Free Response - District Court of Federal Claims - federal

Case 1:05-cv-00748-CCM

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EXHIBIT A

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(I
Robert B. Fiske, Jr., Esq. James P. Rouhandeh;Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017

U.S. Department of Justice
United States Attorney. .. ~
Southern District of

New. York

The Silvio J. Motto Buildiiig
One Saini Andrew's Plaza New York, New York 10007

March 26, 2007

Re: Jenkens & Gilchrist
Dear Messrs. Fiske and Rouhandeh:

The protection against prosecution with respect to the tax offenses set fort below has been approved by the Tax Division, Departent of Justice.

District of

Pursuant to our discussions, the Office of the United States Attorney for the Southern New York ("this Offce") and Jenkens & Gilchrist ("J&G"),l pursuant to the authority granted by the Boards of Directors or Management Committees of J&G Texas, J&G Ilinois, these Resolutions for each of J&G California, J&G New York, and JGPC, Inc., in the form of entities (copies of which are attached hereto as Exhibit A), and represented by its undersigned
attorneys, hereby enter into this Agreement.

1 Jenkens & Gilchrist and J&G are defined herein to include Jenkens & Gilchrist, A Professional

Corporation, a Texas professional corporation (EIN 75-2204006) ("J&G Texas"); Jenkens & Gilchrist, A Professional Corporation, an llinois professional corporation (EIN 36-4263272) ("J&G Ilinois"); Jenkens & Gilchrist LLP (ElN 95-4775690) ("J&G California"); Jenkens & Gilchrist Parker Chapin, LLP (EIN 13-4148545) ("J&G New York"); and JGPC Incorporated the attorneys of J&O New York either 2005, all of ("JGPC Inc.") (EIN: 20-8614033). In April retired or withdrew from that entity and joined Troutman Sanders LLP or other law firms.
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Robert B. Fiske, Esq. James P.Rouhandeh, Esq.

This Offce has been investigating the tax shelter activities engaged in by J&G during the period i 998 through 2004. According to representations made to this Offce by and on behalf of J&G, J&G has suffered and continues to suffer significant financial hardship caused largely by its revenues associated with the deparure former tax shelter practice, including a significant loss of of 397 attorneys since 200 l, with the number of attorneys employed by the firm dropping from February 28, 2007. J&G has also represented to this 605 attorneys in 200 1 to 208 attorneys as of its financial diffculties, J&G's offces have already been or wil soon Offce: that as a result of join other law firms; that J&G Texas be closed, and J&G's lawyers have already joined or wil
thereafter wil remain in operation to wind up J&G's business affairs; that the purposes of

this

continuing entity wil include continuing to cooperate with this Offce by assisting in the ongoing criminal investigation of J&G's tax shelter activities and any resulting prosecutions, as well as
paying a civil penalty to the Internal Revenue Service (the "IRS") pursuant to the terms

the Closing Agreement reached by J&G and the IRS to resolve the promoter penalty audit and other the Closing Agreement; and that J&G will no matters, and otheiwise complying with the terms of longer be engaged in the practice of law. Since September 2004, J&G has cooperated with this Responsibility (the Offce's investigation. Moreover, J&G has provided a Statement of "Statement") to this Offce, acknowledging that certain J&G attorneys developed and marketed significant tax revenues. A fraudulent tax shelters that wrongly deprived the U.S. Treasury of copy of the Statement is attached hereto as Exhibit B. In consideration of the foregoing, this Offce enters into this Agreement with J&G.
of

