Georgia CPA Pleads Guilty to Promoting Syndicated Conservation Easement Tax Scheme Involving Fraudulent Charitable Deductions

A Georgia man pleaded guilty today to conspiracy and filing a false personal tax return related to his participation in the promotion and sale of abusive syndicated conservation easement tax shelters.

According to court documents and statements made in court, Herbert Lewis was a CPA and return preparer at an Atlanta-based accounting firm. Beginning at least in 2014 and through at least 2019, Lewis promoted and sold tax deductions to his wealthy clients in the form of units in illegal syndicated conservation easement tax shelters organized and created by co-defendants Jack Fisher, James Sinnott and others. For their involvement in the scheme, Fisher and Sinnott were sentenced in January to 25 and 23 years in prison respectively.

According to the superseding indictment, the scheme entailed the creation of partnerships that would purchase land and land-owning companies and then donate conservation easements over that land or the land itself. Appraisers would allegedly generate fraudulent and inflated appraisals of the conservation easements that frequently valued the easements at amounts at least 10 times higher than the price actually paid by the partnership for the land or land-owning company – often just months prior to the appraisals. As the superseding indictment charged, the partnerships claimed a charitable contribution tax deduction based on the inflated value of the conservation easement, resulting in a fraudulent tax deduction flowing to the clients who purchased units in the partnership.

According to court documents and statements made in court, Lewis knew that, contrary to law, the transactions related to these illegal tax shelters lacked economic substance; that his wealthy clients participated only to obtain a tax deduction and that his clients received only a tax benefit for their participation in the shelters. For example, a client who purchased units in a partnership had a “vote” ostensibly on what to do with the land the partnership owned. However, Lewis knew that the “vote” held by the partnership each year was just for optics and that the land invariably would be donated largely as a conservation easement.

In some cases, to make it appear that his clients had joined the partnerships before the date of the conservation easement donation, which was necessary to claim the tax benefits, Lewis also instructed and caused his clients to falsely backdate documents – such as subscription agreements and checks – related to the partnerships. In 2019 alone, Lewis assisted 15 clients with claiming false deductions on their 2018 returns. In total, Lewis assisted in the preparation of tax returns that claimed nearly $14 million in false deductions based on backdated documents, causing a tax loss to the IRS of nearly $5 million.   

Lewis earned over $1 million in commissions for his role in promoting and selling the illegal tax shelters to clients. Lewis also concealed the amount of commissions he had earned from selling units in these shelters by not fully reporting the commissions on his personal returns and instead fraudulently reporting commission income he had earned as income on the tax returns of nominee entities in his children’s names.

Lewis is scheduled to be sentenced on Oct. 16 and faces a maximum penalty of five years in prison for the conspiracy charge and three years in prison for the charge of filing false tax returns. Lewis also faces a period of supervised release, restitution and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

To date, in addition to the convictions of Fisher and Sinnott noted above, eight additional defendants have pleaded guilty to criminal conduct related to the syndicated conservation easement tax shelter scheme, including appraiser Walter Douglas “Terry” Roberts, CPAs Stein and Corey Agee, CPA Ralph Anderson, CPA James Benkoil, CPA Victor Smith, CPA William Tomasello and CPA and Attorney Randall Lenz.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, U.S. Attorney Ryan K. Buchanan for the Northern District of Georgia and IRS Criminal Investigation Chief Guy Ficco made the announcement. They thanked U.S. Attorney Dena J. King for the Western District of North Carolina for her office’s assistance.

IRS Criminal Investigation and the U.S. Postal Inspection Service investigated the case.

Trial Attorneys Richard M. Rolwing, Parker Tobin, Jessica Kraft, Grace Albinson and Nicholas J. Schilling Jr., of the Justice Department’s Tax Division and Assistant U.S. Attorney Christopher Huber, Deputy Chief of the Complex Frauds Section, for the Northern District of Georgia are prosecuting the case.