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Law360, New York (March 27, 2020, 5:47 PM EDT ) A Manhattan federal judge denied bail Friday for a lawyer jailed for tax evasion, after prosecutors said his work helping wealthy EY clients with illegal tax shelters cost the government $1 billion and argued the prison system is adequately handling the coronavirus outbreak.
U.S. District Judge Sidney H. Stein's order, docketed Friday afternoon, did not elaborate on his decision. But it did say that defendant David L. Smith may renew his application for bail in the future.
Earlier in the day, the Manhattan U.S. attorney's office told Judge Stein in a letter that Smith, 63, should remain in custody, though his scheduled April 2 sentencing has been put off until June 4 as a result of the outbreak of COVID-19, the illness associated with the coronavirus.
"Now that the defendant has firsthand experience of life in custody, he has every incentive to flee in order to avoid further imprisonment," prosecutor Tim Capozzi wrote, arguing that Smith fled for Canada before he was indicted in 2008 and did not return voluntarily.
The letter said the federal government lost $1 billion in taxes tied to shelters allegedly crafted by Smith, who was charged with conspiracy and tax evasion in assisting others formerly at the accounting giant — which was previously known as Ernst & Young — in implementing illegal tax tricks. A group of former EY partners was criminally charged. Their cases were resolved long ago.
The letter said Smith, who copped to a count of tax evasion in February after being denied bail by Judge Stein in July, got $3.75 million from EY for his services and dodged taxes on $18.4 million of his personal income.
"The government respectfully submits that any appropriate sentence should substantially exceed the approximately ten months that he has served thus far. There is thus no basis to bail him now," the letter says.
The filing came in response to a March 25 letter by Smith's lawyer that says the defendant, who faces a maximum three-year prison sentence having copped to a single tax count, poses no danger to the public and could await sentencing at a family home in Wisconsin while being electronically monitored.
"Even if the court were to impose the maximum sentence allowable, it is hardly the type of sentence one would flee from especially with close to a year already served," the letter from defense attorney Amy Gallicchio says.
The letter also says that Smith — who denies fleeing to avoid prosecution — suffers from a variety of ailments, has not be able to get proper nutrition while behind bars and is at high risk of contracting COVID-19.
"His well-being diminishes daily, making him more and more susceptible," the letter says.
The government said the Bureau of Prisons "is well prepared to handle the risks posed by coronavirus/COVID-19, as with other infectious diseases and other medical conditions."
Counsel had no immediate comment on the decision.
Smith is represented by Amy Gallicchio and Sarah Baumgartel of the Federal Defenders of New York Inc.
The government is represented by Tim Capozzi of the U.S. Attorney's Office for the Southern District of New York.
The case is U.S. v. Coplan et al., case number 1:07-cr-00453, in the U.S. District Court for the Southern District of New York.
--Editing by Michael Watanabe.
For a reprint of this article, please contact reprints@law360.com.