On the understandings specified below, this Offce, and with respect to tax offenses, the Tax Division, Department of Justice, wil not criminally prosecute J&G for crimes arising from J&G's tax shelter activities from 1998 through 2004, including but not limited to: the design, development, marketing, sale, and implementation of certain tax shelters commonly referred to as BOSS, BART, HOMER, and variants ofthe so-called "Son of BOSS" shelter that went by names including BEST, BEDS, BLISS, COBRA, the Short Option Strategy ("SOS"), and the Option Partnership Strategy ("OPS"); J&G's issuance oflegal opinions supporting those tax those transactions against the IRS; and J&G's failure, shelters; J&G's assistance in the defense of
at any time, to withhold taxes or fie certain tax forms (including IRS Forms 1099 and W-2) with

respect to compensation paid to "Paul M. Daugerdas, Chartered." This Agreement does not provide any protection against prosecution for any crimes except as set forth above. It is
understood that this Agreement does not apply to any fonner or current shareholder, parter,

associate, or employee of J&G, but only to J&G, as defined above.

It is further understood that J&G has entered into a Closing Agreement with the IRS in connection with the IRS's promoter penalty audit of J&G, and that the ClosingAgreement will also resolve all other outstanding issues between J&G and the IRS upon such terms and
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Robert B. Fiske, Esq.
James P. Rouhandeh, Esq.

conditions as have been mutually agreed Upon. It is understood that the resolution reached in the Closing Agreement is a condition precedent to this Agreement, and that J&G's commission ora the Closing Agreement shall constitute a violation of Default under the terms of Major Event of this Agreement. In view of J&G's agreement to resolve the IRS's promoter penalty audit, and J&G's financial condition, this Office wil not seek any restitution or fine from J&G in connection with any of the conduct described in this Agreement.
and completely disclose all information in its possession and control with respect to the activities of J&G, its current or former shareholders, partners, associates, and employees, concerning all matters about which this Office, the IRS (civil and criminal), and the Tax Division, Department ofJustice (civil and criminal) ("Tax DOJ") inquires, which information can be used for any purpose; (b) shall cooperate fully with this Offce, the IRS (civil and criInnal), Tax DOJ, and any other law enforcement agency designated by this Offce; (c) shall volunteer and provide to this Offce any information and documents that come to J&G's attention that may be relevant to this Offce's investigation; (d) shall use its best efforts to assemble, organize, and provide, in a responsive and prompt fashion, and upon request, in an expedited fashion, all documents, records, information, or control as may be requested by this Offce, and other evidence in J&G's possession, custody the IRS (civil and criminal), Tax DOJ, or any other law enforcement agency designated by this Offce; (e) shall use its best efforts to make available its present and former shareholders,
It is further understood that J&G: (a) shall trthfully

parers, associates, and employees to provide information and/or testimony before a grand jury

or in court proceedings, and in interviews with law enforcement authorities, and to identify witnesses who, to J&G's knowledge may have material information concerning this Offce's investigation, including but not limited to the conduct described in the fourth paragraph öfthis Agreement and in l&O's Statement; (f) shall use its best efforts to provide testimony or establish the original location, authenticity, or other basis for admission in evidence of documents and/or physical evidence in any criminal proceeding as requested by this Offce, the IRS (civil and which J&O criminal), or Tax DOl; (g) shall bring to this Office's attention any crimes of becomes aware that J&G or its current and former shareholders, partners, associates, and employees have committed, and all administrative, civil or criminal proceedings, investigations,
or prosecutions of which l&G becomes aware in which J&G, or any of

its current and former

shareholders, partners, associates, or employees have been or are a subject, target, part, or witness (excluding domestic disputes, traffic and personal injury proceedings, as well as any proceedings regarding real property owned by current and former shareholders, partners, associates, or employees in a personal capacity); and (h) shall commit no crimes whatsoever.

