U.S. District Court
Eastern District of Missouri (LIVE) (St. Louis)
CIVIL DOCKET FOR CASE #: 4:07-cv-00728-JCH
Smith et al v. Holland & Hart LLP et al
Assigned to: Honorable Jean C. Hamilton
Cause: 28:1332 Diversity-Tort/Non-Motor Vehicle
Date Filed: 04/13/2007
Jury Demand: Plaintiff
Nature of Suit: 370 Fraud or Truth-In-Lending
Jurisdiction: Diversity
Plaintiff
J. Rance Smith represented by Francis J. Flynn
JEFFREY J. LOWE, P.C.
8235 Forsyth Boulevard
Suite 1100
St. Louis, MO 63105
314-678-3400
Fax: 314-678-3401
Email: casey@jefflowepc.com
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Plaintiff
Larhea Smith represented by Francis J. Flynn
(See above for address)
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Plaintiff
J. Zane Smith represented by Francis J. Flynn
(See above for address)
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Plaintiff
Shannon R. Creese Smith represented by Francis J. Flynn
(See above for address)
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Plaintiff
Rhett R. Smith represented by Francis J. Flynn
(See above for address)
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Plaintiff
Alice A. Smith represented by Francis J. Flynn
(See above for address)
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Plaintiff
BENECO, INC. represented by Francis J. Flynn
(See above for address)
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
V.
Defendant
Holland & Hart LLP
Defendant
Reinhart, Boerner, Van Deuren, Norris & Rieselbach S.C.
Defendant
Snell & Wilmer LLP
Defendant
Global Strategies, LLC
Defendant
Chatzky & Associates
Defendant
Frederick G. Meyer
Defendant
Harley Hunter
Defendant
Michael Chatzky
Defendant
Grace Chung
Date Filed # Docket Text
04/13/2007 1 COMPLAINT against defendant Reinhart, Boerner, Van Deuren, Norris & Rieselbach S.C., Snell & Wilmer LLP, Global Strategies, LLC, Chatzky & Associates, Frederick G Meyer, Harley Hunter, Michael Chatzky, Grace Chung, Holland & Hart LLP with receipt number 1071635, in the amount of $350, Jury Demand,, filed by J. Rance Smith, Larhea Smith, J. Zane Smith, Shannon R. Creese Smith, Rhett R. Smith, Alice A Smith, BENECO, INC.. (Attachments: # 1 Complaint Part B# 2 Civil Cover Sheet # 3 Original Filing Form # 4 Summons Chatzky & Associates# 5 Summons Michael Chatzky# 6 Summons Grace Chung# 7 Summons Global Strategies, LLC# 8 Summons Harley Hunter# 9 Summons Holland & Hart LLP# 10 Summons Frederick G. Meyer# 11 Summons Reinhart, Boerner et al# 12 Summons Snell & Wilmer LLP)(Flynn, Francis) (Entered: 04/13/2007)
04/16/2007 SUMMONS Issued as to defendant Reinhart, Boerner, Van Deuren, Norris & Rieselbach S.C., Snell & Wilmer LLP, Global Strategies, LLC, Chatzky & Associates, Frederick G. Meyer, Harley Hunter, Michael Chatzky, Grace Chung, and Holland & Hart LLP. (KLK) (Entered: 04/16/2007)
Holland & Hart, Chatzky, Snell & Wilmer, Global Stra
-
Hunter
Tax shelter mess for BENECO folks
FEW SEGMENTS FROM COMPLAINT - more in thread on Chatzky at ALAF (towards end of thread)
http://alabamaagainstfraud.com/phpBB/vi ... =3279#3279
SEGMENTS OF COMPLAINT
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
Case 4:07-cv-00728-JCH
J. RANCE SMITH, an individual; LARHEA SMITH, an individual; J. ZANE SMITH, an individual; SHANNON R. CREESE SMITH, an individual; RHETT R. SMITH, an individual; ALICE A. SMITH, an individual; and BENECO, INC, an ARIZONA corporation,
Plaintiffs
v.
HOLLAND & HART LLP
Serve: P.O.B.
555 Seventeenth Street Suite 3200
Denver, CO 80202
REINHART, BOERNER, VAN DEUREN, NORRIS & RIESELBACH S.C.
Serve: P.O.B.
