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Jenkens & Gilchrist’s long-running tax scandal has brought the 56-year-old firm to its knees, with it finally closing its doors for good.
The chairman of the Dallas-headquartered firm Patrick Mitchell confirmed to The Lawyer that the firm would indeed close, referring to a Derpartment of Justice statement that said the firm would be “terminating its legal practice”.
The news follows a $76m (£38.7m) settlement between the US Internal Revenue Service (IRS) and Jenkens. The IRS statement continues: “The penalty stems from the firm’s promotion of abusive and fraudulent tax shelters and violation of the tax law concerning tax shelter registration and maintenance and turnover to the IRS of tax shelter investor lists.”
This is the second large settlement the firm has made in relation to the shelters in the past year.
Jenkens’ problems began in 2003 when a federal investigation found that several tax shelters, which were endorsed mainly by Jenkens’ Chicago-based lawyers, were in fact illegal.
The firm spent three years controlling the damage, including firing the partners responsible and making an $82m (£41.74m) settlement with 1,100 tax shelter investors in 2006.
By early March, the dissolution of Jenkens’ national offices was almost complete, but the future of the firm hung in the balance, with the firm continuing a restricted practice being a possibility.
Jenkens also confirmed to The Lawyer (5 March) that it had entered into emergency talks with Virginia-headquartered Hunton & Williams, among others, about taking on a number of Dallas-based lawyers, where Jenkens had 124 fee-earners.
It is unclear where those lawyers are now going. Jenkens’ website is up-and-running and functioning as normal.
A firm spokesman confirmed that Jenkens had met its financial obligations for 2006, although was not able to provide figures. In 2005 turnover stood at $179m (£98.35m), down from $312m (£216.67m) during the firm’s heyday in 2001. Lawyer numbers also have dropped, from 610 in 2001 to 250 at the beginning of March.
At the beginning of 2007, Jenkens had offices in Chicago, Los Angeles, Dallas, Houston, Austin and San Antonio.