A promoter of land-conservation deals sued by the Department of Justice more than a year ago accused the government of delaying the case because it doesn’t have enough evidence necessary to back up its fraud claims.
The government filed suit in December 2018 against EcoVest Capital Inc. and related parties alleging that 96 tax-advantaged land transactions, known as syndicated conservation easements, put together by the Georgia-based promoters over 10 years, led to more than $2 billion in improper tax deductions by investors who bought pieces of the deals.
The company and the DOJ submitted a joint filing Jan. 7 asking for a resolution on the timing of various aspects of the case, mostly related to the discovery process.
Lawyers for the defendants said the department’s proposed schedule would delay a resolution of the case by “at least another two or three years” and is a tacit admission that the government “lacks the evidence necessary to prove its well-publicized claims of fraud and gross valuation overstatements with respect to the conservation easements.”
“If the IRS doesn’t like the law that allows investors to take conservation easements instead of developing land, it should use any of the many avenues available to it to get the law changed, instead of using unjust enforcement actions as a means of chilling legitimate business activity,” EcoVest said in a statement.
The DOJ said it had no comment on the proposed schedule, but the government’s filing defended the request for a longer pretrial discovery period given the nature of the case.
“The United States contends that the work necessary to prepare a complex civil matter like this one for trial cannot realistically be accomplished on the timeline set forth by Defendants,” the DOJ said.
Nearly 100 Deals Challenged
In its 2018 lawsuit, the government sought an injunction against EcoVest from doing any more conservation deals.
Tax laws encourage investors or property owners to donate land to preservation groups by allowing them to take a tax deduction for the appraised value of the donation.
Syndicated conservation easements, as defined by the IRS, take that a step further by creating partnerships to buy shares in the undeveloped lands. Investors ostensibly are asked to vote between two or more options on how the land should be used, though offering prospectuses for past deals show near unanimous votes for donating it.
Some promoters have promised investors opportunities to claim charitable deductions as much as six times the value of their investments—which the Justice Department and Internal Revenue Service say is made possible by wildly inflated appraisals.
The IRS, which in 2016 declared syndicated conservation easements to be tax-avoidance schemes, and the Senate Finance Committee are conducting their own investigations. The IRS said in a Dec. 20 news release that it will pursue not just civil penalties, but also criminal options “when appropriate.”
EcoVest continues to sponsor deals, adamant that it has done nothing wrong and therefore has no reason to stop. It filed documents with the Securities and Exchange Commission on one transaction initially formed in 2018, involving a 629-acre tract in coastal Texas, only two months ago. A prospectus given to investors warns them about the Justice lawsuit and IRS crackdown, saying they could be held liable if the IRS rules it an abusive shelter.
The case is United States v. Zak, N.D. Ga., No. 1:18-cv-5774, proposed order submitted 1/7/20.