Lawyer jailed over tax shelters cannot stop IRS collection, court says

By David Thomas

March 30 (Reuters) - The Chicago-based 7th U.S. Circuit Court of Appeals on Monday rejected former tax lawyer Paul Daugerdas' latest legal challenge stemming from his conviction in one of the largest U.S. criminal tax fraud cases in history, more than a decade after he was convicted.

The 7th Circuit's ruling allows the U.S. Internal Revenue Service to immediately collect $371 million in restitution from Daugerdas, who was found guilty on charges including conspiracy, tax evasion and mail fraud by a New York federal jury in 2013.

The appeals court ruled that the U.S. tax code allows the IRS to assess and collect its own restitution against a defendant like Daugerdas, who was convicted of conspiring to defraud the agency. The court also held that the U.S. tax code does not inhibit or limit the IRS from imposing its own payment schedule on Daugerdas.

Daugerdas, who represented himself in his lawsuit against the IRS, did not immediately respond to a request for comment. An IRS spokesperson declined to comment.

Daugerdas, 75 was convicted of overseeing fraudulent tax shelters for about two decades, mostly at now-defunct law firm Jenkens & Gilchrist, costing the U.S. government more than $1.63 billion in tax revenue. He was sentenced to 15 years in prison, ordered to forfeit $164.7 million and pay $371 million in restitution to the federal government.

After his conviction was upheld by a federal appellate court in New York, the IRS launched its own civil case against Daugerdas and assessed its own penalty against him — $371 million, the same amount he owed in restitution in his criminal case.

The IRS's assessment against Daugerdas does not double the amount his owes, but it means that the full amount is due immediately, even though the judge in his criminal case set a payment schedule for him. Daugerdas was ordered to make monthly payments 10% of his gross monthly income — to the federal government 30 days after his release from prison.

Daugerdas was released from federal prison in December 2024, according to inmate records.