Who is Richard Smith and the Bryan Cave law firm and where do they fit into the puzzle?

According to their website, Bryan Cave is a law firm with over 1100 attorneys and 19 offices worldwide. Richard C. Smith is a partner in this mega firm. His webpage states that "[h]is practice has a particular emphasis in the employee benefits area including the design, implementation and other aspects of pension, profit sharing and other qualified plans." His bio says that he graduated summa cum laude from Syracuse University College of Law.

What did Bryan Cave and Richard Smith provide Kenneth Hartstein necessary to sell his Pendulum Plan ---In one word---Credibility.

To sell this plan to wealthy individuals and their advisors, Hartstein had to have more than a fancy sale pitch and marketing materials. He had to have credibility. That is exactly what Richard Smith and Bryan Cave delivered. These plans were more complicated than most could comprehend. In fact, most accountants and even tax attorneys don't have the expertise to understand the nuances of these plans and whether they past muster with the IRS. Who would challenge a partner in a thousand plus member law firm that specializes in the design, implementation and other aspects of pension plans!

This is not the first time I have come across the Bryan Cave law firm. Several years ago, I represented a client who purchased a "One Man ESOP." It was a similar type tax shelter--hatched where---Phoenix---and guess who provided the tax opinion letter to the promoters of that plan---you guessed it---Bryan Cave attorneys.

The Bryan Cave tax opinion letter issued in September of 1999 opined that pursuant to Section 412(i) of the code, the Pendulum Plan would "more likely than not" be considered a qualified plan and "should not be considered a tax shelter." As we now know, this turned out to be dead wrong---just as they were wrong on the "One Man ESOP." How could Richard Smith and Bryan Cave been so wrong? Any research would have indicated that the characteristics of these plans were contrary to federal tax laws and regulations. What was their incentive? A complaint filed in Federal Court in Texas, which lists Bryan Cave as a "related party", alleges that they conspired with insurance companies and consultants to design 412(i) plans. I suspect when individuals are required raise their hands and testify under oath, we will find out much more about the involvement of Bryan Cave and their incentives to promote and defend these plans.

If that was not enough, Richard Smith was directly challenged by IRS officials who advised him that these plans were abusive tax shelters. In writings believed to be created in the early part of 2003, Richard Smith acknowledged that Richard J. Wickersham, who was a representative of the Tax Exempt/Government Entities Division of the Service, warned sponsors and administrators of 412(i) plans and indicated that the Service had assigned a high priority to plans that misused section 412(i) of the code.

Stay tuned for more postings on Bryan Cave.