It is further understood that J&G shall maintain the originals of all docqments, records, or other items of tangible evidence in its possession and control related to the conduct described in
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Robert B. Fiske, Esq. James P. Rouhandeh, Esq.
this Agreement, at J&O's own expense, in a location or locations that the fourth paragraph of shall be designated in writing to this Office and leased for a period of three years from the this Agreement. J&G shaU designate and train appropriate personnel, who wil be signng of available for a period of five years, to satisfy its obligations to provide materials under subsection such the preceding paragraph. J&G shall also provide for payment to retain the services of (d) of personnel to fulfill such obligations for a period of three years from the signing of this these Agreement. After three years, this Offce and/or the IRS shall pay for the storage of personnel designated and trained by J&G documents and other materials, and for the retention of
to satisfy its obligations under subsection (d) of records and other items of

the preceding paragraph. These documents,

tangible evidence include: (i) the firm's accounting ledgers and biling records pertaining in any manner to the conduct described in the fourth paragraph of this Agreement; (ii) the hard-copy originals of all client files pertaining in any manner to the conduct described in the fourth paragraph of this Agreement, to the extent they presently exist; (iii) the "non-client" fies pertaining in any manner to the conduct described in hard-copy originals of all this Agreement, to the extent they presently exist; (iv) electronic copies the fourh paragraph of of all of the files in the firm's iManage database system pertaining in any manner to the conduct described in the fourth paragraph of this Agreement; (v) electronic copies of all of the e-mail currently present on or derived from the firm's e-mail servers contained in the e-mail accounts of certain current and former shareholders, partners, associates, and employees to be designated in writing by this Office upon consultation with 1&0; and (vi) the hard drives of current and former shareholders, parners, associates, and employees to be designated in writing by this Offce upon consultation with J&G, to the extent such hard drives presently exist.

It is further understood by this Offce that by

'agreeing to take the actions indicated in the

preceding two paragraphs, J&G is not waiving any attorney-client or work product privilege with respect to its representation in connection with this Offce's criminal investigation, its
representation in the IRS promoter penalty audit, and its representation in private civil It is the understanding of

litigation.

this Offce, however, that following the 2004 cour decision directing 1&G to disclose the names of tax shelter clients, and in the course of complying with grand jury subpoenas issued by this Office, J&G has not maintained or asserted that its activities with respect to the design, development, marketing, sale, and implementation of tax shelters is covered by any attorney-client or work product privilege, or that it had any privileged communications with third parties with respect to such activities.

It is further understood that should J&G commit any crimes after the signing ofthis
Agreement, or should this Offce, in its sole discretion, determne that J&G, or any individual or

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Robert B. Fiske, Esq. James P. Rouhandeh, Esq.
entity authorized to act on behalf of J&O, has given false, incomplete, or misleading testimony or information, or should J&G otherwise violate any provision ofthis Agreement, J&G shall which this Offce has thereafter be subject to prosecution for any federal criminal violation of knowledge, including perjury and obstruction of justice. Any such prosecution that is not timebarred by the applicable statute oflimitations on the date of the signing ofthis Agreement may be commenced against J &G, notwithstanding the expiration of the statute of limitations between the
signing of this Agreement and the commencement of

such prosecution. It is J&G's intent by

entering into this Agreement to waive all defenses based on the statute of limitations with respect to any prosecution that is not time-barred on the date that this Agreement is signed.
this

It is further undersood that should J&G commit any crime after the signing of

Agreement, or should this Offce determine that J&G, or any individual or entity authorized to

act on behalf of J&G, has given false, incomplete, or misleading testimony or information, or this Agreement, (a) all statements made by should J&G otherwise violate any provision of shareholders, parners, associates, employees, and agents of J&O to ths Offce or other designated law enforcement agents, and any testimony given by shareholders, partners, jury or other tribunal, whether prior to associates, employees, and agents of J&G before a grand or subsequent to the signing of this Agreement, and any leads from such statements or testimony shall be admissible in evidence in any criminal proceeding brought against J&G; and (b) J&G
shall assert no claim under the United States Constitution, any statute, Rule 410 of

the Federal

Rules of Evidence, or any other federal rule that such statements or any leads therefrom should
be suppressed. It is J&G's intent by entering into this Agreement to waive all rights in the

foregoing respects.

