Gramercy Advisors is suing Shahid Khan, the owner of the Jacksonville Jaguars, to be held harmless from legal claims arising out of the billionaire's aggressive use of tax shelters in the early 2000s. Khan sued the firm after the IRS disallowed tax losses he claimed.
Gramercy Advisors, Gramercy Financial Services, Gramercy Asset Management and Tall Ships Capital Management are suing Khan for attorneys' fees, litigation expenses and breach of contract agreement claims, according to the lawsuit, filed in the U.S. District Court for the Southern District of New York.
The suit states that Khan 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, by which Khan managed to shelter nearly all of his approximately $250 million of income for that period.
In connection with his 2001, 2002 and 2003 shelters, Khan "retained Gramercy for the limited purpose of sourcing certain assets and executing certain transactions requested by him and his tax advisors," the suit states. Gramercy had no involvement with his 1999 and 2000 tax shelters.
Khan owns the Jacksonville Jaguars NFL football team, the Fulham Football Club of the English Premier League, and a $112 million, 223-foot yacht named Kismet, according to the suit. He also owns Flex-N-Gate Corp., a manufacturer of car parts, with affiliates within and outside of the United States. Flex-N-Gate Corp. has annual sales estimated to be in excess of $3 billion.
In written contracts, Khan "acknowledged and agreed that Gramercy had not rendered advice concerning the legal efficacy of the tax shelter strategies; that Gramercy could not be held liable to Khan for adverse tax outcomes; and that Khan would indemnify Gramercy for any litigation costs (including attorneys' fees) arising from Khan's breach of such promises," the suit states.
The contracts, according to the suit, "also expressly obligate Khan to advance to Gramercy its costs incurred in defending litigation by Khan."
The IRS and state revenue collection authorities subsequently disallowed the tax losses Khan claimed, the suit states.
