On Monday, December 21, 2020, Stein Agee, 42, of Canton, Georgia and Corey Agee, 38, of Atlanta, Georgia, appeared before U.S. Magistrate Judge W. Carleton Metcalf and entered guilty pleas to conspiracy charges related to their roles in a wide-ranging scheme to defraud the IRS with respect to the assessment and collection of U.S. individual income taxes, announced United States Attorney for the Western District of North Carolina R. Andrew Murray, Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division, and Commissioner Charles Rettig of the IRS.
According to court documents, from at least 2013 through at least December of 2019, S. Agee and C. Agee, then partners at an Atlanta accounting firm, conspired with others to develop, market, promote, and sell investments in fraudulent syndicated conservation easement (SCE) tax shelters to high-income taxpayers.
“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 Murray. “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.”
Congress created the option to deduct the value of a donated conservation easement from an individual’s taxable income as a tool for the protection of environmentally and historically important land. A conservation easement restricts the future use or development of a parcel of land in order protect its conservation value. When created and used in a legitimate way, in compliance with the Internal Revenue Code, a conservation easement can both protect the environment and provide tax incentives to the landowner. In contrast, abusive SCE tax shelters are designed to game the system and to generate inflated and unwarranted tax deductions, often through the procurement of inflated appraisals for the undeveloped land and through the sale of interests in partnerships devoid of any legitimate business purpose beyond the transfer of tax benefits.
Here, the Agees’ co-conspirators designed the SCE tax shelters to produce large pass-through tax deductions for high-income taxpayers who bought shares in partnerships and LLCs that purported to make “real estate investments” in plots of land. In reality, however, these “investment” transactions lacked economic substance and served no legitimate business purpose beyond the purchase and sale of tax benefits. The placement of conservation easements over the real estate purchased by the “investment” partnerships—as opposed to the development of the real estate, or any other approach to generating a profit—was always a foregone conclusion, and the co-conspirators marketed the opportunities to their clients as straightforward tax transactions designed to reduce the clients’ tax liabilities. For example, S. Agee and C. Agee 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, with no economic risk.
Furthermore, according to court documents, S. Agee, C. Agee, and their co-conspirators often solicited investors after the end of the relevant tax year, and advised them to fraudulently backdate payments and documents so it would appear that their “investments” in the SCE tax shelters were, in fact, in compliance with applicable tax laws. 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 from the developer of the SCE tax shelters.
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.
U.S. Attorney Murray, Principal Deputy Assistant Attorney General Zuckerman, and IRS Commissioner Rettig, thanked special agents of IRS-Criminal Investigation and the United States Postal Inspection Service, who are conducting the investigation, as well as Assistant United States Attorneys Daniel Bradley and Caryn Finley, and DOJ-Tax Division Trial Attorneys Brittney Campbell and Grace Albinson, who are prosecuting the case.