This month we discuss United States v. Coplan, 1 in which a divided panel of the U.S. Court of Appeals for the Second Circuit reversed the convictions of two defendants due to insufficient evidence. The majority decision, written by Judge Jose Cabranes and joined by Judge Joseph McLaughlin, reversed the convictions of two of the five defendants-appellants, Martin Nissenbaum and Richard Shapiro, who had been found guilty by a jury of conspiracy, tax evasion, and obstruction of the IRS. Judge Amalya Kearse dissented in part from the majority opinion; she would have affirmed all but one count of the convictions on the basis that the evidence was sufficient.
Background and History
The Coplan case revolved around a series of five tax shelters devised by Ernst & Young between 1998 and the early 2000s; all six of the accused defendants were associated with the development and use of these tax shelters. 2 The two defendants whose convictions were later reversed by the Second Circuit, Nissenbaum and Shapiro, were both tax attorneys at Ernst & Young. The specific details of the tax shelters are complicated and were “largely irrelevant on appeal” 3; in effect, through a number of different mechanisms, the tax shelters sought to convert ordinary income to capital gains, generate deductible tax losses, and defer indefinitely tax on capital gains. Each of the five tax shelters was audited by the IRS, but only one was deemed subject to tax evasion charges.
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