Fourth Circuit Overturns Million Dollar Judgment Against Charleston CPA Defended by LWC

The Fourth Circuit overturned a judgment last week issued at the District Court level against a Charleston CPA defended by Lindsey W. Cooper Jr.  The judgment of more than $2.5million in Section 6700 tax shelter promoter civil penalties was imposed by a jury after the admission of evidence the Fourth Circuit determined was inflammatory and prejudicial. 

At trial, Judge David C. Norton overruled Cooper's strenuous objection to the admission of the CPA's delinquent personal tax filings into evidence.  The Fourth Circuit found that the government offered no evidence linking Robert Nagy's failure to timely file or pay his personal taxes with work he performed for Derivium regarding their 90% Stock Loan tax shelter program, concluding that the admission of evidence regarding Nagy's personal returns violated Federal Rule of Evidence 404(b).   

Rule 404(b) prohibits admission of evidence of wrongdoing solely for purposes of proving a person's character and the government's evidence regarding Nagy's personal returns served only to reflect his character negatively, resulting in prejudice.  It also explained that the evidence was quite likely to influence the jury against Nagy. 

The case was remanded to U.S. District Court for a new trial.  Check back with us for updates.