Federal prosecutors won’t pursue the Texas law firm of Sidley Austin LLP for its part in signing off on sketchy tax shelter structures.

The Internal Revenue Service announced that Sidley Austin, the successor firm of the 2001 merger between Sidley & Austin and Brown & Wood LLP, has paid a civil tax shelter promoter penalty of $39.4 million.  The penalty stems from the firm’s promotion of abusive tax shelters and a failure to comply with tax shelter registration requirements.

“Sidley Austin has paid a significant penalty for its role in promoting abusive tax shelters,” said IRS Acting Commissioner Kevin M. Brown, in a statement. “The firm has also taken concrete steps to prevent a recurrence of this behavior in the future, which they have agreed to maintain going forward.”

The firm issued opinions in connection with a number of legally suspect tax shelters -- many of which have seen their convoluted acronyms appear in connection with high-profile tax evasion prosecutions -- to over 700 high-net-worth individuals and corporations. 

In a statement, the U.S. attorney’s office in Manhattan said that it had decided not to charge Sidley Austin because the firm’s tax shelter work had primarily been carried out by a single person between 1996 and 2003, former partner and tax lawyer Raymond J. Ruble. Ruble, along with more than a dozen former KPMG employees, is set to go to trial over criminal charges in connection with the shelter sales.

In March, Jenkens & Gilchrist, a national law firm that had also been under criminal investigation over its work with tax shelters, shut down and paid a $76 million fine after prosecutors said they would not bring an indictment.


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