Thursday, February 10, 2011

Red Handed

The New York Appellate Division for the First Judicial Department has imposed a one-year suspension for tax violations. The court described the circumstances:

In March 2008, respondent was contacted by the Nassau County District Attorney's Office about his failure to file state tax returns for the period 2002 through 2006. He did not make any estimated state tax payments during those years, nor did he pay his federal taxes. Respondent retained counsel and within approximately two weeks, prior to his arraignment, he filed his New York State tax returns for 2002 through 2006 and paid $97,511 in outstanding taxes; on December 22, 2008, he paid New York penalties and interest of $55,574. In July 2008, respondent paid the Federal government approximately $1.2 million in taxes, penalties and interest covering the same time period. Respondent testified, "[t]he state taxes I had the money, it was available in the bank, and the federal taxes, which were considerably larger...came from two sources - one from a refinancing of our home ... [and the other] was covered by withdrawing money from the pension plan." Respondent has filed all subsequent tax returns on time.

The Panel noted, however, that "Respondent did nothing to rectify his tax situation until he was caught red-handed and without a glimmer of a defense to felony charges." In aggravation, the Panel commented on respondent's intent:

Respondent's failure to pay taxes was no accident. Nor was it the result of economic distress. Respondent's annual income during the years when he chose not to pay taxes ranged from $363,992 to $597,989. Respondent acknowledged that this failure to file his tax returns and pay his taxes was not the result of an inability to pay.

Respondent knowingly and intentionally did not file returns and pay taxes. He received notices from the IRS, he read them, but he "just didn't do anything further with them." The decade-long pattern of filing for extensions with which he did not . . . comply, the calculated nature of Respondent's actions, and the fact that, when he was caught, he was able to come up with the money in very short order - because it was tucked away in the bank, in the equity in his home and in his pension account - speak to a greater culpability here than in other failure-to-pay cases.

The court rejected a hearing panel's proposed 18 month suspension:

The Hearing Panel's recommendation that respondent be suspended for 18-months is disaffirmed. While the Panel seemed to criticize him for promptly paying the money he owed and treating his charitable contributions of $160,000 as aggravation, both of those circumstances could also be seen as mitigation, at least in part. Moreover, respondent has practiced law for 36 years without blemish, he fully cooperated with all investigating authorities, he accepted responsibility for his actions and expressed remorse, he took corrective actions to ensure his nonpayment never happens again, and he has continued with counseling. A suspension from the practice of law for one year is appropriate under the circumstances.

(Mike Frisch)

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Does anyone have any take on Mickey Sherman's situation?

Posted by: Rick Underwood | Feb 11, 2011 1:49:46 PM

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