EcoVest Capital Settles Conservation Easement Fraud Allegations

In March 2023 the conservation easement sponsor EcoVest Capital reached a settlement with the US Department of Justice in connection with federal allegations of fraud and other forms of misconduct. According to a report by The DI Wire, the settlement agreement includes an indefinite prohibition from “future involvement in the sale or promotion of any investment programs with a conservation easement option.”

As that article notes, the DOJ had alleged that EcoVest Capital operated “an allegedly abusive conservation easement tax scheme” in which it offered investors tax deductions derived from “overvalued and improper contributions,” causing “hundreds of millions of dollars of tax harm.” As a 2020 ProPublica investigation reported, the DOJ alleged that EcoVest “has been involved in 51 syndication easement deals since 2009, generating $1.7 billion in federal tax deductions.” It added that EcoVest informed investors in a private placement memo for a Texas offering that there was a “very high likelihood that the Property Entity or the Company will be audited by the IRS.”

As ProPublica describes, a conservation easement involves a landholder’s “permanent” protection of a parcel of land from real estate development. In theory, the undeveloped land provides a public benefit: people can go and enjoy “pristine” natural beauty.” The landowner, meanwhile, reaps a charitable deduction on their taxes. The problem arises when “profit-seeking middlemen known as ‘promoters’” purchase undeveloped land, get an appraiser to attest that it has “huge development value and thus is worth many times the purchase price,” and then sell interests in the land to investors. These investors then get tax deductions that may be “five or more times what they put in,” according to ProPublica. The risk they face, however, is that the appraisals may be fraudulent and the tax deductions therefore “bogus.” That’s why the IRS added conservation easements to their “Dirty Dozen” list of tax scams in 2019, while the Senate Finance Committee has launched investigations of conservation easement promoters and legislators have drafted bills that would prevent them.

EcoVest’s settlement agreement with the federal government did not involve any fines or penalties, according to DI Wire, and the company did not admit to any wrongdoing. “The Department of Justice’s case was premised on false allegations and a failure to understand EcoVest’s business,” it said in a statement to The Sun News in Myrtle Beach, South Carolina. “While EcoVest was confident it would have prevailed at trial, its primary goal is to avoid further costly litigation and focus its resources on behalf of the best interests of its existing investors.”

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