1000 North Water Street, Suite 2100
Milwaukee, WI 53202
SNELL & WILMER LLP
Serve: Registered Agent John J. Bouma
One Arizona Center Phoenix, Arizona 85004-2202
GLOBAL STRATEGIES, LLC
Serve:
P.O.B. One Metro Center 700 12th Street, NW Suite 1100
Washington, DC 20005
CHATZKY & ASSOCIATES
Serve:
P.O.B. 6540 Lusk Blvd., C121 92121
San Diego, CA 92121
FREDERICK G. MEYER
Serve: Registered Agent
141 Union Boulevard, Suite 300
Lakewood, Colorado 80228
HARLEY HUNTER
Serve: (return to plaintiff
for service)
MICHAEL CHATZKY
Serve:
P.O.B. 6540 Lusk Blvd., C121 92121
San Diego, CA 92121
GRACE CHUNG
Serve: (return to plaintiff
for service)
DOES 1 through 50, inclusive,
Defendants.
COMPLAINT
Plaintiffs J. Ranee Smith, an individual; LaRhea Smith, an individual; J. Zane Smith, an individual; Shannon R. Creese Smith, an individual; Rhett R. Smith, an individual; Alice Avila Smith, an individual; and Beneco, Inc., a Arizona corporation (collectively "Plaintiffs"), respectfully file this Complaint and allege as follows:
I. NATURE OF THE ACTION
1. Between June 1,1995 and November 30, 2005, defendants Holland & Hart LLP
("Holland & Hart"); Reinhart, Boerner, Van Deuren, Norris & Rieselbach S.C. ("Reinhart");
Snell & Wilmer LLP ("Snell & Wilmer"); Global Strategies Group LLC ("Global Strategies"); Chatzky & Associates ("Chatzky & Associates"); Frederick G. Meyer ("Rick Meyer"), an individual; Harley Hunter ("Harley Hunter"), an individual; Michael Chatzky ("Michael Chatzky"), an individual; and Grace Chung ("Grace Chung"), an individual, (collectively "Defendants") engaged in a course of business in furtherance of a scheme to defraud Plaintiffs, who, in reliance upon Defendants' false and misleading misrepresentations, entered into tax strategies that both the Internal Revenue Service ("IRS") and the State of Arizona Department of Revenue ("AZDOR") have determined is an abusive tax shelter. Both the IRS and the AZDOR have designated the tax structure the Offshore Employment Leasing Structure ("OEL") as an abusive tax shelter. Defendants represented to Plaintiffs, and others, that OEL was a legitimate means to reduce Plaintiffs' tax liability. Defendants collected substantial fees from Plaintiffs through the development, promotion, implementation, operation, and sale of the OEL scheme.
2. Defendants knew or recklessly disregarded that OEL is an abusive tax shelter that was highly likely, if not virtually certain, not to be approved by the IRS. Nonetheless and with such knowledge or reckless disregard, Defendants took affirmative actions to hide the OEL structure from the IRS and the AZDOR, including the formation of nominee foreign entities to avoid information filing requirements, concealing Defendants' actions and motives from Plaintiffs, and failing to advise Plaintiffs of their true filing requirements. As set forth in detail below, Holland & Hart and Global Strategies jointly participated in the development, promotion, operation and sale of the OEL tax shelter to Plaintiffs, despite their knowledge that the OEL tax shelter would undoubtedly be invalidated by both the IRS and the AZDOR.
3. On or about January 1, 1997, Holland & Hart was hired by Plaintiffs J. Ranee Smith ("Ranee Smith"), J. Zane Smith ("Zane Smith"), Rhett R. Smith ("Rhett Smith") and Beneco, Inc. ("Beneco") to provide a legal opinion on the merits and propriety of the OEL tax strategy that Defendants' Holland & Hart and Global Strategies called their "Cornerstone Strategy." However, Holland & Hart performed no independent legal analysis of the strategy. Instead, Holland & Hart secretly participated in the drafting, development, and sale of the OEL shelter, including its promotional materials, to Plaintiffs.
4. The legal opinion that Holland & Hart was engaged to render was communicated to Plaintiffs one day after Holland & Hart substantially modified the promotional package upon which it was engaged to opine. Holland & Hart thusly opined on a fraudulent tax shelter promotion that it helped prepare. Moreover, the legal opinion letter was drafted by Holland & Hart jointly and in business with Harley Hunter, President of Global Strategies.
