(CNN) -- A former Chicago, Illinois, attorney has admitted that he helped create, push and hide fraudulent tax shelters that ended up costing the federal government billions of dollars in tax revenue, the U.S. attorney for the Southern District of New York said.
Erwin Mayer, 47, pleaded guilty in a New York federal court to conspiracy and tax evasion charges, according to a news release issued on Tuesday.
Law enforcement authorities -- including investigators from the U.S. attorney's office, the Internal Revenue Service and the U.S. Department of Justice's tax division -- said that Mayer designed, marketed, ran and defended illegal tax shelters, the clients of which wrongly claimed billions of dollars in fraudulent losses.
"These professionals, who were supposed to be the gatekeepers preventing fraud, instead helped their well-heeled clients avoid their tax obligations through deceit and trickery," U.S. Attorney Preet Bharra said in a statement, referring to Mayer, some of his colleagues at the now defunct law firm Jenkins & Gilchrist, and others involved in the scam.
After being a partner at Altheimer and Gray in Chicago between 1994 and 1998, Mayer joined a new Chicago office of Texas-based Jenkins & Gilchrist. Up until 2006, Mayer and colleagues set up, pitched and ran high-fee tax shelters so clients could skirt taxes on significant income or gains, according to statements made during his guilty plea proceeding.
Mayer worked with brokers at financial institutions, partners and employees of accounting firms, and others, court documents said. Illicit programs included "short sales" that resulted in the loss of $2.6 billion in tax revenue, "short options strategy" setups that cost the government $3.9 billion, and "swaps" that led to more than $420 million in false and fraudulent tax losses.
In his guilty plea proceedings, Mayer admitted that claiming the losses from transactions was only OK if the clients actually used the partnerships and corporations that he and his partners helped create for legitimate, non-tax business reasons, and not just to produce tax losses.
The Winnetka, Illinois, resident will be sentenced on February 10. He faces a maximum sentence of five years in federal prison on the conspiracy charge, plus another five years for tax evasion. Mayer has agreed to forfeit his two residences and various financial accounts worth more than $10 million as part of his plea deal.
Mayer is the latest person to plead guilty in this tax shelter scam. Charles W. Bee Jr., former vice chairman of the assurance, tax, financial advisory and consulting services company BDO Seidman, pleaded guilty on June 3, 2009, to charges of conspiracy to defraud the IRS, tax evasion and perjury. Michael Kerkes and Adrian Dicker, members of that same firm, also pleaded guilty on tax evasion and conspiracy charges earlier that year. Fellow former BDO employee Mark Bloom pleaded guilty in 2009 on an IRS obstruction charge. Mayer's law firm, Jenkins & Gilchrist, ceased operation in 2007.
A trial for other defendants implicated in the tax shelter scheme is set to start to February 28.