CHICAGO (CN) - Chuhak & Tecson attorneys perpetrated a multimillion-dollar tax fraud scheme by selling bogus unconventional fuel-tax credits, a former client claims in a class action.
Rauxa Direct filed the class action on March 16 in Cook County Circuit Court against the Chicago firm; two of its attorneys, Gary Stern and Leon Greenblatt III; a dozen other individuals and eight other businesses. Andy Tecson, the president of the firm who is not a party to the action, did not have a comment on the lawsuit by press time.
In addition to running a massive scheme of selling bogus tax credits, Chuhak & Tecson attorneys charged outrageous fees to prepare fraudulent tax documents, Rauxa says.
The Internal Revenue Service permits producers of fuels from non-conventional sources to claim tax credits if the fuel was sold to an unrelated third party.
Rauxa said the illegal plot was simple: approach wealthy individuals and have them agree to buy a certain amount of credits for a certain amount of money.
"The defendants would represent that by claiming the credits purchased from them, plaintiff and others could substantially decrease their tax liability," the complaint states.
Holding themselves out as experts in tax law, Chuhak & Tecson attorneys agreed to assist a number of landfill operators sell the tax credits they received for capturing methane gas produced by garbage landfills, Rauxa claims.
Stern and the other attorneys allegedly knew, however, that the vast majority of the tax credits they offered to unsuspecting individuals were not legitimate because, Rauxa says, most of the landfills lacked the proper equipment to convert methane gas to electricity.
When the IRS began to investigate the tax credits, defendants "submitted false statements and documents to the IRS in the hope that they could somehow convince the tax authorities that the credits were legitimate," the complaint states.
Rauxa says the IRS ultimately disallowed 90 percent of the credits.
Undercutting the attorneys' attempts to legitimize the credits, Rauxa says, is "their failure to respond to the IRS audit request for the production of documentation that could have established the legitimacy of the credits."
The class seeks punitive damages for violations of federal anti-racketeering law, conspiracy, breach of fiduciary duty, and aiding and abetting fraud.
It is represented by Daniel Konicek and other attorneys with Konicek & Dillon.