$30 Million Restitution Is Ordered 2 Sentenced To Prison In Tax-shelter Scam

Posted: March 18, 1989

A Long Island man convicted of running the largest fraudulent tax shelter in U.S. history was sentenced yesterday to 15 years in prison and ordered to make more than $30 million in restitution to 4,000 investors nationwide.

His co-defendant, described as the "front man" in the illegal shelter, was sentenced to eight years in prison and ordered to make $500,000 in restitution.

Rejecting pleas of leniency, U.S. District Judge James T. Giles also ordered Frank J. Giuffrida, 51, of Belle Terre, N.Y., the alleged mastermind of the scam, to pay a $1 million fine. Co-defendant William B. Medina, 41, of Port Jefferson, N.Y., was fined $200,000.

The investors live in 48 states; about 150 of those bilked are from eastern Pennsylvania.

"In terms of people swindled, no fraudulent tax shelter has cut such a wide swath," U.S. Attorney Michael M. Baylson told the court.

Giuffrida received $7.7 million from the fraud and Medina received $1.5 million, prosecutors Ronald H. Levine and Tina Williams Gabbrielli said in court papers.

After a five-week jury trial, both men were convicted Dec. 3 along with another defendant, Salvatore Giuffrida, of 55 counts of filing false tax returns, four counts of mail fraud and five counts of unlawful interstate transportation of money taken by fraud.

Salvatore Giuffrida, who is Frank's brother, was sentenced Tuesday to six years in prison, fined $125,000 and ordered to repay $1.3 million.

The three men - all officers of the OEC Leasing Corp., an energy tax shelter that operated in 1982 and 1983 - were among 12 indicted by a federal grand jury last April in connection with the operations of OEC Leasing and several related tax shelters.

The defendants told the judge that there was no criminal intent in the 1982-83 tax shelter, which involved the leasing of energy equipment. They insisted that it was strictly a misunderstanding of the tax laws.

But Giles rejected their contentions. "I'm satisfied the jury's verdict is consistent with the evidence," he said.

The government contended in court papers that Frank Giuffrida had "at least $2.39 million" in offshore accounts in Switzerland, Liechtenstein and the Cayman Islands.

Medina spent his illegal earnings on two Long Island homes and a Florida time-share condominium, Levine said. "Some of the money was paid out due to a high standard of living," Medina conceded to the judge.

Giles allowed both men to remain free on bail pending appeal.

The OEC tax shelter was billed as a way for investors to take advantage of two tax credits offered during the early 1980s. OEC asked taxpayers to invest $3,000 to $25,000 so that it could buy and install machines that the firm said would monitor and conserve electricity used by businesses.

Investors were told that they could take a 10 percent investment tax credit as well as a 10 percent energy tax credit on their income tax returns, according to trial testimony. For a $5,000 lease payment on a $65,000 energy- saving machine, taxpayers were told, they were entitled to declare a total of $13,000 in the two tax credits.

But prosecutors said the tax credits were supposed to be based on the fair market value of the machines, which was only a fraction of what OEC contended it was. For example, a machine said to be worth $65,000 was bought by the company for $304, according to trial testimony.

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