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The government says it offered immunity to socialite Carol Peeler, accused of tax fraud. Apparently, her attorney had other ideas. Now she’ll do prison time.
By Sally Giddens |

It’s March 31, and Carol Peeler-Highland Park mother of two, Phi Beta Kappa, former ball chair for the Junior League of Dallas-walks into U.S. District Judge Joe Fish’s federal courtroom flanked by her two highly paid attorneys. She wears a rumpled khaki skirt and flat shoes, her gold lamé ball gown left to happier days. Tears running down her face. Peeler looks more like an innocent lamb being led to slaughter than a former finance whiz kid who made $3 million in two years on the tax shelter scheme that has brought her here today, one of the largest tax frauds ever prosecuted.

In a halting voice, Peeler tells the judge that even though she had a couple of glasses of wine the night before, she is fully able to understand her actions today. She pleads guilty to aiding and assisting in the filing of a false and fraudulent 1982 U.S. Partnership Return of Income and to fraudulently backdating documents for government securities trades. For this, she faces three years in prison and a possible $100,000 fine, though the prosecutors recommend a term of eighteen months. But in return for her admission of guilt, her husband, Charles, also a target of the felony indictment, will go free.

Peeler’s plea of guilty is final. But government sources say that Carol Peeler could have avoided her ordeal by taking a government offer of immunity from prosecution in exchange for testimony-an offer made to one of her attorneys, Darrell Jordan, more than three years ago.

Peeler says she does not remember an immunity offer being discussed. If she is right, and if an offer was made, her attorney could be accused of a serious ethical violation that may be of interest to the state bar association, sources within the Department of Justice say. Noncommunication of an immunity offer could also be malpractice.

Attorney Jordan, president-elect of the State Bar of Texas, maintains that he did tell Peeler that he had gotten a call from former Assistant United States Attorney Bill Alexander, the orig inal prosecutor in the case, but that he never talked extensively about any immunity offer with his client because he thought he had a settlement working with the IRS. Originally, the principals in the Hill-crest deal had tried to stick together and make a global settlement with the IRS, offering to pay $100 million if criminal prosecution were dropped. But with the government estimating it will recover $750 million on this case, that wasn’t enough to get the deal done. Jordan says he was in the heat of those negotiations when he got the call from Alexander to “discuss immunity.”

Criminal attorney Doug Mulder, who is assisting Peeler now, and Jordan both maintain that Peeler had nothing to offer the government because she is innocent and could not deliver the other principals in the case. They both reiterate that Peeler has passed a polygraph examination. They say that the government was only offering to “sit down and talk” about immunity and feel sure when the government found out their client couldn’t deliver, there would have been no deal.

But Peeler’s deal was past the discussion stage before Alexander ever made that call to Jordan, sources say. It had been approved through every required channel and had been signed off on all the way up and down the line through the Department of Justice and the Internal Revenue Service all the way to Washington. The government was seeking out Peeler specifically because she was the key to their whole strategy at that point-the other principals were too far removed. Peeler had the greatest computer access, she was closest to the deal. and she was the one who made the trades the government labeled fraudulent, sources say. The sweeping immunity deal not only included a statement that said the taker had not done anything wrong, but also basically forgave him or her of any sin in word or deed from the beginning until the end of time.

Jordan was given a deadline to get back to prosecutor Alexander, but he never did. (Alexander is now in private practice and cannot comment on the case for more than two years.) So, when the deadline passed, the government went looking for someone else. Apparently Jordan, a civil attorney who has limited knowledge in criminal matters, didn’t take Alexander’s phone call-or the deadline-seriously. Regardless, it is Peeler who will pay the price of that judgment call with jail time.

Eventually, prosecutors reached Jay Eth-ington, attorney for David W. “Buzz” Tompkins, vice president of Hillcrest Equities, who jumped at the offer Tompkins was in the marketing area of the business and left Hillcrest in January of 1984.

Prosecutors may or may not have gotten what they needed from Tompkins, but from Peeler, they expected to get information leading them to the source of the crime.

