Ex-Quellos Execs. Plead Guilty In Tax Shelter Case

Sep 13 2010 | 11:15am ET

Two former hedge fund executives have pleaded guilty to running a phony tax shelter scam.

Jeffrey Greenstein, the former CEO of Quellos Group, and Charles Wilk, a principal and tax attorney at the firm, struck a plea deal with prosecutors on Friday. The two men, who had pleaded not guilty to running the $9.6 billion scam last year, will pay $7 million to the Internal Revenue Service and serve between two and six years in prison for conspiracy and assisting with the filing of a false tax returns.

The Quellos tax shelter shielded clients from paying some $240 million in taxes, the U.S. Attorney in Seattle said. The POINT program allegedly offered clients stock that had depreciated in value in order to offset large capital gains, but prosecutors say those shares never existed. The indictment against the two men said Quellos earned some $136 million through the tax-shelter program.

Greenstein and Wilk are to be sentenced in January. In addition to the IRS penalties and jailtime, the two men have agreed to speak about business and legal ethics at their respective graduate schools.

BlackRock bought the fund of hedge funds business of Quellos in 2007.

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