IRS says Cohan owes; lawyer says case may go to trial
Is Golden State Warriors' owner Chris Cohan facing tax troubles that could cost him as much as $160 million?
The IRS says yes, according to a story in Thursday's San Francisco Chronicle. Cohan's lawyers tell the newspaper he has settled one claim and is close to settling another. But a third claim, which his lawyer says is the largest portion of the disputed taxes and penalties, could go to trial.
Cohan is not targeted in any criminal matters.
The IRS, in a 2005 Notice of Deficiency sent to Cohan and his wife, Angela, claims he owes more than $95 million in back taxes and more than $66 million in penalties. According to the Chronicle, court documents filed in San Francisco claim that Cohan paid $14 million for three tax shelters designed to save him the $95 million when he sold his cable television company, Sonic Communications to Charter Communications, in 1998. Cohan sold the company for more than $200 million.
Last May, Cohan filed an amended petition to the U.S. Tax Court disputing the assessments, but saying two of the shelter transactions were "not valid or supportable," according to the Chronicle.
IRS agent Bernard McKenna filed a declaration on Feb. 9, claiming: "All three tax shelters were promoted, funded and closed as a package deal for Cohan's benefit. The three listed tax shelter transactions were designed and implemented as a full-coverage plan to afford Cohan tax shelter both at the corporate and individual level."
Cohan's lawyer, Edward Robbins Jr., told the Chronicle on Wednesday that his client "relied totally on his advisers in doing these transactions." Cohan had told the IRS in a September 2004 interview that he had hired the accounting firms KPMG and Presidio Advisors, an investment company that worked with KPMG, and that "all these decisions were by a group of advisors that were so-called experts in the field," according to the Chronicle.
In previous testimony, Cohan said that trusted advisers were in charge of all decisions regarding the Sonic sale.
The government alleges that Cohan paid $14 million to KPMG and Presidio Advisors, Inc. to set the shelters up.
"The Cohans acknowledged entering into two tax shelter transactions ... overseen by Presidio Advisors, on the advice of KPMG Peat Marwick LLC and petitioner's attorneys that these were valid and supportable transactions," the motion states.
KPMG and Presidio Advisors are both subjects of federal criminal investigations into abusive tax shelters.
KPMG and Presidio Advisors have both been identified in a large New York criminal investigation into abusive tax shelters.
A previous attempt by the government to sue Cohan for the back taxes was unsuccessful. In 2005, Cohan's attorneys successfully argued that documents the IRS needed as evidence were protected by attorney-client privilege.
Robbins didn't return a telephone call or an e-mail seeking comment from The Associated Press. A Warriors spokesman said the team had no comment.
Information from The Associated Press was used in this report.