Prosecutors have indicted John B. Ohle III, a former member of a bank's tax shelter promotion group, on charges of conspiring with lawyers at the law firm of Jenkens & Gilchrist and others to defraud the U.S. Treasury of an estimated $100 million in the sale of a tax shelter known as "HOMER."
According to the indictment, between 1999 and 2002, Ohle was a supervisor in the Chicago office of Bank One's Innovative Strategies Group. The bank has since been acquired by J.P. Morgan Chase. Deutsche Bank has also been linked to the scheme, according to The New York Times, for arranging the financial transactions sold by Ohle.
The indictment states that the ISG provided estate planning and tax shelter strategies for high-net-worth clients, including a tax shelter called Hedge Option Monetization of Economic Remainder, or HOMER. ISG sold 36 HOMER strategies to wealthy clients in 2001, according to the indictment, creating almost $430 million in fraudulent tax losses and resulting in the evasion of approximately $100 million in taxes.
The indictment alleges that Ohle and his co-conspirators marketed HOMER as a legitimate tax elimination strategy, despite the fact that it was actually designed as a carefully planned series of steps to fraudulently produce the tax loss amounts desired by the clients. Jenkens allegedly issued a false and fraudulent opinion letter that found that it was "more likely than not" that the transaction would withstand IRS challenge.
Ohle and two Jenkens lawyers are alleged to have known that the opinion letter contained false representations, including that the clients had a substantial non-tax business purpose in engaging in the HOMER transaction; that the clients created the HOMER trust for estate planning purposes; and that the clients exchanged the options for third-party notes for sound economic reasons. In order to participate in the HOMER transaction, the indictment states that the client had to pay fees of 6 percent of the desired tax loss.
Ohle has also been charged in a separate conspiracy with William Bradley, a Hammond, La., attorney and friend, to defraud the IRS and commit wire fraud in relation to a scheme to fraudulently obtain referral fees on HOMER transactions. The indictment asserts that Ohle, Bradley, Chicago businessman and co-conspirator Douglas Steger, and others created false and fraudulent invoices to obtain referral fees to which they were not entitled for HOMER deals.
The indictment asserts that Ohle and his co-conspirators schemed to run the funds through Bradley and Steger's bank accounts, as well as the bank account of a business acquaintance of Ohle in San Francisco. Ultimately, according to the indictment, Ohle ended up with more than $700,000, Steger took more than $200,000, and Bradley took $25,000 in fraudulent fees.
At Ohle's direction, Steger, who pleaded guilty in July to tax charges related to the scheme, reported fraudulent fees on his tax return that should have been reported by Ohle, and then eliminated taxes on those fees and the fees he retained through the use of a fraudulent shelter. Bradley paid another Chicago businessman $184,000 of the false and fraudulent referral fees Bradley generated, which the businessman reported on a corporate return but on which he paid no taxes due to his also claiming false expenses at Ohle's suggestion, according to the indictment.
Ohle also is charged with attempting to evade the taxes of three HOMER clients and his own personal taxes for 2001 and 2002. According to the indictment, Ohle filed false personal tax returns in 2001 and 2002 that failed to report at least $642,634 and $1.4 million, respectively, in income, and concealed the receipt of income through the use of nominees. Ohle eliminated taxes due on his 2002 return through the use of a fraudulent shelter.
The indictment seeks forfeiture of Ohle's home in Wilmette, Ill., his condominium in New Orleans and his sports memorabilia collection. Ohle also faces up to 38 years in prison and fines of up to $2 million or twice the gross tax gain or loss on the charges. Bradley faces up to five years in prison and fines of up to $250,000 or twice the gross tax gain or loss on the charge.
