Gramercy Advisors LLC says it’s not responsible for the billionaire’s failed tax strategy.By: Mark Basch
A Connecticut investment firm is suing Jacksonville Jaguars owner Shad Khan, alleging it is not responsible for failed tax strategies implemented by Khan two decades ago.
The lawsuit filed in federal court by Gramercy Advisors LLC and three affiliated firms said Khan was trying to shelter about $250 million in income from 1999 to 2003 but the IRS and state tax authorities disallowed his claims of tax losses. They filed two lawsuits in 2009 against Gramercy and other firms that worked on the strategies in Champaign County, Illinois, where his auto parts company Flex-N-Gate Corp. is located.
However, the suit filed Oct. 7 in U.S. District Court for the Southern District of New York claims Gramercy had agreements with Khan that it could not be held liable for potential tax losses.
The lawsuit “arises out of the willful and unjustifiable breach by Shahid Khan of his express contractual agreement to indemnify and save Gramercy harmless from and against all claims arising out of Khan’s pursuit of aggressive of tax shelter strategies in the early 2000s,” it said.
“Khan, a billionaire, pursued (at least) five consecutive tax-avoidance strategies in tax years 1999 through 2003 designed by accounting firm BDO Seidman, LLP and other professional firms,” it said.
“Khan retained Gramercy for the limited purpose of sourcing certain assets and executing certain transactions requested by him and his tax advisors,” it said.
Gramercy, headquartered in Greenwich, Connecticut, describes itself on its website as a “dedicated emerging markets investment manager.”
Representatives of Khan’s businesses did not respond to phone and email messages about the lawsuit.
The suit said Khan had to pay more than $85 million in federal taxes after his deductions were disallowed.
“Instead of accepting the fact that his aggressive strategies to avoid taxes did not work, Khan has sued everyone in sight hoping to shift the public focus of blame onto others and to recoup his self-imposed losses through abusive litigation,” it said.
The lawsuit said Gramercy has incurred “millions of dollars” in attorneys’ fees and costs because of the two suits filed in Illinois.
The federal lawsuit seeks reimbursement of those fees and unspecified damages to be determined at a trial.