Glenn E. Rachis was convicted on four counts of tax evasion in March 2011. Dr. Rachis was sentenced to serve five years in prison (three years of supervised probation after his release), and paid a $10,000 criminal fine and $100,000 in prosecution costs. At trial, in addition to the grand jury evidence, the prosecution presented evidence that Rachis deferred compensation funds were returned to the U.S. using nominees to conceal his involvement. Once the funds were directed back to Rachis, he invested the funds in real estate. Further trial evidence revealed that beginning in 2008, the I.R.S. attempted to audit tax returns filed by Dr. Rachis for 2004, 2005 and 2006. Throughout 2008, all I.R.S. communications mailed to the street address of Blackstone Valley Chiropractic Clinic were returned (though unsealed) marked as addressee not known. On five different occasions in 2009, when an I.R.S. agent visited the clinic to personally contact Dr. Rachis, the clinic receptionist reported Dr. Rachis was traveling and unavailable. Dr. Rachis failed to keep three appointments set up by the examining agent.

Dr. Rachis plans to appeal the original courts conviction. He has asked your firm to represent him before the I.R.S. and to work with his new defense attorney to develop a strategy for the appeal. Dr. Rachis expressed regret for getting into such an aggressive arrangement and provided plausible assurances that he wants to pay the taxes owed and resolve the matter.

Ray Bertman emailed Martin the news that Dr. Rachis was convicted. He asked Martin to prepare a research memo to address the following items.

1. Re-analyze the circumstances and recommend whether the accounting firm should work on the Dr. Rachis appeal. Firm policy is to represent only clients that are in compliance with tax law.
2. Evaluate Dr. Rachis liability for tax evasion, taking into consideration his reliance on his attorney (also a CPA).

In responding to both 1 and 2, explicitly address the impact, if any, of the trial evidence of Rachis efforts to avoid I.R.S. contact as well as his personal access to deferred compensation funds on your assessment.