Lawyer Pleads Guilty in NY Tax Shelter Case

A California attorney pleaded guilty on Friday in a tax shelter scheme that Manhattan prosecutors say helped rich investors dodge $200 million in taxes.

As part of the plea deal, prosecutors told a federal judge on Friday that Michael Kerekes will cooperate in an ongoing investigation of tax work done by an accounting firm where he once worked.

The firm, Chicago-based BDO Seidman, said in a statement that it “has cooperated fully'' with the investigation.

Prosecutors say the 46-year-old Kerekes, who lives in Santa Monica, Calif., was involved in a scheme that allowed clients to falsely report $1 billion in investment losses and evade at least $200 million in taxes.

“I knew ... what I was doing was against the law,'' Kerekes said during the plea.

At BDO Seidman, Kerekes made hefty bonuses by convincing wealthy clients to invest in tax shelters based on short selling of stocks and foreign currency, court papers said.

The deals were “executed simply to generate huge tax loses,'' the papers said. “The transactions resulted in massive tax evasion by the accounting firm.''

Kerekes faces up to five years in prison on each charge of conspiracy and tax evasion at sentencing on March 4, 2010.