5. Holland & Hart's legal opinion assured Plaintiffs that the OEL was a sound tax strategy that would legitimately reduce their respective tax liabilities. Yet a mere two (2) days prior, Holland & Hart provided a separate legal opinion on the identical OEL that was antithetical to the opinion provided Plaintiffs. Defendants concealed the antithetical opinion from Plaintiffs. On information and belief, Plaintiffs allege that no research was performed by Holland & Hart concerning the legal opinion rendered to Plaintiffs which on its face was devoid of any legal analysis. The lack of legal analysis is particularly egregious given that Holland & Hart provided legal opinions to other clients concerning the OEL structure that were virtually verbatim of a legal opinion of another law firm that also promoted the OEL tax shelter. Upon information and belief, the other law firm is currently under Internal Revenue Code Section 6700 investigation by the IRS for promoting the OEL tax shelter.
6. Upon information and belief, the OEL tax structure that Defendants marketed and sold to Plaintiffs is a "cookie cutter" tax shelter that is identical in all material respects to the OEL tax shelter promoted by a California law firm, Defendant Chatzky & Associates. On information and belief, Holland & Hart utilized documents in its marketing of the OEL tax structure that referred to the relationship of Holland & Hart, Chatzky & Associates, and Global Strategies as the OEL "Brain Trust." Upon information and belief, Chatzky & Associates was paid $7,000 by Global Strategies and/or Holland & Hart for copying its transactional documents as part of their Cornerstone Strategy.
7. Holland & Hart and Global Strategies marketed and sold the OEL tax shelter to
Plaintiffs, and others, for the singular purpose of generating substantial fees; however, they
performed little or no work for the fee. In addition to receiving substantial fees for the
structuring of the OEL tax shelter, upon information and belief Defendants collectively
continued to receive annual fees for operating the OEL shelter.
8. Holland & Hart and later Reinhart and Snell & Wilmer were fully aware that the
OEL shelter was not a legitimate tax strategy for several reasons. For example, (a) Holland &
Hart participated in the development of the OEL shelter and in the development of its marketing
materials that contained a false and misleading legal opinion; (b) Holland & Hart issued a "bare"
legal opinion that provided no legal support for the OEL shelter; (c) Holland & Hart had the
legal opinion prepared by a partner in its tax department, which partner ignored clear statutory
and common law authority that prohibit the tax benefits promoted; (d) Defendants recommended
that the transactions occur in "tax haven" jurisdictions that have been "black listed" by the IRS,
and allowed the transaction to continue in such jurisdiction without advising Plaintiffs of the
tainted nature of the respective jurisdiction; (e) each defendant failed to advise Plaintiffs of their
duty to make certain tax filings for foreign accounts and for operating in foreign jurisdictions
required under Federal tax law; (f) Holland & Hart failed to advise Plaintiffs of the severe tax
consequences of selling their corporation to nominee foreign shareholders formed by Holland &
Hart; (g) upon information and belief, each defendant periodically culled operative documents,
such as the promotional materials, from Plaintiffs' files; and (h) each defendant was responsible
for several aspects of the implementation of the OEL shelter, including the formation of offshore
entities, establishing sham loans through the foreign entities that they formed, and utilizing
entities owned by Defendant Chatzky & Associates to further the scheme.
9. The OEL tax shelter was broadly marketed by Defendants through public seminars conducted by Global Strategies. Prospective clients were referred to Holland & Hart by Harley Hunter of Global Strategies without being advised that Holland & Hart participated in the development of the promotional materials.
10. The OEL shelter promoted by Holland & Hart and Global Strategies, together with continued and ongoing promotion by the remaining Defendants, was and is labeled a "listed transaction" by the IRS and the AZDOR. This official listing made it abundantly clear that the OEL structure is an abusive tax structure."
11. Plaintiffs are suing Defendants for Fraud, Negligence, Civil Conspiracy to Commit Fraud, Negligence, Unjust Enrichment and Breach of Fiduciary Duties, and claim that such wrongdoing occurred in the context of a conspiracy. Plaintiffs seek restitution,
disgorgement, punitive damages, and other relief preventing Defendants from any future misconduct.
....
....
http://alabamaagainstfraud.com/phpBB/vi ... =3279#3279
SEGMENTS OF COMPLAINT
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
Case 4:07-cv-00728-JCH
J. RANCE SMITH, an individual; LARHEA SMITH, an individual; J. ZANE SMITH, an individual; SHANNON R. CREESE SMITH, an individual; RHETT R. SMITH, an individual; ALICE A. SMITH, an individual; and BENECO, INC, an ARIZONA corporation,
Plaintiffs
v.
