The Internal Revenue Service has accused former U.S. ambassador to Ireland Richard Egan of setting up a $62 million illegal tax shelter as soon as he moved to Dublin, a charge Egan denies.

Following an investigation, the IRS claims that Egan set up an economic sham involving another businessman that used a complex system to sell each other's stock in order to dodge tax payments. Egan, the billionaire co-founder of technology company EMC Corp., has started legal action against the IRS in Massachusetts, claiming that the investment deal was perfectly legal.

Egan said that he set up the transaction after he resigned from the EMC Board in September 2001, before taking the ambassador post, and was looking for ways to sell his stock without it being reported by the media and possibly negatively affecting EMC's stock price. He said that an unnamed international accounting firm urged him to use a European-style options scheme.

Egan was appointed ambassador to Ireland by President George W. Bush, and resigned after 15 months. Egan and his family were the most successful fundraisers for the president's re-election campaign.

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