Matthew Krane is a Harvard-educated attorney who soared to the top little circle of L.A. entertainment lawyers and who lived in the exclusive Hollywood Hills above the trendy Sunset Strip.

But for the past year, he has been sitting in a cramped cell at the Metropolitan Detention Center, a federal holding facility in downtown Los Angeles. He faces federal charges over money laundering and conspiracy in what a federal prosecutor has called one of the largest tax evasion schemes in U.S. history.

At the heart of the case is a shelter that Krane used to allow his star client, Haim Saban, to evade taxes on capital gains of $1.5 billion Saban made after selling his interest in the Fox Family Channel in 2001. In surprising testimony in 2006, the media mogul told the U.S. Senate that his limited formal education prevented him from understanding the shelter was illegal. He ended up paying $250 million in back taxes and penalties.

That would appear to end it for Saban. But several insiders, most of whom did not want to be identified, pointed out that since a trial is in Krane’s future, it is possible – but by no means a certainty – that Saban or others could be touched by Krane’s ongoing legal troubles.

Actually, Krane’s troubles with tax shelters are only part of his problem. While authorities were investigating the case, they served a search warrant at his West Hollywood home, where they found the fake passport documents, along with crystal meth, date-rape drugs and horse tranquilizers.

The judge in this case, Dale Fischer, has ruled the 55-year-old attorney a flight risk. That’s why he’s remaining locked up, although a bail hearing is scheduled for July 27.

In a statement to the Business Journal, Krane’s attorney, Robert Barnes, denied that his client committed any wrongdoing.

“Allegations of any criminal conduct against Matt are false, and will be proven so at trial” said Barnes, who is best known for defending Wesley Snipes in a high-profile tax fraud case.

A representative for Saban did not return requests for comment. However, in his 2006 statement to a Senate subcommittee investigating the high-level tax scheme, Saban said Krane “assured me that the transaction was legal.”

Meanwhile, another attorney – Robert Jason, a former classmate of Krane’s – involved in the same tax shelter scheme has pleaded guilty. The plea is under seal, which, other attorneys said, implies that he is cooperating with the prosecution.

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The Business Journal has reconstructed the sharp rise and fall of Krane through court documents and interviews with lawyers who worked with him.