HOLLAND & HART LLP
Serve: P.O.B.
555 Seventeenth Street Suite 3200
Denver, CO 80202
REINHART, BOERNER, VAN DEUREN, NORRIS & RIESELBACH S.C.
Serve: P.O.B.
1000 North Water Street, Suite 2100
Milwaukee, WI 53202
SNELL & WILMER LLP
Serve: Registered Agent John J. Bouma
One Arizona Center Phoenix, Arizona 85004-2202
GLOBAL STRATEGIES, LLC
Serve:
P.O.B. One Metro Center 700 12th Street, NW Suite 1100
Washington, DC 20005
CHATZKY & ASSOCIATES
Serve:
P.O.B. 6540 Lusk Blvd., C121 92121
San Diego, CA 92121
FREDERICK G. MEYER
Serve: Registered Agent
141 Union Boulevard, Suite 300
Lakewood, Colorado 80228
HARLEY HUNTER
Serve: (return to plaintiff
for service)
MICHAEL CHATZKY
Serve:
P.O.B. 6540 Lusk Blvd., C121 92121
San Diego, CA 92121
GRACE CHUNG
Serve: (return to plaintiff
for service)
DOES 1 through 50, inclusive,
Defendants.
COMPLAINT
Plaintiffs J. Ranee Smith, an individual; LaRhea Smith, an individual; J. Zane Smith, an individual; Shannon R. Creese Smith, an individual; Rhett R. Smith, an individual; Alice Avila Smith, an individual; and Beneco, Inc., a Arizona corporation (collectively "Plaintiffs"), respectfully file this Complaint and allege as follows:
I. NATURE OF THE ACTION
1. Between June 1,1995 and November 30, 2005, defendants Holland & Hart LLP
("Holland & Hart"); Reinhart, Boerner, Van Deuren, Norris & Rieselbach S.C. ("Reinhart");
Snell & Wilmer LLP ("Snell & Wilmer"); Global Strategies Group LLC ("Global Strategies"); Chatzky & Associates ("Chatzky & Associates"); Frederick G. Meyer ("Rick Meyer"), an individual; Harley Hunter ("Harley Hunter"), an individual; Michael Chatzky ("Michael Chatzky"), an individual; and Grace Chung ("Grace Chung"), an individual, (collectively "Defendants") engaged in a course of business in furtherance of a scheme to defraud Plaintiffs, who, in reliance upon Defendants' false and misleading misrepresentations, entered into tax strategies that both the Internal Revenue Service ("IRS") and the State of Arizona Department of Revenue ("AZDOR") have determined is an abusive tax shelter. Both the IRS and the AZDOR have designated the tax structure the Offshore Employment Leasing Structure ("OEL") as an abusive tax shelter. Defendants represented to Plaintiffs, and others, that OEL was a legitimate means to reduce Plaintiffs' tax liability. Defendants collected substantial fees from Plaintiffs through the development, promotion, implementation, operation, and sale of the OEL scheme.
2. Defendants knew or recklessly disregarded that OEL is an abusive tax shelter that was highly likely, if not virtually certain, not to be approved by the IRS. Nonetheless and with such knowledge or reckless disregard, Defendants took affirmative actions to hide the OEL structure from the IRS and the AZDOR, including the formation of nominee foreign entities to avoid information filing requirements, concealing Defendants' actions and motives from Plaintiffs, and failing to advise Plaintiffs of their true filing requirements. As set forth in detail below, Holland & Hart and Global Strategies jointly participated in the development, promotion, operation and sale of the OEL tax shelter to Plaintiffs, despite their knowledge that the OEL tax shelter would undoubtedly be invalidated by both the IRS and the AZDOR.
3. On or about January 1, 1997, Holland & Hart was hired by Plaintiffs J. Ranee Smith ("Ranee Smith"), J. Zane Smith ("Zane Smith"), Rhett R. Smith ("Rhett Smith") and Beneco, Inc. ("Beneco") to provide a legal opinion on the merits and propriety of the OEL tax strategy that Defendants' Holland & Hart and Global Strategies called their "Cornerstone Strategy." However, Holland & Hart performed no independent legal analysis of the strategy. Instead, Holland & Hart secretly participated in the drafting, development, and sale of the OEL shelter, including its promotional materials, to Plaintiffs.
