CHARLESTON, W.Va. -- West Virginia University graduate Raymond Lane, now an investment tycoon and member of WVU's board of governors, has agreed to pay up to $100 million in back taxes and penalties for what the Internal Revenue Service calls a "sham" tax-avoidance scheme. This may be a record tax-ducking case involving anyone connected to West Virginia.
Various U.S. billionaires and American corporations are notorious for using overseas loopholes and accounting tricks to avoid U.S. taxes. The Obama administration has cracked down on numerous schemes and recovered billions for America's treasury.
Lane -- recently ousted as Hewlett-Packard chairman -- is accused of using a gimmick called POPS (partnership option portfolio securities) to elude taxes arising from the dot-com bubble more than a decade ago. Bloomberg News explained:
"Lane, also the former president of Oracle Corp. and partner emeritus at venture-capital firm Kleiner Perkins Caufield & Byers, used POPS in an attempt to shield $250 million of income through what the IRS ruled were 'sham' transactions."
IRS said Lane's POPS operation involved "a series of meaningless steps" that let investors claim losses they didn't deserve.
The <I>Silicon Valley Business Journal<P> commented:
CHARLESTON, W.Va. -- "Things are just not going Ray Lane's way recently. The Hewlett-Packard board member and former Oracle exec had to step down as chairman of HP to quell a shareholder revolt, his investment in Fisker Automotive has gone south as the electric carmaker nears bankruptcy, and now he owes the government $100 million."
The paper said Lane's case is "not the largest in U.S. history. That dubious distinction goes to Walter Anderson, a telecom entrepreneur who ended up paying $247 million in fines and back taxes after being found guilty of tax fraud in 2011."
Several months ago, in a New York Times report, a former Hewlett-Packard director said the Silicon Valley computer firm had what has "got to be the worst board in the history of business."
Lane's POPS shelter was contrived by BDO Seidman and Germany's giant Deutsche Bank. In 2010, Deutsche Bank admitted criminal guilt in helping 2,100 rich clients duck $6.9 billion taxes, and agreed to pay a $553 million U.S. penalty to avoid prosecution. In 2011, four top BDO executives were convicted of criminal tax fraud, but the verdict was overturned and a retrial is pending. A year ago, BDO agreed to pay a $50 million settlement for helping wealthy investors evade $1.3 billion taxes.
Ordinary West Virginians can't use complicated legal tricks to duck taxes. This state's members of Congress should do their utmost to close law loopholes that let the rich do so.
As for WVU, we wonder if Lane will remain on the university's prestigious board.