Bay Area tax attorney Harry Margolis was acquitted today on all counts in a federal tax fraud trial involving the use of offshore tax havens.
The jury of nine men and three women returned the not guilty verdict after a week of diveration and more than six months of trial. Last Friday they returned not guilty verdicts on five of six counts against Margolis.
The acquittal is perhaps the final blow ot "Project Haven", a decade-long federal probe into the use offshore tax havens for alleged money laundering and evasion of income tax. The Margolis prosecution was the first case associated with "Project Haven" to go to the courts.
When Margolis was first indicted in October, 1975, he was charged with 23 counts of helping to prepare false tax returns for more than a score of individuals,partnerships and corporations. He was also charged with one count of conspiring to defraud the United States of $1.4 million in taxes.
That indictment alleged that Margolis arrange fictitious tax deductions for his clients by using a network of sham companies in the Bahamas and Netherlands Antilles. The government claimed Margolis controlled the various companies involved in the transactions, and employed such devices as backdating of documents and phoney records.
Many of the witnesses at the trial were Margolis' clients and employees, including entertainer Barbara McNair, Olympic diving star Dr. Sammy Lee and Werner Erhard, founder of est. a sensitivity training group ion the West coast. The government attempted to show that Margolis controlled business transactions that resulted in false deductions for these and other clients.
But Margolis and his attorneys continually challenge the government witnesses and repeatedly attempted to show that the transactions involved were legal.
Margolis has claimed throughout that tax laws are ill-defined and designed to help the rich.
He said the government singled him out because his tax maneuvers have been successful in saving his clients money.
"I can understand the terrible frustration (of the government probers)," he said in an interview before the trial. "Because I have done my job carefully and technically, I beat them out of $1 million for clients."
Since the trial began there have been several other setbacks for the government. First, federal judge John M. Manos in Cleveland ruled that much of the evidence used to build the cases against alleged tax evaders was "tainted" because Internal Revenue Service agents had acquired it illegally. The judge cited an incident in Miami where a Bahamian banker had his briefcase pilfered by an IRS informant while a female IRS informant took the banker to dinner.
The evidence acquired from the briefcase laid the foundation for dozens of prosecutions around the country. The briefcase incident was considered a major breakthrough by Justice Department and IRS officials involved in the investigations.