(Bloomberg) Former BDO Seidman LLP Vice Chairman Charles Bee’s cooperation with prosecutors in a $1 billion tax fraud probe didn’t spare him from prison, as a judge, citing the magnitude of the crime, sentenced him to 16 months.
While Bee pleaded guilty to fraud in 2009 and testified twice against BDO’s former Chief Executive Officer Denis Field, U.S. District Court Judge William Pauley in Manhattan said Monday he couldn’t overlook Bee’s participation in the biggest tax-shelter fraud in U.S. history.
“Your cooperation was important, but your crimes are of unbelievable proportions,” Pauley said today in federal court in Manhattan. “I believe a term of imprisonment is entirely appropriate.”
Pauley said Bee, a certified public accountant, earned at least $23.6 million in fees as a result of the scheme, encouraged others at BDO to break the law and had been one of the leaders of what he called “a rogue group” at the firm.
“Mr. Bee should have come forward a lot earlier than he did,” Pauley said. “Had he done so, this horrific scheme wouldn’t have gone as far as it did.”
The judge said that while he found Bee’s testimony to be credible and his cooperation significant, “it doesn’t change the fact that he helped perpetrate one of the largest tax frauds in the history of the United States.”
Both defense lawyer Michael Hueston and Assistant U.S. Attorney Nanette Davis argued Monday that Bee deserved leniency, citing his aid to the government. Davis said federal prosecutors and investigators interviewed 50 to 75 BDO partners about the scheme before Bee agreed to discuss his crimes and said he was the most forthcoming of the cooperators.
“Bee was the most candid about blatant criminality that went on there,” Davis said. “It was a refreshing change and for that reason, the government moves for a substantial departure” from the potential life term which Bee faced because the fraud scheme was larger than $400 million.
The judge said Bee knew the tax shelters would have been disallowed by the Internal Revenue Service and had lied during a 2005 deposition in a lawsuit.
Davis said Bee has forfeited at least three homes, including a residence in Florida worth $3.5 million and a 40-foot trailer.
Before sentencing, Bee apologized for his crimes and said he should have followed the example set by his father, who he called “an honest, small-town banker.”
“I’m just ashamed of what I did,” Bee said. “Every value he held up I violated in these transactions. I felt what I had to do was to finally stop lying. The money blinded me.”
Pauley credited Bee’s assistance to the government by testifying twice against Field, who was convicted by a jury in 2011 of conspiracy, tax evasion and attempting to obstruct the IRS. Field’s conviction was overturned because a juror lied about her background to get on the panel and he was acquitted of those charges after a retrial in November.
Working with the defunct law firm Jenkens & Gilchrist, BDO sold fraudulent shelters designed to generate phony losses to help clients offset taxes due on income, according to prosecutors.
Late Monday, Pauley separately sentenced former BDO Vice Chairman Adrian Dicker to 10 months in prison, with three years of supervised release to follow.
Pauley also ordered Bee and Dicker to together pay $69.4 million in restitution. The judge will sentence Robert Greisman, a former BDO Seidman partner who pleaded guilty and agreed to cooperate with the U.S., on Tuesday.
“As Henry Ford said, money doesn’t change men, it mainly unmasks them,” Pauley said describing the tax scheme. “If a man is naturally selfish or arrogant or greedy, the money merely brings that out,” he said. “That’s what happened here.”
The case is U.S. v. Bee, 09-cr-545, U.S. District Court, Southern District of New York (Manhattan).
—With assistance from Bob Van Voris in federal court in Manhattan.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access