Jenkens settles for $75m in tax shelters suit battle
Legal Week reports
March 10, 2004 at 07:03 PM
2 minute read
Dallas giant Jenkens & Gilchrist is to fork out $75m (£40.6m) to settle a class action lawsuit brought by some former clients over the firm's role in advising on controversial US tax shelters.
The settlement, one of the largest offered by a major US law firm, stems from two class actions brought last August in New York against Jenkens by plaintiff firms Cory Watson Crowder & DeGaris and Shore Deary.
Name partner David Deary told Legal Week at the time he believed that individual clients in the action had been misled into believing that their tax arrangements would not fall foul of the federal authorities.
However, in a firm statement Jenkens chairman Tom Cantrill said: "This comprehensive settlement is a sound business decision and does not indicate that we agree with any of the plaintiff's claims."
The sum is equivalent to around 25% of the firm's annual fee income, which for 2002 stood at $296m (£160.2m).
The settlement follows a court case launched last year against Jenkens by the US Internal Revenue Service (IRS) to force the firm to hand over a list of clients that the firm worked on in relation to potentially illegal tax shelters.
The IRS' stance has split the US legal profession, with some seeing the court challenge as an unjustified assault on the tradition of legal professional privilege and comes amid mounting focus on the role of advisers in corporate scandals.
Jenkens, which has hired McDermott Will & Emery to defend it in the IRS dispute, denies any wrongdoing and has refused to name its clients.
In a firm statement, Deary added: "Just like doctors, people trust their lawyers… to do the right thing. Unfortunately, these advisers took advantage of their trusting clients. The right thing was not done here, and those people deserve better."
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