In a blog post entitled Offshore trust scheme leads to former U.S. Attorney pleading guilty to tax fraud, I wrote about two North Carolina attorneys who had been charged with conspiring to commit tax fraud in connection with a tax evasion scheme revolving around the use of off-shore trusts.
One attorney, Samuel T. Currin, a former North Carolina U.S. Attorney, state judge and state Republican chairman, agreed to plead guilty to conspiring to launder $1.45 million through his law firm’s client trust account and to lying on his taxes by failing to report an offshore debit card account. The second attorney caught up in the prosecution was North Carolina tax attorney Rick Graves.
In fairness to Mr. Graves, I feel compelled to follow up on my original blog posting by reporting that he was recently cleared of all charges by a unanimous jury verdict of NOT GUILTY. The following are excerpts from this post on the North Carolina Estate Planning Blog:
Mr. Graves is a lawyer in Wilmington, North Carolina, who was charged a year ago with two federal crimes: 1) Conspiring to Defraud the IRS and 2) Obstructing the IRS. Both charges arose from Mr. Graves’ association with other individuals who engaged in “off-shore” criminal activities – without Mr. Graves’ knowledge — relating to tax planning and asset protection. Mr. Graves has always asserted his complete innocence, and based upon all the evidence, including a 7-hour cross-examination of Mr. Graves, the jury agreed.
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Co-counsel, Will Terpening added that, “over the last two weeks, during the trial, Rick Graves was finally given an opportunity to defend himself and to clear his name. With the jury’s verdict —- He has done both.” Reflecting on the investigation, the trial, and the jury’s verdict, Rick Graves wondered how he gets his good reputation back. More specifically, he stated that “the case against me was based on false assumptions and guilt by association.” He added that, “the prosecutors indicted first, and investigated later.”
Lawyer Anderson also added that:
The investigation of Rick Graves raises important issues about the increasing use of criminal punishment in highly regulated areas, like tax planning. In this arena, the line between mistakes” and “crimes” is often too blurry for fair prosecutions. Criminal charges should only
be used for truly “bad actors.”
Lawyer Terpening added that:
Mr. Graves was a lawyer with an impeccable reputation, who was a deacon in his church, and who had a 20-year military career. At a minimum, he should have been given the chance to address the government’s concerns before being indicted. In the end, Rick Graves was thrilled with the outcome and with the hard work of his legal team. He concluded by stating that: “Justice has finally been served. This nightmare is over. My name is finally cleared.”
Lesson learned: Make sure you get paid for taking on the risks associated with an estate tax practice.
My personal belief is that estate planning attorneys often take on risks they are not paid for. In other words, the fees they charge for the tax services they provide do not adequately compensate them for the risks they assume. This case is a prime example. I have no idea what Mr. Graves was paid for the tax work he did in this case. But I am absolutely certain that it in no way adequately compensated him for the risk of possibly being the subject of a two-year nightmare/criminal prosecution. In the corporate context, CPAs and tax attorneys charge very large sums of money to compensate them for the risks they assume when they give their corporate clients tax advice. Much of those fees are generated in the "due diligence" phase of the corporate engagement. My sense is that this rarely happens in the estate-planning context.