7 Indicted For Alleged $1.3B Conservation Easement Tax Fraud
A federal grand jury indicted a group of Atlanta certified public accountants, including one already facing federal fraud charges, for allegedly orchestrating a $1.3B conservation easement scam.
In a 135-count indictment unsealed Tuesday, accountants Jack Fisher, James Sinnott, Herbert Lewis, Yekaterina Lopuhina (aka Kate Joy) and Victor Smith, along with property appraisers Clayton Weibel and Walter Roberts II, were charged with conducting a conspiracy to market and sell “fraudulent charitable contribution tax deductions” to high-income clients in the form of conservation easements.
The indictment was handed down by a grand jury in Atlanta, and the charges include wire fraud, conspiracy to commit wire fraud, preparing false tax returns as it relates to the easement tax shelters and filing false income tax returns. Fisher, who along with Sinnott was cast as the primary instigators of the scheme, was also charged with several counts of money laundering. All could face more than a decade in prison, according to the Department of Justice.
While a legal tax deduction, the Internal Revenue Service has long complained about conservation easement tax scams and in recent years has vowed to crack down on their use. While conservation easements' purpose is to incentivize landowners to prevent eligible properties from being developed commercially or otherwise, the IRS has alleged that many have abused the write-off as a tax loophole.
The agency's main ire has been focused on syndicators — middlemen who buy up and package land, and potentially inflate their values with appraisers, and then create conservancy easements that they sell to investors with promises of larger charitable write-offs than the initial investments.
In this instance, the IRS alleges that Fisher and Sinnott lured partnerships to donate land easements, and then, using hand-picked appraisers, inflated their appraisals to “amounts at least 10 times higher than the price that was actually paid for the partnership — often within months of the appraisals," according to the indictment. Using those new values, the partnerships then claimed charitable contributions, resulting in fraudulent tax deductions for the clients in the partnerships.
“Fisher, Sinnott, Joy, Lewis, Smith and other co-conspirators allegedly promoted, marketed and sold partnership units for $25,000 and guaranteed at least a 4-to-1 tax deduction ratio to their clients, which meant that four units with a total cost of $100,000 would yield a $400,000 tax deduction,” the IRS said in the release. “The marketing materials allegedly stated, for example, that depending on their personal tax rate, such a $400,000 deduction could result in the client receiving $170,000 back within months of purchasing their units for $100,000.”
According to the nearly 100-page indictment filed in the U.S District Court for the Northern District of Georgia, Fisher organized and promoted 11 conservation easement tax shelters between 2002 and 2012 within two of his land development projects in Western North Carolina called The Preserve at Little Pine and French Broad Crossing. By 2013, Fisher expanded the operation into real estate not directly related to his own developments and sold at least 15 conservation easements along with Lewis and Smith, according to the indictment.
The U.S. alleges Fisher admitted to the fraudulent nature of the partnerships to an undercover agent posing as a potential promoter in 2018.
“We know that if we're examined by the [IRS] they will ask for all promotion materials,” Fisher told the agent, according to the indictment. "So you have to be very, very careful that these look like real estate investments ... as compared to, you know, basically a tax shelter."
Last summer, the U.S. charged Lewis with conspiracy, wire fraud and helping to file false tax returns over conservation easements arranged by two brothers in Sandy Springs, Stein Agee and Corey Agee, according to Bloomberg. The Agees admitted to one count each of conspiracy to commit fraud in December, and are now cooperating with prosecutors, Bloomberg reports.
Sinnott, Lopuhina, Weibel and Roberts worked at Fisher's firm, according to Bloomberg. Attorneys for Fisher and Weibel denied the allegations to Bloomberg.
The government alleges in the indictment that Fisher earned $60M with these schemes, using the proceeds to buy millions of dollars in real estate as well as a $102K Mercedes GLS 550 4Matic, a $2M vacation home in Bonaire in the Caribbean Islands, a nearly $1M Model EA 500 airplane, $750K for a “show jumping horse” and $255K for a Super Bowl LIII Hall of Fame Experience.
“Those who contemplate promoting fraudulent tax shelters involving syndicated conservation easements — and the accountants, appraisers and tax preparers who create and execute strategies to assist them — should know that the Tax Division and IRS will unravel even the most elaborate schemes,” Stuart Goldberg, the acting Deputy Assistant Attorney General for the Justice Department’s Tax Division, said in a statement.