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Attorney Sentenced in Saban Tax Case

Los Angeles tax attorney Matthew Krane was sentenced to 32 months in prison Friday for taking a $36 million kickback federal prosecutors say he received in return for steering media mogul Haim Saban into an illegal tax shelter.

Krane agreed to forfeit $23.1 million to the U.S. Treasury in back taxes and return $17.9 million in illegal fees to Saban. U.S. District Court Judge Ricardo Martinez in Seattle also sentenced Krane to two years of supervised release following his prison term.

Krane pleaded guilty to tax evasion and passport fraud in March 2009. Under the terms of the deal, he agreed to cooperate with federal prosecutors in what they’ve called one of the largest tax evasion schemes in U.S. history.

Federal prosecutors charged Krane with failing to pay taxes on the $36 million kickback he received from Seattle investment firm Quellos Group LLC in exchange for bringing Saban into the illegal tax shelter. The shelter allowed Saban to evade taxes on capital gains of $1.5 billion he made after selling his interested in the Fox Family Channel in 2001.

In surprising testimony in 2006, Saban told the U.S. Senate that he didn’t understand the shelter was illegal due to his limited formal education. He paid $250 million in back taxes and penalties.

Saban and wife Cheryl issued a statement through their attorney saying they plan to donate the $17.9 million to the Saban Foundation for use by several charities, including Children’s Hospital Los Angeles, Saban Free Clinic, Operation Homefront and Para Los Ninos.

“Cheryl and Haim Saban are gratified that through the efforts of the United States Attorney’s Office, the IRS and their counsel,” the statement said. “They have recovered the funds held in a foreign bank, and justice has been done.”

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