First DOJ Criminal Case Involving Syndicated Conservation Easements; Scheme Defrauded IRS of More than $250 Million in Taxes
Stein Agee of Canton, Georgia, and Corey Agee of Atlanta, Georgia, appeared before U.S. Magistrate Judge W. Carleton Metcalf and pleaded guilty for their roles in a wide-ranging abusive tax scheme to defraud the IRS, the Department of Justice announced today.
According to court documents, from at least 2013 through 2019, S. Agee and C. Agee, then partners at an Atlanta accounting firm, marketed, promoted, and sold together with co-conspirators, investments in fraudulent syndicated conservation easement (SCE) tax shelters. The SCE tax shelters were designed to produce tax deductions for high-income taxpayers through partnerships that purported to make “real estate investments.” In truth, the partnerships were a sham, lacking economic substance and serving no legitimate business purpose. The placement of conservation easements over the real estate was a foregone conclusion, which fraudulently enabled the investors to shelter their income from the IRS with no economic risk and to claim substantial tax deductions to which they were not entitled. S. Agee, C. Agee, and their co-conspirators marketed the SCE tax shelters by promising investors that for every $1 invested in the partnership, the investor would receive more than $4 in charitable tax deductions.
“The defendants’ and their co-conspirators’ criminal conduct enabled their clients to claim more than $1.2 billion in fraudulent tax deductions and generated hundreds of millions of dollars of tax loss to the United States,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. “Their convictions signal just the beginning of the department’s prosecutive efforts. Taxpayers engaging in such schemes, and the lawyers, accountants, appraisers and other professionals that enable them, should understand that they will be held fully to account for their fraudulent conduct.”
“Each year, millions of law-abiding Americans painstakingly file accurate tax returns and pay timely their tax obligations, which support important government services our communities rely on,” said U.S. Attorney R. Andrew Murray for the Western District of North Carolina. “As the defendants admitted in court today, their tax shelter scheme helped wealthy clients skirt their tax responsibilities and avoid paying their fair share. Such actions not only increase the tax burden on honest taxpayers; they are a violation of our federal tax laws. Today’s guilty pleas send a strong message that tax professionals who promote, and benefit from, illegal tax shelters will be investigated and prosecuted accordingly.”
“Two defendants pleaded guilty today in the first-ever criminal case by IRS-CI involving conservation easements,” said Commissioner Charles Rettig of the IRS. “It should be considered the next step in the IRS’ battle against abusive SCEs. The defendants and their co-conspirators used conservation easement donations to personally enrich themselves and allow wealthy tax clients to evade their tax obligations. The charges and guilty pleas demonstrate that participation in abusive SCEs will not be tolerated. Once again, the IRS recommends that anyone who participated in an abusive SCE consult independent counsel about coming into compliance.”
Conservation easements were created by Congress to be a key tool used for protecting environmentally and historically important land. The donated conservation easement typically restricts the use or development of land in order to protect its conservation value. When legitimately created and used in compliance with the Internal Revenue Code, the conservation easement can both protect the environment and provide tax incentives. By contrast, abusive SCEs are designed to game the system and generate inflated and unwarranted tax deductions, often by using inflated appraisals of undeveloped land and partnerships devoid of legitimate business purpose.
According to court documents, S. Agee and C. Agee additionally solicited investors after the end of the tax year and advised them to backdate payments and documents to make it appear that the “investments” were timely made before the end of the tax year. S. Agee and C. Agee also prepared and assisted in the preparation of false tax returns for clients who agreed to invest in the SCE shelters. In exchange for their promotion of the abusive SCE tax shelters, between 2013 and 2019, S. Agee and C. Agee each received more than $1.7 million in commissions.
S. Agee and C. Agee both pleaded guilty to one count of conspiracy to defraud the United States which carries a maximum penalty of five years in prison. They also face a period of supervised release, restitution, and monetary penalties.
U.S. Attorney Murray, Principal Deputy Assistant Attorney General Zuckerman, and IRS Commissioner Rettig, thanked special agents of IRS-Criminal Investigation and the U.S. Postal Inspection Service, who are conducting the investigation, as well as Assistant U.S. Attorneys Daniel Bradley and Caryn Finley, and Tax Division Trial Attorneys Brittney Campbell and Grace Albinson, who are prosecuting the case.