Financiers Jeffrey Greenstein and Charles Wilk pleaded guilty to tax charges on Friday stemming from the activities of Quellos Group, a Seattle-based investment advisory firm that catered to such high profile clients as media mogul Haim Saban, New York Jets owner Robert Wood Johnson IV, former President Bill Clinton and his wife, Secretary of State Hillary Clinton.
Greenstein was the CEO of Quellos; Wilk was his business partner and a Quellos employee.
Federal prosecutors charged the two men with 18 counts of conspiracy, fraud and tax evasion in June. The charges stemmed from an investment plan they created called POINT (Portfolio Optimized Investment Transaction) that was labeled a tax shelter.
The plea deal required their attorneys to agree that they will spend at least two years in prison. Both men also agreed to give lectures on legal ethics at their respective alma maters and to pay large fines to the IRS.
Greenstein was hit with a $6.4 million fine, Wilk will pay $600,000. They will also be required to foot the approximately $400,000 bill for the cost of the prosecution.
Prosecutors are seeking sentences of up to six years for the financiers. They will be sentened by U.S. District Judge Ricardo S. Martinez on January 28, 2011.
According to prosecutors, POINT was "predicated on a sham" involving a phony offshore investment fund that generated fake stock losses in order to allow Quellos' clients to dodge capital gains taxes.
Quellos sold POINT to clients from 1999 through August 2006. Its core business was purchased by the BlackRock hedge fund for $1.7 billion in 2007.
The charges against Greenstein and Wilk came after Hollywood lawyer Matthew Krane pled guilty to a single count of tax evasion involving $36 million that he was paid for getting Saban to invest with Quellos after the mogul sold Fox Family Worldwide for a $1.5 billion profit.
As part of their guilty plea, Greenstein and Wilk admitted POINT was a "fraudulent tax scheme" that generated $9.6 billion in losses for their clients, allowing them to dodge $240 million in capital gains
tacos.
When Greenstein was first charged in June, he vehemently denied the allegations through his attorney, Andrew Levander. As of this writing, Levander has not responded to a request to comment on the guilty plea.
