Deloitte Grilled Over Work With Pistons Client

     MANHATTAN (CN) – Hoping to make a billionaire one of their “marquee clients,” Deloitte Tax used “highly risky techniques” that caused a $2.7 billion tax bill, the estate of William Davidson, the late owner of the Detroit Pistons, claims in court.
     Before he died six years ago at the age of 86, Davidson owned several sports teams and headed the glass manufacturing giant Guardian Industries as the company’s chief executive.
     The Detroit native was the longtime owner of the Pistons basketball franchise during the team’s 1989, 1990 and 2004 NBA championship seasons. The Tampa Bay Lightning skated their way to the Stanley Cup in 2004 under Davidson’s ownership as well.
     In 2008, the year before his death, Forbes ranked Davidson as the 62nd richest man in the United States.
     His estate slammed Deloitte with a 92-page fraud complaint in Manhattan Supreme Court on Thursday, saying the firm saw the “multi-billionaire, prominent sports team owner and philanthropist” as a client who could generate large fees while being a “prominent showpiece” to lure other “high net worth individuals.”
     “Deloitte Tax seized this opportunity, quickly convincing Mr. Davidson to undergo a drastic reworking of his existing estate plan by using highly risky techniques, many of which Deloitte Tax did not fully understand,” the Sept. 24 complaint says.
     Davidson’s estate says Deloitte repeatedly characterized its plan as letting him “win if he lived, or win if he died.”
     The plan focused on so-called “self-canceling installment notes,” or SCINs, which differ from other promissory notes because their outstanding debt balances will cancel if the lender dies before their maturity date, according to the complaint.
     In creating a five-year term for the SCINs, however, the estate says Deloitte failed to take into account Davidson’s “actual anticipated life expectancy.”
     “Deloitte Tax knew or should have known that the IRS would scrutinize the estate plan closely, given the estate’s size and Mr. Davidson’s prominence, and its use of the controversial SCINs,” the complaint says. “The Davidson estate was one of the largest estate and gift tax cases ever heard by IRS Appeals at that time. Yet, in its strong desire to make Mr. Davidson its client, Deloitte Tax sold an unsustainable plan that had minimal chance of passing IRS muster.”
     Indeed, the Internal Revenue Service was “unpersuaded” and issued a “resounding rejection” of the estate plan, according to the lawsuit.
     “To make matters worse,” the lawsuit says, “at least some if not the majority” of the funds the estate lost “would otherwise have gone to the charitable foundation established by Mr. Davidson, the ‘William Davidson Foundation.'”
     Established in 2005, the foundation is dedicated to revitalizing the southeastern Michigan area and enhancing Jewish identity and tradition in the United States and Israel, the estate says.
     The estate’s representatives, Jonathan Aaron and Eric Garber, demand $500 million plus punitive damages for five counts of fraud, malpractice, negligent misrepresentation and other claims.
     Steven Cooper of Reed Smith filed the complaint for them.
     Deloitte said in a statement that it stands “fully behind the services our team provided to Mr. Davidson.”
     “We regret that the estate executor has decided to pursue this path,” the company said. “We are prepared to defend ourselves vigorously and are confident we will prevail in this matter.”

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