Investors who purchased syndicated conservation easements through Patrick Capital Markets may be facing significant financial challenges as the Internal Revenue Service (IRS) ramps up enforcement against these controversial tax strategies.
The IRS has identified syndicated conservation easements as abusive tax transactions, labeling them as “listed transactions” and including them in its “dirty dozen” list of top tax schemes. Since November 2019, the agency has increased enforcement actions, auditing hundreds of these deals and routinely disallowing the tax deductions claimed by investors.
If you invested in a conservation easement based on the recommendation of a Patrick Capital Markets broker and are now facing IRS penalties or investment losses, you may have grounds to recover your funds. The securities fraud lawyers at Meyer Wilson Werning can help you evaluate your legal options.
The Risks of Syndicated Conservation Easements
A syndicated conservation easement typically involves investors acquiring an interest in a land-owning partnership. The partnership then donates a conservation easement—a restriction on how the land can be used—to a charity. The central issue with these transactions is that they often rely on grossly overvalued appraisals to generate inflated charitable contribution deductions for the investors.
While the tax benefits are the primary selling point, the risks are substantial. When the IRS audits these transactions and determines the deductions are invalid, investors face severe financial consequences:
- Disallowed Deductions: The IRS may completely disallow the charitable contribution deduction.
- Back Taxes and Interest: Investors are responsible for the taxes due, plus interest.
- Heavy Penalties: Investors may face penalties of up to 40%.
Regrettably, some brokerage firms and investment advisors reviewed the offering documentation but failed to adequately disclose these material risks or investigate red flags regarding the land appraisals.
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Regulatory Crackdown: A Timeline of Warnings
The risks associated with these investments were well-known in the financial industry long before many investors were sold them. Regulators have issued repeated, specific warnings about the illegitimacy of these schemes:
December 2016 (IRS Notice 2017-10): The IRS formally labeled syndicated conservation easements with inflated values as “listed transactions”—a classification reserved for abusive tax avoidance schemes.
December 2018 (DOJ vs. EcoVest): The U.S. Department of Justice sued EcoVest Capital, the country’s largest syndicator, to stop the sale of these products. This was a “watershed event” that put the entire industry on notice that the federal government considered these products fraudulent.
November 2019: The IRS added conservation easements to its “Dirty Dozen” list of tax scams and announced increased enforcement actions.
Present Day: Since 2021, the IRS has audited nearly every syndicated conservation easement transaction, consistently denying deductions due to “misleading data” and “unreasonable conclusions” in appraisals.
Patrick Capital Markets Brokers and Due Diligence Failures
Brokers and investment advisors have a legal duty to conduct adequate due diligence on any investment they recommend. This includes conducting independent research, identifying red flags, and ensuring the investment is suitable for the client’s financial situation and risk tolerance.
Investigations are currently underway to determine if brokers at Patrick Capital Markets failed to uphold these duties. Key allegations include:
- Failure to Conduct Due Diligence: Advisors may have failed to investigate the legitimacy of the offering or the validity of the appraisals.
- Withholding Key Facts: Brokers may have withheld material information regarding the risks of IRS enforcement.
- Unsuitable Recommendations: Recommending high-risk private placements to retail investors for whom such speculative strategies were inappropriate.
Our lawyers are nationwide leaders in investment fraud cases.
Scrutiny of Conservation Easements Linked to Patrick Capital Markets
Meyer Wilson Werning is currently reviewing potential claims regarding the following syndicated conservation easements and private placements that were reportedly recommended by brokers at Patrick Capital Markets:
Bear Mountain Partners, LLC
Camden Cove Partners, LLC
Cedar Grove Investments, LLC
Charolais Solar Investments, LLC
Jake Hollow Investment Fund, LLC
Liberty Grove Partners, LLC
Magnolia Heights Partners, LLC
Mill Creek Investors, LLC
Red Angus Solar Investors, LLC
River Birch Investments, LLC
Salem Bend Partners, LLC
Wayside Hill Partners, LLC
Wood Duck Energy Opportunity Fund, LLC
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Recovering Losses Through Arbitration
If you took a charitable contribution deduction that the IRS is now disallowing, you may be able to recover your losses through an action against the brokerage firm that recommended the investment.
Investors across the United States are filing arbitration claims against brokers and advisors who recommended these high-risk strategies without adequate warnings. A firm may be liable for its broker’s failure to recommend suitable investments, breach of fiduciary duty, or misrepresentation.
How Meyer Wilson Werning Helps
At Meyer Wilson Werning, we hold firms accountable for dishonest investment advisory practices, unsuitable recommendations, and over-concentration in risky strategies. If Patrick Capital Markets brokers failed to warn you about the high-risk nature of these investments, you may have a claim for damages. Contact us today for a free and confidential consultation to discuss your case.
Frequently Asked Questions
Why are conservation easements considered risky?
The IRS considers many syndicated conservation easements to be abusive tax schemes because they often use grossly overvalued appraisals to create inflated tax deductions. This puts investors at risk of audits, disallowed deductions, and significant financial penalties.
What penalties do investors face from the IRS?
Investors involved in these transactions may be responsible for paying back taxes, interest, and penalties that can reach up to 40% of the underpayment.
Can I recover my losses if the IRS disallows my deduction?
Yes. If your broker or investment advisor recommended the strategy without conducting proper due diligence or disclosing the risks, you may be able to recover your losses through arbitration.
What is the responsibility of Patrick Capital Markets brokers?
Brokers must have reasonable grounds for their recommendations and must investigate the facts of a security to confirm it is suitable for the customer. If they failed to do so, the firm may be liable for the resulting damages.
Recovering Losses Caused by Investment Misconduct.
