A husband and wife have filed a case against Ernst & Young, blaming the firm for the loss of $40 million in a tax shelter deemed abusive by the Internal Revenue Service, according to a published report.
The Wall Street Journal reported that the Florida couple, Rocco and Mary Abessinio, are seeking class-action status for the lawsuit, which was filed in federal court in Manhattan earlier this week.
In the filing, the Abessinios said that they paid more than $40 million in increased tax liabilities for 2001 and 2002 after Ernst & Young's Personal Investment Company, or PICO, strategy was challenged by the IRS. PICOs were among what IRS Commissioner Mark Everson termed "flaky tax products" last October, when the agency encouraged thousands of taxpayers to settle pending audit cases.
The complaint alleges that Ernst & Young advised clients that the PICO tax shelter and the transactions associated with it were legal. The lawsuit says that several firms between 2000 and 2003 marketed the shelter, and that Ernst & Young alone sold more than 90 of the shelters.The Abessinios said that they spent nearly $6 million in fees pursuing the PICO strategy, and are also seeking actual and punitive damages, reimbursement for not pursuing legitimate tax savings because of the PICO strategy, and other costs.
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