Feds Say $7B Tax Fraud Atty Is Safer In Prison

By Lauraann Wood
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Law360 (April 21, 2020, 9:54 PM EDT) -- An ex-Jenkens & Gilchrist lawyer serving time for orchestrating a $7 billion tax fraud scheme shouldn't get to return to his Chicago suburban home because of concerns over the COVID-19 virus and would be safer at the prison where he's currently stationed, the U.S. government has argued.

Federal prosecutors on Friday urged U.S. District Judge William Pauley to reject 69-year-old Paul Daugerdas' request to serve the rest of his 15-year sentence from home in light of his age and medical conditions — including diabetes and elevated cholesterol — which make him more susceptible to the effects of the novel coronavirus.

The government said Daugerdas is effectively asking for permission to carry out the rest of his sentence in more dangerous health conditions, and he failed to exhaust his administrative remedies to pursue his release.

Daugerdas is currently serving his time from a low-security prison in southern Illinois that has no active and few surrounding cases of the coronavirus, prosecutors told Judge Pauley. But he'd be released to live in an area with numerous COVID-19 cases, alongside his wife, who works as a nurse at a hospital treating numerous positive patients, they argued.

Daugerdas' proposal to let his wife help keep him safe as part of his release plan "would actually put him in greater peril of COVID-19 infection" than if he continued serving his sentence in the prison, prosecutors said.

There is no dispute that Daugerdas suffers from serious health issues, or that those health issues are among a list of others that make people more vulnerable to the novel coronavirus, they said. But the court considered Daugerdas' medical conditions when it sentenced him, and his conditions are "are both reasonably common and stable, and do not distinguish him from numerous others," they argued.

Henry E. Mazurek of Meister Seelig & Fein LLP, who represents Daugerdas, told Law360 in an email Tuesday that "human decency and compassion should outweigh the need to continue to incarcerate a man who approaches 70 with serious health conditions." Daugerdas "is old and feeble, and society does not need him incarcerated during times of a grave health crisis to feel protected or convey some sense of just punishment," he said. 

"He should be detained at home without the unjust risk to his health. The cost to American society would be less in dollars, and we would profit as a society by proving ourselves to be decent and merciful even to those who committed crimes," Mazurek told Law360. 

Representatives for the government did not immediately respond Tuesday to a request for comment.

Prosecutors claimed Daugerdas, the former head of Jenkens & Gilchrist's Chicago office, created and implemented four tax shelters for wealthy clients that resulted in more than $7 billion worth of fraudulent tax deductions or benefits. He personally reaped $95 million from the scheme, according to the government.

Daugerdas was convicted on conspiracy, tax evasion, impeding Internal Revenue laws and mail fraud charges in 2013 and has been incarcerated since 2014. He was initially convicted in 2011, but Judge Pauley nixed that verdict after finding a woman lied about her failed legal career and hid her husband's criminal background to get selected as a juror.

At sentencing, Judge Pauley said Daugerdas would be remembered as "the architect of the greatest tax fraud in U.S. history."

Daugerdas was one of several individuals ensnared in a wide-ranging tax evasion investigation focused on Jenkens & Gilchrist, a once-proud Texas law firm that was forced to shut its doors in 2007 following a nonprosecution deal with the government. Others charged in the fraud included former Jenkens lawyers Donna Guerin and Erwin Mayer, and several former partners at accounting firm BDO Seidman LLP.

The government is represented by Stanley J. Okula Jr. of the U.S. Attorney's Office for the Southern District of New York.

Daugerdas is represented by Henry E. Mazurek and Ilana Haramati of Meister Seelig & Fein LLP.

The case is U.S. v. Daugerdas et al., case number 1:09-cr-00581, in the U.S. District Court for the Southern District of New York.

Additional reporting by Kevin Penton, Max Stendahl, Richard Vanderford and Sindhu Sundar.

--Editing by Gemma Horowitz.

For a reprint of this article, please contact reprints@law360.com.

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Case Number

1:09-cr-00581

Court

New York Southern

Nature of Suit

Judge

William H. Pauley, III

Date Filed

June 09, 2009

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