Media mogul Haim Saban, who paid the government about $250 million to settle charges of tax evasion, is now in a battle over the $36-million commission his tax lawyer got for putting Saban into the illegal tax shelter in the first place.
Saban is accused in a civil lawsuit filed Tuesday in Los Angeles County Superior Court by his former tax lawyer, Matthew Krane, of trying to take the commission that Krane received from Quellos Group, a Seattle investment firm that cooked up the illegal tax shelter scheme. Saban paid Quellos Group $54 million and the firm in turn gave $36 million to Krane. Saban has not gone after Quellos for the other $18 million.
Krane parked the $36 million, which was deemed by the U.S. government to be an illegal kickback, in an Austrian bank, and Saban last year filed a suit there laying claim to the money, an action that has effectively frozen the assets.
The origins of this battle stem from the sale of Fox Family cable channel from Saban and News Corp. to Walt Disney Co. in 2001 for $5.2 billion. Saban made a capital gain of $1.5 billion on that deal and Krane was tapped to minimize Saban's tax payment. Krane turned to Quellos Group, which managed to turn Saban's gain into a loss until the federal government jumped in and charged Quellos Group with tax fraud on the Saban matter as well as several other high-profile tax shelters. Quellos co-founder and former Chief Executive Jeffrey Greenstein and Quellos principal Charles Wilk were hit with tax evasion charges last month.
Krane, once a powerful Hollywood lawyer and the brother of movie producer Jonathan Krane, has spent the last year in a federal holding pen in Los Angeles on charges of identity theft and passport fraud. When the IRS searched Matthew Krane's home in 2008, the agency found methamphetamine as well as materials to make a fake passport and cash hidden in a VCR. Last month, Krane was hit with a federal charge of money laundering.
The colorful suit, written with vitriol, accuses Saban of making Krane a scapegoat in the mogul's efforts to avoid paying taxes. The suit accuses Saban -- a big supporter of the Democratic Party -- of using his political donations to demand "special treatment and personal favors," but it doesn't offer any examples or specifics.
A Saban spokeswoman called Krane's suit "frivolous" and a "transparent attempt to distract from Mr. Saban's right to recover the money stolen from him by Mr. Krane."