Word: coal
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...alleged leaders of the group are George Osserman and Paul Garfinkle, a pair of freewheeling tax attorneys, along with Irwin Meyer and Stephen Friedman, two producers of the hit Broadway musical Annie. According to federal investigators, the four built a tax-shelter empire selling interests not only in American coal but also in distribution rights to European films and a Namibian diamond mine. They funneled investment money through a string of paper corporations with headquarters in the U.S., and such offshore havens as the Cayman Islands and Curaçao. Although the current charges concern only the coal caper, which...
Another questionable aspect of the coal deal, according to the Government lawyers, was its timing. The IRS sharply curtailed this particular kind of tax shelter...
Over the years, Congress has fiddled with the tax code to allow deductions for investments in ventures considered worthwhile but risky, like coal mining, oil drilling and public housing construction. The shelters encouraged the wealthy to invest chunks of income that would otherwise have been heavily taxed. The problem was that in some cases lawyers and accountants found clever ways to make such investments appear much larger on paper than they actually were. In 1976 a major revision of the tax code eliminated some of the most abused shelter provisions...
...clients that they would never have to pay another dime in taxes. In 1975 the two lawyers joined forces with Producers Meyer and Friedman, whose show-biz connections helped catch the stars as investors. A year later, the group leased 22,000 acres in Wyoming, ostensibly to develop coal deposits. The investors signed notes specifying that for every dollar they put up in cash, four additional dollars would be taken out of their anticipated coal-mining profits. That was the gimmick that gave the investors a five-for-one write-off. Those profits never materialized. One excellent reason: though Osserman...
...told, the Osserman group raked in $20 million in coal investments, only $300,000 of which went to pay for leasing the lands. The rest was dissipated through a network of corporations; part went for commissions to tax-shelter salesmen and payoffs to business associates, part into other deals, and part was used to purchase such assets as a business jet, a Ferrari and several Rolls-Royces. Investigators believe that a sizable chunk of the money may remain salted away in Swiss bank accounts. Further indictments might be handed down against some investors, who knew that the transactions were...