SEC brings proceedings against Charlotte accountant over tax deal

The Securities and Exchange Commission this week brought an administrative proceeding against a Charlotte accountant over what the agency called the fraudulent sale of investments in land conservation easements designed to create tax deductions.

But an attorney for Paul Edward “Ed” Lloyd Jr., 51, said the SEC lacks jurisdiction over the issue and that no clients were defrauded.

“Every client who participated received a substantial tax deduction, just as they expected, and the Internal Revenue Service has never questioned any of it,” said attorney Rick Sharpless, one of three lawyers representing Lloyd. “No one was defrauded of anything and nothing was misrepresented. Not one client has complained.”

In response, Bill Hicks, the SEC’s associate regional director in Atlanta, said: “Our order alleges differently.”

Lloyd, a certified public accountant and tax planner, has his office in south Charlotte but is a resident of Waxhaw, according to the SEC’s order.

Under the Internal Revenue Code, the owners of land that is set aside under a conservation easement may obtain a tax deduction. Investors can acquire an interest in the land to obtain the benefit of the tax deduction.

According to the SEC’s order, between August 2012 and December 2012, Lloyd induced 17 tax-planning clients to purchase a total of $632,500 of interests in a limited liability company that would be used to buy land that was to be set aside in an easement. The SEC, however, alleged that Lloyd used only $502,500 of the funds to purchase ownership units in the land and misappropriated the rest of the money.

Sharpless, however, said the SEC was wrong and that all of the money was used appropriately for the land transaction.

According to an order filed Tuesday, the SEC is bringing administrative proceedings to determine whether its allegations are true and whether Lloyd should face any remedial actions such as restitution or civil penalties. A hearing is to be held before an administrative law judge, rather than before a judge or jury in federal court.

“We look forward to having this case decided on evidence and law, rather than on the government’s inflammatory, uninformed and unsupported allegations,” Sharpless said. He said there were U.S. Supreme Court and Circuit Court of Appeals precedents supporting his claim that the SEC lacks jurisdiction over the issue.

“The Securities and Exchange Commission is created to regulate the purchase and sale of securities, and there were no securities purchased or sold by any of Mr. Lloyd’s clients,” he said. “This was a tax transaction, not an investment.”

Hicks said the SEC has jurisdiction over the sale of any security. “I think at the end of the day the facts will establish it as a security,” he said.

This story was originally published October 1, 2014 at 5:54 PM with the headline "SEC brings proceedings against Charlotte accountant over tax deal."