Peeler was in on the deal from the very beginning. In 1981, having earlier traded government securities for several Dallas banks, Peeler developed a trading program dubbed Hillcrest Securities Corp. Inc. for Hillcrest Equities, the parent firm for which she served as vice president. The Hillcrest tax shelter trading program sold investments in government securities to more than 7,000 people across the United States. According to some who sold it, the deal was bought by high-profile Hollywood types, two or three senators and congressmen, those ever-present phenomenally rich farmers from the boonies, and even some Mafiosi from Ohio. A complete list of the Hillcrest tax shelter investors is not public record.

Each $10,000 unit originally provided income tax deductions of $120,000 for investors. But now that the Internal Revenue Service has declared the deal fraudulent, those taxpayers owe back taxes, interest, and penalties of more than $150,000 for each $10,000 unit. The government expects to recover more than $750 million from the Hillcrest case. You can bet the buyers are mad. And the civil lawsuits against the Hillcrest principals are piling up.

The deals sold by Hillcrest were fraudulent, the government maintains, because the trading of securities never actually occurred. Hillcrest did business with companies owned by Edward Markowitz, who pleaded guilty in 1984 to operating companies that provided customers with hundreds of millions of dollars in tax write-offs related to securities trades that never occurred. Though Peeler’s attorneys maintain that she believed her trades were real, and that she passed a polygraph to that effect, the government has seventeen incriminating tapes of conversations between Peeler and Marko-witz, sources say. Since Peeler pleaded guilty prior to the discovery portion of the trial, her attorneys Jordan and Mulder have no detailed knowledge of the tapes.

Peeler’s guilty plea relates specifically to the government’s second thrust in prosecution-backdating documents that allowed certain Hillcrest partnerships to escape new tax regulations that went into effect in September of 1982.

Originally, in a twenty-one-count indictment, Peeler faced fifty-six years in federal prison. But this spring Jordan and Mulder entered into a plea bargain agreement with the government that greatly reduced her jail exposure and saved her husband from prosecution altogether. Peeler says for those two reasons she is happy with her defense and can’t dwell on missed opportunities.

“I have to move forward at this point,” she says.

In pleading guilty. Peeler joins other Hill-crest principals Albert E. Johansen, president of Hillcrest Equities, and Ron Williams, the “tax expert” who set up the alleged tax fraud scheme. Williams is considered the “mastermind” of the Hillcrest deal. This isn’t his First foray into tax fraud. Williams, formerly a partner in the Turtle Creek law firm of Atwell, Thompson & Williams, was involved in deals in California and New York that have led to indictments and convictions. Williams’s plea agreement with the government included his cooperation in the New York and Hillcrest cases. For his cooperation, the government has limited his jail exposure to eleven years.

An important factor in securing guilty pleas in the Hillcrest case has been Judge Joe Fish. Known as “the hanging judge,” Fish has a reputation for being as hard as he can be on white collar criminals and for showing no mercy to defendants who happen to be women, mothers, or first-time offenders. Last year Fish gave sixty years to a woman convicted of mail fraud, while 66 to 74 percent of the defendants sentenced to jail time in similar cases were given a term of less than five years.

To date, John “Corky” Jaeger, Mayor Annette Strauss’s former son-in-law, is the only principal in the Hillcrest case who has not entered a guilty plea. He vows he will go to trial. If he does, Peeler and the others will be called to testify and we’re likely to learn much more about the Hillcrest tax shelter trading program.

“Corky Jaeger could have pleaded to the same terms that Carol Peeler pleaded to,” says his attorney, Steve Sumner. “But he is willing to risk a fifty-six-year exposure because he is so committed to his innocence. I have to admire that.”

The Hillcrest case is set for trial on June 5. Carol Peeler seems at peace with her fate-and her representation-but when she trades in her Harold’s togs for a rough cotton uniform and leaves her home and family to live behind bars, her ordeal will not be finished. The civil litigation in this case is likely to last through the greater part of the next decade. Lawsuits involve the accounting and law firms that endorsed the investment as well as the principals. Investors who bought the deal will be asked to make restitution to the IRS, in some cases wiping out fortunes. But the principals at Hillcrest will lose their fortunes and their freedom. For Peeler, the days of charity balls are probably over.