4. The legal opinion that Holland & Hart was engaged to render was communicated to Plaintiffs one day after Holland & Hart substantially modified the promotional package upon which it was engaged to opine. Holland & Hart thusly opined on a fraudulent tax shelter promotion that it helped prepare. Moreover, the legal opinion letter was drafted by Holland & Hart jointly and in business with Harley Hunter, President of Global Strategies.
5. Holland & Hart's legal opinion assured Plaintiffs that the OEL was a sound tax strategy that would legitimately reduce their respective tax liabilities. Yet a mere two (2) days prior, Holland & Hart provided a separate legal opinion on the identical OEL that was antithetical to the opinion provided Plaintiffs. Defendants concealed the antithetical opinion from Plaintiffs. On information and belief, Plaintiffs allege that no research was performed by Holland & Hart concerning the legal opinion rendered to Plaintiffs which on its face was devoid of any legal analysis. The lack of legal analysis is particularly egregious given that Holland & Hart provided legal opinions to other clients concerning the OEL structure that were virtually verbatim of a legal opinion of another law firm that also promoted the OEL tax shelter. Upon information and belief, the other law firm is currently under Internal Revenue Code Section 6700 investigation by the IRS for promoting the OEL tax shelter.
6. Upon information and belief, the OEL tax structure that Defendants marketed and sold to Plaintiffs is a "cookie cutter" tax shelter that is identical in all material respects to the OEL tax shelter promoted by a California law firm, Defendant Chatzky & Associates. On information and belief, Holland & Hart utilized documents in its marketing of the OEL tax structure that referred to the relationship of Holland & Hart, Chatzky & Associates, and Global Strategies as the OEL "Brain Trust." Upon information and belief, Chatzky & Associates was paid $7,000 by Global Strategies and/or Holland & Hart for copying its transactional documents as part of their Cornerstone Strategy.
7. Holland & Hart and Global Strategies marketed and sold the OEL tax shelter to
Plaintiffs, and others, for the singular purpose of generating substantial fees; however, they
performed little or no work for the fee. In addition to receiving substantial fees for the
structuring of the OEL tax shelter, upon information and belief Defendants collectively
continued to receive annual fees for operating the OEL shelter.
8. Holland & Hart and later Reinhart and Snell & Wilmer were fully aware that the
OEL shelter was not a legitimate tax strategy for several reasons. For example, (a) Holland &
Hart participated in the development of the OEL shelter and in the development of its marketing
materials that contained a false and misleading legal opinion; (b) Holland & Hart issued a "bare"
legal opinion that provided no legal support for the OEL shelter; (c) Holland & Hart had the
legal opinion prepared by a partner in its tax department, which partner ignored clear statutory
and common law authority that prohibit the tax benefits promoted; (d) Defendants recommended
that the transactions occur in "tax haven" jurisdictions that have been "black listed" by the IRS,
and allowed the transaction to continue in such jurisdiction without advising Plaintiffs of the
tainted nature of the respective jurisdiction; (e) each defendant failed to advise Plaintiffs of their
duty to make certain tax filings for foreign accounts and for operating in foreign jurisdictions
required under Federal tax law; (f) Holland & Hart failed to advise Plaintiffs of the severe tax
consequences of selling their corporation to nominee foreign shareholders formed by Holland &
Hart; (g) upon information and belief, each defendant periodically culled operative documents,
such as the promotional materials, from Plaintiffs' files; and (h) each defendant was responsible
for several aspects of the implementation of the OEL shelter, including the formation of offshore
entities, establishing sham loans through the foreign entities that they formed, and utilizing
entities owned by Defendant Chatzky & Associates to further the scheme.
9. The OEL tax shelter was broadly marketed by Defendants through public seminars conducted by Global Strategies. Prospective clients were referred to Holland & Hart by Harley Hunter of Global Strategies without being advised that Holland & Hart participated in the development of the promotional materials.
10. The OEL shelter promoted by Holland & Hart and Global Strategies, together with continued and ongoing promotion by the remaining Defendants, was and is labeled a "listed transaction" by the IRS and the AZDOR. This official listing made it abundantly clear that the OEL structure is an abusive tax structure."
11. Plaintiffs are suing Defendants for Fraud, Negligence, Civil Conspiracy to Commit Fraud, Negligence, Unjust Enrichment and Breach of Fiduciary Duties, and claim that such wrongdoing occurred in the context of a conspiracy. Plaintiffs seek restitution,
disgorgement, punitive damages, and other relief preventing Defendants from any future misconduct.
....
....