Grassley, Wyden Set Deadline for Conservation Easement Subpoena

Grassley, Wyden Continue Pressing Syndicated Conservation Easement Promoter

Senators set final deadline for compliance with subpoena

Tuesday, January 28, 2020

WASHINGTON — Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) are today continuing to press a subject of their bipartisan investigation into syndicated conservation easements transactions, which may have allowed some taxpayers to game the tax code for illegal profit.

Following voluntary requests for documents and information, Grassley and Wyden served a subpoena on Robert McCullough of Georgia seeking information and documents related to McCullough's activity promoting and participating in syndicated conservation easement transactions. McCullough has thus far failed to adequately comply with the subpoena.

In the course of ongoing litigation with the Department of Justice in the U.S. District Court for the Northern District of Georgia, however, McCullough produced thousands of pages of documents and apparently plans to produce more by February 15. Despite a commitment from his attorney to further provide any relevant documents discovered in the course of that litigation, McCullough has made no additional productions to the Senate Finance Committee.

In a final letter seeking compliance with their months-old subpoena, Grassley and Wyden set a deadline for response of February 25. After that deadline, the committee leaders will determine whether to press forward with enforcement through criminal or civil contempt.

Full text of the letter from Grassley and Wyden can be found HERE.

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Sean M. Akins, Esq.

January 28, 2020

Dear Mr. Akins:

This is our final letter to you demanding that your client, Mr. Robert McCullough, fully respond to the subpoena issued to him on September 12, 2019. On November 20, 2019, you sent us a letter ("November 20 letter") discussing the efforts your client has made to produce documents pursuant to our requests and subpoena. That letter included a certification from your client in which he

Both that November 20 letter and its accompanying certification are attached to this letter. They describe production efforts that are not complete. The November 20 letter states, "EcoVest will produce to the Committee any additional responsive communications that it identifies in connection with ongoing litigation in the United States District Court for the Northern District of Georgia." When you initially met with our respective staffs in April 2019, they generally communicated to you that they would accept rolling productions of documents, as they did with every other subject of this investigation, and that such rolling productions would be forthcoming just as they would be forthcoming in your client's litigation in the Northern District of Georgia. Our staffs, however, did not agree to an unlimited timeframe in a manner that would make our investigation of conservation easements seemingly subordinate to your client's litigation in the Northern District of Georgia.

In that litigation, your client, along with other "EcoVest Parties," appear to have told the Court hearing that case,

We did not receive a production of documents from your client at any time in the last few weeks that might coincide with the January 6, 2020 production of documents mentioned above. We understand the possibility that the documents responsive in that litigation might not entirely correspond with the documents requested in our subpoena to you, but we suspect there should be substantial overlap between the two. Given the sizeable number of documents your client mentions to the Court as being at issue in both recent and forthcoming productions in that case, we are at a loss to understand how your client can certify accurately to having produced all responsive documents found pursuant to a diligent search of 47,587 documents that have recently been produced in ongoing litigation — with more to come — but none produced in response to our subpoena. To that end, we expect full compliance to our subpoena by February 25, 2020.

In the subpoena, the Committee requested "communications made prior to an investor's participation in the transaction, including but not limited to presentations, memoranda, letters, emails, and notes, however formal or informal, describing the investment opportunities or the amount of tax benefits expected as a result of or potential result of the investment." This obviously includes emails. But you responded to us that Eco Vest did not search for all responsive emails. Rather, Eco Vest relied on FINRA regulations that purportedly "prohibit the use of promotional materials unless they have been reviewed and filed with FINRA," and Eco Vest's internal "policy of promoting investments, describing investment opportunities, and quantifying any possible tax benefits exclusively in Private Placement Memoranda (each a 'PPM') distributed to broker dealers, financial advisors, and prospective investors." Based on these circumstances, you decided to search a subset of emails "[t]o confirm . . . EcoVest's policy of limiting promotional communications to the PPM was adhered to and that there are few if any additional communications that promote the investments[.]" While you claim that FINRA regulations and company policy would prohibit emails containing responsive material beyond the PPM, our experience in this investigation with other entities, equally subject to FINRA, is to the contrary.Searching a self-selected group of emails and declaring that nothing relevant was uncovered, and, therefore, no further search is necessary is insufficient to meet your duty under the subpoena to produce responsive materials unless there is a legal basis for withholding. Accordingly, Mr. McCullough has failed to fully comply with the subpoena by failing to produce all responsive emails.²

It has now been ten months since the Committee first sought materials from Mr. McCuJlough and over four months since a subpoena was served on him requiring the production of responsive documents. In sum, your client's response to the subpoena has been inadequate to meet his duties under it. The Committee will provide Mr. McCullough until February 25, 2020 to complete a full search of potentially responsive emails and provide any remaining responsive documents that have not yet been produced. At that point, should Mr. McCullough continue to object to the subpoena and withhold documents, the Committee will consider those objections, along with any additional authority or argument you wish to provide in writing by the above date, and determine whether it may be necessary to proceed towards criminal or civil enforcement of the subpoena.

Sincerely,

Charles E. Grassley
Chairman
Senate Committee on Finance

Ron Wyden
Ranking Member
Senate Committee on Finance