It is furer understood that this Agrement does not bind any federal, state or local prosecuting authority other than this Offce and, to the extent set fort above, the Tax Division, Deparment of Justice. This Office wil, however, bring the cooperation of J&G to the attention requested by J&G. prosecuting offces, if of other

It is furter understood that this Offce and/or J&G may disclose this Agreement to the
public.

With respect to this matter, this Agreement supersedes all prior, ifany, understandings, promises and/or conditions between this Offce, the Tax Division, Department of Justice, and J&G. No additional promises, agreements, and conditions have been entered into other than
"

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Robert B. Fiske, Esq.
James P. Rouhandeh, Esq.

those set fort in this letter and none wil be entered into unless in writing and signed by all

paries.
Very trly yours,

AP~~
SHIRAH NEIMAN Chief Counsel to the United States Attorney

f#PTEI2 AND AGREED BY:

.3 Yá:feL £ ~J;Æt_ DATE - 2¿, - 07 PATRICK E. MITCHELL, ESQ.,
Authorized Signatory for:

J&G Texas

J&G Ilinois
J&G California J&G New York
JOPC, Inc.

DA

l~/07
".

~ p ~~ 4J - /f,lL
JA ES P. ROUHANDEH, ESQ.

3/2.6 107 DATE

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,~;:,

.11¥''F~~~~!t~1t

'\ Exhibit A

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UNANIMOUS CONSENT IN LIEU OF MEETING OF THE BOAR OF DlREClORS OF JENKENS & GILCHRST, A PROFESSIONAL CORPORATION
Puruant to the authority contained in Aricle 9.10B of the Texas Busines Corporation
Act, the undersigned, being all of the members of the Board of

Directors of Jenkens & Gilchrst,

A Profesional Corporation, a Texas professional corporation (the "Company"). do hereby adopt

the following recitals and resolutions with the same force and effect as though adopted at a
special meeting of the Board of

Directors duly called and held:

Resolutions Approving Settlement Agreements

RESOLVED, that the Boar of Diretors hereby approves a Closing Agreement As To
Final Deterination Of Tax Liabilty And Specific Mattrs and a Non Prosecution and

Cooperation Agreeent among the Company, certn of its afliates and certin agencies of the
United States governent (the "Agreements") in the fonn presented to and reviewed by each of Directors. the members of the Board of
RESOLVED, in furtherance of hereby is, authorized, empowered and directed on behalf of

the foregoing resolutions, that Patrck Mitchell be, and he the Company, to execute and deliver

the Agreements, to take or cause to be taen all such further actions and to execute, acknowledge, certfy, deliver, accept, record and file àn such other insments and notices in the name and on behalf ofthe Company as in his discretion he may deem necessary or appropriate in
order to cary out and effectuate the intent and purses of

the foregoing resolutions.

RESOLVED, that all actions heretofore taken by the offcers and directors of the
Company in furterance of the puroses of these resolutions ar hereby ratified and confrmed in all respects.

c,

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,,'
"

IN WIESS WHREOF, the undersigned have hereunto set their hands.
Date:

3 -2.1,- 07

Pa k E. Mitchell
Date:

IJ.dÙJ C. ~w.;£

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.'

Thomas H. Cantrll

Date: ~" "JÚ1- Ð 7

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UNANMOUS WRTTEN CONSENT OF THE MAAGEMENT COMMlITEE
OF JENKENS & GILCHRT, LLP,

The undersigned being the Management Commttee of Jenkens & Gilchrst, LLP, a

Californa lirrted liability parnerslp (the "Parership"), pursuant to the authonty grted to
them in the Parershp Agreement of the Paiership, do hereby tae the following action and

adopt the following resolutions:

