gave phony information to his accountants and lawyers who were representing him in an audit by the Internal Revenue Service. He also claimed to have donated $1 million to a conservation group to purchase land on Block Island in Rhode Island, when he actually bought the land outright himself.

In addition to pleading guilty, Zukerman agreed to pay $37 million to the IRS.

Lending Art

Zukerman launched his investment firm in the late 1980s after a 16-year run at Morgan Stanley, where he led the bank’s energy practice for a time. His major projects included partnerships with ConocoPhillips Co., Exxon Mobil Corp. and Kinder Morgan Inc. He was also active in philanthropy, funding a sociology professorship at his alma mater, Harvard University, and lending works from his art collection to the Metropolitan Museum of Art.

Authorities alleged that part of Zukerman’s tax evasion involved his art dealings, having $50 million worth of Old Masters paintings shipped to addresses in Delaware and New Jersey to avoid New York state sales tax. The paintings almost immediately ended up on the walls of his Park Avenue duplex. He also agreed to pay New York state $4.6 million.

In support of their sentencing position, prosecutors submitted emails between Zukerman and others coordinating the delivery of art to his New York apartment after it had been shipped to Delaware, and emails in which he openly discussed profits from a business deal that he didn’t declare to tax authorities.

In his defense, Zukerman submitted more than 100 letters from supporters vouching for his character, including one from Zbigniew Brzezinski, the U.S. national security adviser during the Carter administration, who presided over the marriage of Zukerman’s daughter and cited his "genuine patriotism." He also submitted a 2007 letter from the then-president of the Metropolitan Museum of Art, Emily Rafferty, thanking him for a $100,000 pledge.

The case is U.S. v. Zukerman, 16-cr-00194, U.S. District Court, Southern District of New York (Manhattan).

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