It’s Friday morning. Matthew Krane is sitting on a bench inside the labyrinth Stanley Mosk Courthouse moments after his latest hearing concluded.
It had lasted all of 10 minutes and concluded with the judge only putting everything on hold for half a year.
Last month, in a federal court in Seattle, the 55-year-old, onetime star tax lawyer pleaded guilty to tax evasion and for passport falsification.
He will be sentenced in March as part of a deal that is expected to get him no more than five years in prison. Another part of that deal is his cooperation with an ongoing federal probe involving one of the largest crooked tax shelters in U.S. history.
Does Krane (in a Facebook photo, left) think his cooperation will, down the road, make trouble for his onetime client and friend, and current nemesis, the billionaire Haim Saban?
“I have one and only one obligation to the government – to tell the truth,” Krane says. “Where it leads, I couldn’t tell.”
Krane’s been out of the downtown’s Mens Detention Center since December, but his prison pallor remains, and the court corridor’s fluorescent lighting seems to make him even paler.
He tells TheWrap about his 16 months in MDC, where he met the disgraced celebrity private eye Anthony Pellicano.
“I was on his floor,” Krane says. “We became friends.”
There is a Steve Buscemi-like nervous energy to Krane’s conversation as he talks about the Gordian knot of litigation that stretches from here to Seattle, to Washington, D.C,. to Vienna.
It began in 2001, when Saban (pictured right) sold his share of Fox Family Worldwide Inc. to the Walt Disney Co. for $1.5 billion. He asked Krane, his legal and financial counsel, to set something up that would get Saban off the hook for most of the capital gains taxes.
Krane had Saban move his earnings into a pair of tax shelters run by Seattle’s Quellos Group, to which Saban paid a $46 million fee.
Saban ended up paying no taxes. However, the tax shelters would be exposed as illegal tax shells that permitted Saban and others to claim enough fabricated investment losses as to wipe out any tax obligations they would normally have incurred from profits elsewhere.
In June 2009, Krane, Quellos Group CEO Jeffrey Greenstein and his business partner, Charles Wilk, were indicted. Claiming ignorance of the tax shelters’ illegality, Saban, a major contributor to the Democratic Party, escaped any charges of wrongdoing, although he was forced to pay $250 million in back taxes and penalties.
After the Quellos deal had gone through, Krane had placed in a Viennese bank $36 million in fees he claims were rightfully his from his work for Saban on the shelters. (Krane says he had them vetted and believed they were legitimate). In 2008, long after the Quellos shelters had been exposed by the government, Saban had Austrian authorities freeze Krane’s assets, claiming they were an illegal kickback from Quellos.
