Big-Four accountant wins appeal

Conviction for designing bogus tax shelters for rich has been overturned

Dec 9, 2012 @ 12:01 am

Five years ago, a Brooklyn, N.Y., accountant named Martin Nissenbaum was indicted and charged with trying to defraud the U.S. government by helping clients set up bogus tax shelters.

But this was no ordinary accountant and no ordinary criminal case. Mr. Nissenbaum was the national director of the personal-income-tax and retirement-planning practice at Big Four accounting firm Ernst & Young LLP.

The tax shelter cases were inherently complex, but they boiled down to an easily understood image of highly paid accountants and lawyers offering the nation's wealthiest people their hush-hush advice on how to cheat Uncle Sam.

“Prosecutors really wanted to get somebody, and judges and juries were ready to accept what the government asserted,” said Nathan Lewin, a prominent defense lawyer in Washington.

Mr. Nissenbaum fought the charges, but the government had e-mail evidence that seemed to lay bare his role in designing the tax avoidance schemes. Ernst & Young wasn't charged, though in 2003, it agreed to pay the Internal Revenue Service a $15 million penalty related to its shelters.

After a 10-week trial in 2009, a jury convicted Mr. Nissenbaum. He was sentenced to 30 months in prison, fined $100,000 and ordered to perform 120 hours a year of community service after his incarceration.

Late last month, Mr. Nissenbaum received stunning news. By a 2-to-1 vote, the U.S. Court of Appeals had thrown out his conviction.

The panel wrote that the crux of the case against Mr. Nissenbaum — a single e-mail — “is simply not enough” to warrant conviction.

“The question is, how do you get your reputation back? And he had a phenomenal one,” said Mr. Lewin, who represented Mr. Nissenbaum, 56, before the appellate court.

A lot of people, understandably, have demanded indictments of the financial world luminaries who led the economy into the abyss four years ago.

For those seeking insight into why prosecutors seem nervous about bringing criminal-fraud cases against Wall Street bigs, Mr. Nissenbaum story may offer a hint.

Aaron Elstein is a senior reporter at sister publication Crain's New York Business.


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