Lawyers, Accountants, and the Tax Shelter Industry
424 pp., 6 x 9 in,
- Published: September 2, 2016
- Published: April 25, 2014
- Published: May 2, 2014
The rise and fall of a tax shelter industry that enabled some of America's richest citizens to avoid paying their fair share of taxes.
For ten boom-powered years at the turn of the twenty-first century, some of America's most prominent law and accounting firms created and marketed products that enabled the very rich—including newly minted dot-com millionaires—to avoid paying their fair share of taxes by claiming benefits not recognized by law. These abusive domestic tax shelters bore such exotic names as BOSS, BLIPS, and COBRA and were developed by such prestigious firms as KPMG and Ernst & Young. They brought in hundreds of millions of dollars in fees from clients and bilked the U.S. Treasury of billions in revenues before the IRS and Justice Department stepped in with civil penalties and criminal prosecutions. In Confidence Games, Tanina Rostain and Milton Regan describe the rise and fall of the tax shelter industry during this period, offering a riveting account of the most serious episode of professional misconduct in the history of the American bar.
Rostain and Regan describe a beleaguered IRS preoccupied by attacks from antitax and antigovernment politicians; heightened competition for professional services; the relaxation of tax practitioner norms against aggressive advice; and the creation of complex financial instruments that made abusive shelters harder to detect. By 2004, the tax shelter boom was over, leaving failed firms, disgraced professionals, and prison sentences in its wake. Rostain and Regan's cautionary tale remains highly relevant today, as lawyers and accountants continue to face intense competitive pressure and regulators still struggle to keep pace with accelerating financial risk and innovation.
Confidence Games is a lively and deeply informed human story of what went on inside the big legal and accounting firms before, during, and after the tax shelter scandals that made front page news at the turn of the millennium. Rostain and Regan give readers a solid primer, translating arcane principles of accounting. Then they add a human touch with telling details mined from a public record few others have explored.
David Cay Johnston, Pulitzer Prize-winning tax journalist and Syracuse University law and accounting lecturer
Few of us imagine that we will cross the line in our professional lives—and be jailed, fined, or both. But Confidence Games tells a sobering tale of individual weakness and institutional and regulatory failure that allowed esteemed law firms, accounting firms, and multinationals to reap illegal profits at the expense of the nation.
Diane Ring, Professor of Law, Boston College Law School, and coauthor of Ethical Problems in Federal Taxation
This book manages what many might think impossible: it's a page-turner about tax. It shows what can happen when very smart people unconstrained by ethics invent and use ingenious schemes. The history is fascinating in its own right, but it is also, unfortunately, a much-needed reminder of how gameable regulation can be.
Claire Hill, Professor and James L. Krusemark Chair in Law, University of Minnesota Law School
Rostain and Regan have captured one of the most interesting—and most troubling—episodes in the checkered history of tax shelters. Their analysis raises critical ethical and policy questions about how we train, monitor, and discipline lawyers and other financial professionals today.
Anne L. Alstott, Jacquin D. Bierman Professor in Taxation, Yale Law School