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- Eleanor Daugerdas argued government should have submitted unredacted documents
- Paul Daugerdas was found guilty in major criminal tax fraud case
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Sept 29 (Reuters) – A Manhattan federal judge on Tuesday blocked the sanctions request of the wife of a former Big Law partner who was found guilty for his part in one of the largest criminal tax fraud cases in U.S. history.
Eleanor Daugerdas, the wife of Paul Daugerdas, sought to sanction the federal government after prosecutors turned over redacted, not unredacted, bank records of Jenkens & Gilchrist’s Chicago law office, which her husband once ran.
Those records, which the federal government obtained in 2007 from Davis Polk & Wardwell as part of a separate investigation into accounting firm Ernst & Young, were already redacted by the time the government obtained them, wrote U.S. District Judge Denise Cote wrote in a 10-page order.
Eleanor Daugerdas had argued that the federal government violated its duty to preserve evidence by never obtaining unredacted versions of the records.
Cote was not persuaded. “The grand jury’s possession of subpoena power does not mean that every conceivable document subject to subpoena is deemed in the government’s possession or under its control,” the judge wrote.
Daugerdas was found guilty on charges including conspiracy, tax evasion and mail fraud by a New York federal jury in 2013. He was convicted of overseeing fraudulent tax shelters for about two decades, mostly at now-defunct Jenkens & Gilchrist, costing the U.S. government more than $1.63 billion in tax revenue.
Two other people were also convicted in connection with the scheme — former Jenkens partner Donna Guerin and David Parse, a Deutsche Bank broker. The jury acquitted another former Deutsche broker, Raymond Brubaker, and Denis Field, former chief executive at accounting firm BDO Seidman.
Jenkens & Gilchrist, which was based in Dallas, was among the country’s highest-grossing law firms and was home to more than 600 lawyers before it eventually shut its doors for good in 2007, the same year it reached a settlement with the Internal Revenue Service related to its tax shelter advice.
In June 2014, U.S. District Judge William Pauley gave the federal government the go-ahead to forfeit more than $160 million of Paul Daugerdas’ assets. Two months later, Eleanor Daugerdas filed a petition to claw back $10 million of those assets, arguing she had a right, title and interest to that money.
Although Pauley and the 2nd U.S. Circuit Court of Appeals denied her petition, the 2nd Circuit allowed her to do more fact-finding. Pauley ordered the federal government in July 2018 to produce the bank records, which didn’t occur until December 2020, in part due to the COVID-19 pandemic.
Even with the redacted records, Eleanor Daugerdas asserted in April that they were enough to support her petition.
Cote, whose decision was released by the court on Wednesday, was assigned to the case after Pauley died in July.
Paul Daugerdas is due to be released from an Illinois federal prison in 2027.
The case is United States of America v. Paul M. Daugerdas, et al., U.S. District Court for the Southern District of New York, 1:09-cr-00581.
For Eleanor Daugerdas: James DeVita, of the Law Office of James R. DeVita PLLC
For the U.S.: Kiersten Fletcher, of the U.S. Attorney’s Office for the Southern District of New York