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Ex-Bechtel Lawyer Acquitted in Tax-Credit Prosecution

Former Bechtel global tax manager Mark Muntean had to resign from Jeffer, Mangels, Butler & Marmaro when the indictment became public

Dan Levine
The Recorder
December 19, 2008

In-house lawyers and tax managers should be breathing a lot easier this Christmas, thanks to jurors in a rare white-collar prosecution.

Deliberating for little more than an hour, a Northern California jury acquitted former Bechtel Corp. global tax manager Mark Muntean on Thursday morning on charges that he caused the company to file a false tax return. Federal prosecutors argued that Muntean, an attorney, knew a research and development credit claimed by Bechtel was improper, but pushed for it anyway.

Muntean's lawyer, John Youngquist, countered that his client trusted subordinates to give him all the information, and they didn't. Bechtel corrected the error after Idaho tax authorities raised questions.

News of Muntean's indictment made the rounds in the professional press, Youngquist said, leading to fears that the government was trying to criminalize tax advice that turned out to be simple error.

"I've been in this business for 40 years, prosecuting and defending cases, and if it's a legitimate tax issue, you don't have a criminal case," the San Francisco solo said.

A U.S. Attorney's Office spokesman did not return a call for comment late Thursday.

Sideman & Bancroft partner Jay Weill, who was the longtime tax chief in the Northern District U.S. Attorney's Office, said he had never seen a similar prosecution.

"I don't recall any case against some in-house guy within a corporation," Weill said, adding that he was not involved in the case.

The trial lasted five days in Northern District of California Judge Saundra Armstrong's Oakland courtroom. Bechtel claimed a $3.3 million R&D tax credit for a project in Idaho, the government argued. But since that project was financed by the government, the company wasn't allowed to benefit from the credit.

Bechtel brought in Shearman & Sterling partner B. John Williams Jr., former chief counsel of the IRS under President Bush, to do an internal investigation. According to Youngquist, Williams fingered Muntean and turned the contents of his probe over to the government.

Without the Shearman probe, the government never would have focused on Muntean, Youngquist contends, adding that his client may now have a civil claim against the company.

In an e-mailed statement, Francis Canavan, Bechtel's media and public affairs manager, said the company "had no role in the U.S. Attorney's decision to indict Mr. Muntean and had no interest in the outcome of this criminal case."

As soon as the outside counsel's investigation found that improper tax credits had been taken, Canavan added, Bechtel voluntarily disclosed the improper credits to the IRS and filed an amended return. Thereafter, Bechtel cooperated with government subpoenas, he said.

Williams, who is now with Skadden, Arps, Slate, Meagher & Flom, said he could not answer questions about his work for Bechtel. But he did say that when the government called him to testify in Muntean's case, Youngquist did not probe the links between his firm's work and the government's investigation.

"He cross-examined me, and he didn't ask one question about that," Williams said.

In speaking to jurors after the verdict, Youngquist said, they reacted to the fact that Assistant U.S. Attorney Thomas Newman did not call some key figures to testify. "The government tried a very lean and mean case," Youngquist said.

Among those witnesses not called were Bechtel's chief financial officer at the time, Georganne Proctor, who now holds the same position with TIAA-CREF. Another was Keith Chang, a submanager who reported to Muntean and allegedly sounded alarm bells about the tax credit.

After leaving Bechtel, Muntean landed at Jeffer, Mangels, Butler & Marmaro. But he had to resign that job once the indictment became public. Youngquist said he does not know whether his client will attempt to return.