The retrial of former Jenkens & Gilchrist partner Paul Daugerdas in an illegal tax shelter prosecution is underway in the southern district of New York.  Mr. Daugerdas and former BDO Seidman Chief Denis Field are accused of marketing and giving legal cover for tax shelters that had no economic purpose except to avoid taxes.

Field, Daugerdas, and two others, Donna Guerin, a former partner at Jenkens & Gilchrist and David Parse, a former banker at Deutsche Bank, were convicted in the scheme in 2011.  Judge William Pauley granted a retrial for Mr. Daugerdas, Mr. Field, and Ms. Guerin because of juror misconduct by Catherine Conrad, a suspended lawyer who lied about her identity and criminal history during voir dire.

Ms. Guerin elected not to have her case retried, instead taking a plea deal earlier this year.  She was subsequently sentenced to eight years in prison.  But Mr. Daugerdas and Mr. Field pressed on.

While there has been much publicity surrounding Mr. Daugerdas’ case, not much has been reported about Mr. Field.  Mr. Field faces criminal fraud and conspiracy charges for his role in selling illegal tax shelters that helped wealthy clients evade more than $ 200 million in taxes.  BDO Seidman, Mr. Field’s former firm, has been a target in a long-standing investigation into tax-shelter fraud by federal prosecutors.  That investigation focused on how bankers, lawyers, and accountants – by working together and devising a scheme in which each person had a designated role – were able to assist people in dodging their taxes by creating phony losses.

Several firms, including KPMG and Deutsche Bank, have paid a big price in making deals with federal prosecutors to avoid prosecution.  BDO Seidman has yet to be charged with any wrongdoing and according to past statements has been cooperating with the government’s investigation.  Still, people familiar with the investigation expect that BDO Seidman will ultimately have to pay a penalty for marketing these bogus shelters.

So far, BDO Seidman has survived the scandal.  Jenkins & Gilchrist, on the other hand, was not so lucky.  However, BDO Seidman is not completely out of the woods.  Evidence is expected to emerge during the trial that could further taint the firm’s reputation.  The trial will give an inside look at how BDO worked with lawyers to concoct what prosecutors have called “cookie-cutter tax scams.”

Four former BDO Seidman tax partners, Michael Kerekes, Adrian Dicker, Charles Bee Jr.. and Robert Greisman, pleaded guilty in 2009 to charges related to the fraud.  Led by Field, BDO Seidman was one of the most aggressive tax-shelter marketers, starting in the late 1990s.  Inside the firm, the tax-shelter team was known as the “wolf pack.”  Field became CEO of the firm in 2000.  Tax services accounted for nearly half of BDO Seidman’s $420 million in U.S. revenues in 2002, up from 28 percent in 1998.

When the IRS began scrutinizing BDO Seidman’s tax returns in 2002, BDO Seidman aggressively fought attempts to turn over the names of its clients.  The firm eventually lost that legal battle, cut ties with Field in October 2003, and shut down the tax-shelter practice.

The trial resumes today, October 7, 2013, in Judge Pauley’s courtroom.