Resolutions Approving Settlement Agreements RESOLVED, that the Mangement Committee hereby approves a Closing Agreement As To Final Determation Of Tax Liabilty And Specific Matters and a Non Prosecution and Cooperation Agement among the Parership, certain of its affliates and certain agencies of the United States government (the "Agreements") in the form presented to and reviewed by each the Management Commtte. of the members of
RESOLVED, in furerace of hereby is, authonzed, empowere and directed on behalf

the foregoing resolutions, tht Patrck Mitchell be, and he
of

the Partership, to execute and

deliver the Agreements. to tae or cause to be taken all such fuer actions and to execute,
acknowledge. certify. deliver, accept, record and file all such other inents and notices in the

name and on behalf of the Partership as in his discretion he may deem necessar or appropnate in order to carry out and effectuate the intent and purposes of the foregoing resolutions.
RESOLVED, that all actions heretofore taken by the representatives and members of the
Management Committee of the Parerhip in furtherace of the purposes of

these resolutions are

hereby ratified and confirmed in all respects.

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~ WITNESS WHEREOF, the undersigned have hereunto set their hands.

Date: MDÅt.L ~~# ,l()7 f
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Date: .f~ iL i 1t

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UNANIMOUS WRTTEN CONSENT

OF THE BOAR OF DIRCfORS OF
JENKENS & GILCHST, A PROFESSIONAL CORPORATION (ILLINOIS)
The undersigned. being all of the directors of Jenkens & Gilchrst, a Professional

Corporation, an Ilinois professional corporation (the "Company"), do hereby consent and agree
to the adoption of the following resolutions pursuant to Secton 8.45 of the Busines Corporation
Act of the State of

Ilinois:

Resolutions Approving Settlement Agreements
RESOL YEn, that the Board of Directors hereby approves a Closing Agreement As To
Final Determination Of Tax Liabilty And Specific Matters and a Non Prosecution and

Cooperation Agreeent among the Company, certain of its affliates and certain agencies of the
United States governent (the "Agreements"') in the form presented to and reviewed by each of Directors. the Board of the members of

hereby is, authorized, empowered and directed on behalf of

RESOL YEn, in furerance of the foregoing resolutions, tht Patrck Mitchell be, and he the Company, to execute and deliver
all such other instruents and notices in the

the Agreements, to take or cause to be taen all such fuher actions and to execute,
acknowledge, certify, deliver, accept, record and file

name and on behalf of the Company as in hi discretion he may deem necesar or appropriate in
order to cary out and effectuate the intent and purpses of the foregoing resolutions.

RESOL YEn, that all actions heretofore taken by the offcers and diretors of the Company in furtherance of the puroses of these resolutions are hereby ratified and confined in all respects.

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IN WITNESS WHEREOF. the undersigned have hereunto set their hands.

Date: 3 - 2 ¿, - () 7

Date: 7/Ul-¿i;7

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UNAN~OUS ~TTN CONSENT
OF TH MAAGEMENT COMMlTfEE
OF

JENKENS & GILCHR PARR CHAIN LLP,
. The undersigned being the Management Commtte of Jenkens & Gilchrst Parker
Chapin LL.P, a New York limite-d liability parership (the "Parer~p" or the "Finn"), pursuant
to the authority granted to them in the Parership Agreement of the Parership, do hereby take

the following action and adopt the following resolutions:

Resolutions Approving Settlement Agreements
RESOLVED. that the Management Committee hereby approves a Closing Agreement As To Final Determination Of Tax Liabilty And Specific Matters and a Non Prosecution and Cooperation Agreement among the Parership, cerain of its affliates and certain agencies of
the United States governent, (the "Agrements") in the form presented to and reviewed by each
ofthe members of

the Management Committee.

RESOL VED, in fuerace of the foregoing resolutions, that Patrck Mitchell be, and he
hereby is, authorized, empowere an directed on behalf of

the Parership, to execute and

delivered Agreements, to take or cause to be taken all such fuher actions and to execute, acknowledge, certfy. deliver, accept, record and file all such other instnents and notices in the the Parership as in his discretion he may deem necessa or appropriate name and on behalf of
in order to car out and effectuate the intent and purpses of the foregoing resolutions.

