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Both Jeffrey Greenstein and Charles H. Wilk plead guilty on September 10th to federal charges of aiding in the filing of a false tax return and conspiracy to defraud the government. Â The men were the chief executive and tax attorney respectively of Quellos Group, LLC., a fictitious investment firm based in Seattle.
Quellos operated under the guise of a tax shelter, but had no employees or even assets.  They advertised avoiding taxes to their clients, then fabricated loses from depreciated stocks from 1999 to 2006.  Among their clients was Haim Saban, a media proprietor and the 102nd richest person in America.  Quellos allowed Saban to circumvent paying $280 million in taxes and other fees which Saban has completely repaid to the Internal Revenue Service.  Quellos ultimately allowed their clients to avoid paying taxes on $1.3 billion in capital gains.
Last year Matthew Krane, a Los Angeles based attorney, pleaded guilty to to tax evasion and false statements.  Krane had been hired to deal with taxes on Saban’s transactions and, in turn, hired Quellos with the promise of receiving $36 million in kickbacks.
Greenstein and Wilk have been ordered to pay $7 million to the Internal Revenue Service, an additional $400,000 to cover court costs, and to return to their graduate schools to give speeches on ethics. Â They will be sentenced in January to no more than six years in prison and no less than two.
