In a landmark case that exposes the misuse of tax incentives designed for land conservation, Georgia-based CPA Herbert Lewis has pleaded guilty to charges of conspiracy and filing a false personal tax return. His involvement in promoting and selling abusive syndicated conservation easement tax shelters has caused a significant loss to the IRS, estimated at nearly $5 million.
The Scheme Unveiled by CPA Herbert Lewis
CPA Herbert Lewis, a certified public accountant and tax return preparer at an Atlanta accounting firm, was at the center of this fraudulent scheme from at least 2014 through 2019. Working alongside co-defendants Jack Fisher, James Sinnott, and others, Lewis marketed and sold tax deductions to wealthy clients through illegal syndicated conservation easement tax shelters. Fisher and Sinnott, pivotal figures in the scheme, have been sentenced to 25 and 23 years in prison, respectively.
The fraudulent scheme involved the creation of partnerships that would purchase land or land-owning companies. These partnerships would then donate conservation easements over the land, claiming inflated charitable contribution tax deductions. These deductions were based on appraisals that significantly overstated the value of the conservation easements. In many instances, the appraised value was at least ten times higher than the actual purchase price of the land, inflating the deductions and consequently, the tax benefits.
Manipulating the System
CPA Herbert Lewis’s role in the scheme was crucial. He knew that these transactions lacked economic substance and that his clients participated solely to secure tax deductions. The “votes” his clients had on the use of the land were mere formalities, as the outcome was predetermined to donate the land as conservation easements. To further perpetuate the fraud, CPA Herbert Lewis instructed clients to backdate documents, including subscription agreements and checks, to make it appear as though they had joined the partnerships before the donation dates.
In 2019 alone, CPA Herbert Lewis facilitated false deductions for 15 clients on their 2018 tax returns. Overall, he assisted in the preparation of tax returns claiming nearly $14 million in fraudulent deductions based on backdated documents.
Financial Gains and Legal Repercussions
For his role, CPA Herbert Lewis earned over $1 million in commissions, which he failed to fully report on his tax returns. Instead, he fraudulently reported the income through nominee entities in his children’s names, further evading taxes. This additional layer of fraud highlights the extensive measures taken by CPA Herbert Lewis to conceal his illegal activities.
CPA Herbert Lewis’s guilty plea brings him face to face with significant legal consequences. He faces the possibility of receiving a maximum sentence of five years for the conspiracy charge and up to three years for filing false tax returns. Additionally, he could be subjected to a period of supervised release, restitution, and substantial monetary penalties. A federal district court judge will determine the final sentence, taking into account the U.S. Sentencing Guidelines and other relevant statutory factors.
Broader Implications
This case is part of a wider effort to combat fraudulent tax shelters. Besides Fisher and Sinnott, eight other defendants have pleaded guilty to related criminal conduct, including appraisers and multiple CPAs. These individuals played various roles in perpetuating the scheme, highlighting a network of professionals exploiting tax laws designed to promote genuine conservation efforts.
The IRS Criminal Investigation and the U.S. Postal Inspection Service led the investigation, with prosecution handled by the Justice Department’s Tax Division and the U.S. Attorney’s Office of Georgia for the Northern District. Acting Deputy Assistant Attorney General Stuart M. Goldberg of the DOJ’s Tax Division, U.S. Attorney Ryan K. Buchanan for the Northern District of Georgia, and IRS Criminal Investigation Chief Guy Ficco have been at the forefront of this enforcement effort.
Conclusion
The conviction of CPA Herbert Lewis serves as a reminder of the consequences of abusing tax incentives meant for public good. Syndicated conservation easement tax shelters, when misused, not only undermine the integrity of tax laws but also divert resources intended for legitimate conservation efforts. This case highlights the commitment of federal authorities to pursue and prosecute those who engage in tax fraud, ensuring that justice prevails and public trust in the tax system is maintained. As CPA Herbert Lewis awaits sentencing, the case continues to send a clear message to tax professionals and investors alike: fraudulent tax schemes will be met with severe legal repercussions.