RESOL VED, that all actions heretofore taken by the represntatives and members oftbe
Management Commttee of the Parership in furterace of the purposes of

these reolutions are

hereby ratified and confrmed in all respects.

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.

.

..

IN WITNESS WHOF, the undersigned have hereunto set their hands.

""

Date:

3 - 2¡, - 0 7

Date:

5-U" ¿:/

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"

UNANIMOUS WRITTN CONSENT OF TH BOAR OF DIRECTORS OF
JGPC INCORPORATED

The undersign~~, being all of the directors of iope Incorporated, a New York
corporation (the "Company"), do hereby consent and agre to the adoption of the following
resolutions pursuant to applicable law:
..

Resolutions Approving Settlemeot Agreements"
RESOLVED, that the Board of Directors hereby approves a Closing Agreement As 10
Final Detenninaton Of Tax Liabilty And Specific Matters and a Non Prosecution and

Cooperation Agreement among the Company, certain of its affiliates and certain agencies of the
United States governent (the "Agreements") in the form presented to and reviewed by each of the members ofthe Board of Directors.

the foregoing resolutions, that Patnck Mitchell be, and he the Company, to execute and deliver hereby is, autorized. empowered and directe on behalf of the Agreements, to take or cause to be taken all such fuer actions and to execute, acknowledge, certify, deliver, accept, recrd and file all such other instrents and notices in the
RESOL YEn, in fuherance of

name and on behalf of the Company as in rus discretion he may deem necesar or appropriate in the foregoing resolutions. order to car out and effectuate the intent and puroses of
RESOL VEn, tht all actions heretofore Company in fuerance of the purses of

taken by the offcers and directors of the these resolutions are hereby ratified and confed in

all respects.

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IN WTImSS WHEREOF, the undersgned have hereunto set their hands.

Date:

3-2(0- D7

Date:

3.,%.. ~7
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Jenkens & Gilchrist
A PROFESSIONAL CORPORATION

STATEMENT OF JEKENS & GILCHRST

Jenkens & Gilchrst ("J&G") has agreed to resolve a crial investigation
conducted by the United States Attorney's Offce for the Southern District of

New

York, as well as a civil promoter penalty audit underten by the IRS, in

connection with tax shelters promoted by the firm's Chicago offce to high net wort individuals, and legal opinons issued by the firm in support of those the shelters, durg the period from 1999 through 2003. Under the tenn of

agreement with the United States Attorney's Offce, the Governent wil not prosecute J&G, and J&G wil fully cooperate with the United States Attorney's Offce and the IRS. In fmal settlement of the promoter penalty audit, J&G has underten to pay a civil penalty to the IRS.
J&G has mae the following statement to the United States Attorney's
Offce for the Southern Distict of

New York concerning the investigation:

"We believe certn J&G attorneys developed and maketed fraudulent tax
shelters, with fraudulent tax opinons, tht wrongly deprived the U.S. Treas of
significant tax revenues. The firm's tax shelter practice was spearheaed by tax

pratitioners in J&G's Chicago offce who ar no longer with the finn. Those responsible for overseeing the Chicago tax practice placed unwaranted trust in the judgment and integrity of the attrneys pricipally responsible for that practice, and failed to exercise effective oversight and control over the finn's tax
shelter practice. Unfortately, that misplaced trst and reliance extended to our

initial response to the IRS and led to public statements we issued in support of our opinions. Our prior support for the opinions adversely affected the effort of legal the IRS to assess and collect tax revenues. We deeply regret our involvement in
this tax pratice, and the serious har it caused to the United States Treasury.

standing reputation, revenues, and stabilty. We appreciate the willngness of

"The Chicago tax shelter practice seriously undermined this Unn's longthe U.S. Attorney's Offce and the IRS to consider those factors, as well as the
cooperation we have provided to the Governent since 2004, in determning an

appropriate resolution of the grand jur and tax proceedings."

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