Thursday, December 17, 2009

Lavish Lifestyle, Disregard Of Tax Obligations, Warrants Suspension

The New York Appellate Division for the First Judicial Department has imposed a one-year suspension of an attorney for failure to file and pay state and federal taxes for almost a decade. The court noted mitigating factors:

The Hearing Panel conducted a hearing and respondent, represented by counsel, respondent's wife, and several character witnesses, including two of his former law partners testified on his behalf. Witnesses testified that respondent devoted thousands of hours to pro bono activities on behalf of his firm representing death row defendants and, as a Trustee, gave a great deal of time to and made substantial financial contributions to Skidmore College, his alma mater. Respondent also submitted a letter from a psychiatrist stating that respondent suffered from "an Obsessive Compulsive Personality Disorder", that caused him to attend to his work compulsively, but caused him to be careless about various personal matters, including those relating to health and finances.

But:

In the within matter, while there are some mitigating factors, we find aggravating factors vastly more compelling. Specifically, while at his law firm and receiving a substantial income, respondent purchased a five bedroom house in New Jersey and a four bedroom house in Florida. He also owned a Lincoln Town car, a Nissan Mini Van, a BMW SUV, and paid for his children to attend private school. In addition, respondent lied to his wife by telling her that tax matters had been taken care of and did not notify his partners of the pending criminal investigation before resigning from the firm to take a position as president of two corporate entities engaged in energy operations in the Philippines. According to the Hearing Panel, his failure to inform his law partners was to insure collection of full compensation and early capital account distribution. We agree with the Hearing Panel's finding that the psychiatric claim is not credible.

While respondent's extensive pro bono work on behalf of defendants facing the death penalty and his dedication to his alma mater is commendable, it does not excuse his failure to file returns or pay taxes during this time. Although respondent has paid all the taxes owed to the State, and has worked out a plan with the Internal Revenue Service, the picture that emerges is that respondent, without any justification, and while enjoying a lavish life style, disregarded his tax obligations. Having considered all of the factors set forth above, we find, as we have found in Matter of Goldman decided herewith, that failure to file tax returns and pay taxes for an extended period of time in these circumstances warrants suspension.

This release from the New York County District Attorney's office notes that the attorney was a Kaye Scholer partner.

The court imposed the same sanction for similar misconduct in an unrelated matter. The suspension was appropriate where the money had been spent on gambling rather than a lavish lifestyle:

In the within matter, while there are some mitigating factors, we find aggravating factors vastly more compelling. Specifically, respondent, while receiving annual compensation in excess of $300,000 a year, spent substantial sums on his restaurant investment and engaged in a pattern of gambling on horses for over ten years. Particularly disturbing is respondent's failure to comply with the order of the sentencing court to establish a payment plan for about a year. He was unable to explain his noncompliance, attributing it to his memory failure due to his aneurysm. In any event, the picture that emerges is that respondent, without any justification, disregarded his obligation to pay taxes.

The mitigating factors are that there has been no suggestion that these actions in any way affected his law practice, that the brain aneurysm may have affected his ability to explain his actions, and that respondent has not enjoyed a lavish life style, as was the case in Matter of Clay, supra or Matter of Chervin, supra. He has also filed all delinquent returns, and is nowallegedly finallyworking out payment plans. Having considered all of those factors, we find, as we have found in Matter of Howley decided herewith, that failure to file tax returns and pay taxes for an extended period of time in these circumstances warrants suspension.

(Mike Frisch)

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