Wednesday, November 30, 2016
Tax offenses drew a six-month suspension by the New York Appellate Division for the First Judicial Department.
The material facts are undisputed. Respondent, who is 49 years old and focuses his practice on Family Court matters, testified that, inter alia, he has always had a fascination with issues related to money and taxation. In or about 2002, after extensive research into nonconventional theories regarding taxation and the monetary system, he decided not to file tax returns or pay taxes based on, among other things, what he now realizes was the misguided belief that monies he earned in connection with the practice of law were not subject to taxation. Between 2002 and 2011, respondent wrote more than 100 letters to New York State and federal tax officials, and also telephoned them, to advise them that their files pertaining to him purportedly contained incorrect Individual Master Files (IMF) codes which affected his tax liability; and that, in his view, he was not obligated to file returns or pay taxes until the issue was addressed.
Respondent admitted that he had spoken with tax attorneys over the years, none of whom agreed with his position. While respondent filed an administrative claim against the IRS for alleged unlawful collection activities, which he understood to be the precursor to a federal lawsuit, he never actually pursued a lawsuit because New York City did not honor an IRS levy on payments to him.
In 2011, shortly after the birth of his son, respondent was approached by New York State tax agents and told that if he did not resolve his outstanding tax liability civilly, it would become a criminal matter. Respondent stated that the birth of his son caused him to reassess his views regarding his tax obligations, and he advised the tax agents, through counsel, that he would file his returns and pay his taxes but he first wanted an agreement that he would not be criminally prosecuted. Such an agreement was not forthcoming, and, as noted, respondent was prosecuted and ultimately pled guilty to a misdemeanor.
Between February and April 2012, prior to his conviction, respondent filed his New York State tax returns for the tax years 2005 through 2010; and, in November 2013, he entered into an installment payment plan with New York State tax authorities pursuant to which he pays $200 per month toward his outstanding tax liability for the tax years 2004 through 2006, and 2011, which exceeds $60,000. Between 2012 and 2013 he filed his federal tax returns for the tax years 2002 through 2012. His federal tax liability is now in excess of $300,000, including interest and estimated penalties. Respondent is awaiting a payment agreement with the IRS and, in the interim, he has been paying the IRS $500 per month.
Respondent admitted that during the 10-year period at issue he saved approximately $200,000 as a result of not paying taxes. He averred that this money was to provide for the future, not to finance a lavish lifestyle, as evinced by, among other things, the fact that he has lived in the same studio apartment for 18 years, has never owned a car, and has not really traveled.
Respondent stated that he has paid approximately $100,000, half of his savings, to satisfy his tax liability to New York State; and his remaining savings were used for legal expenses in connection with the criminal and disciplinary proceedings, a Family Court proceeding involving his now three-year-old son, and to financially support his son. As a result of his tax conviction, respondent was removed from the Family Court, Queens County 18b Assigned Counsel Plan from which he had derived a significant part of his income and which provided him with work that he loved. Respondent expressed remorse for his conduct and averred that his actions were not motivated by greed or self- interest, and that someone of his education level and professional background would not have engaged in such self- destructive behavior absent some sort of mental stress or emotional affliction. Respondent stated that there was an extensive history of depression on his father's side, and while he saw a therapist and psychiatrist for approximately one year, he stopped doing so because his condition stabilized.
Respondent stated that, in retrospect, he was antisocial and was so obsessed with his views on taxation that he failed to recognize his self-destructive behavior. In addition, he explained that he was in close proximity to the September 11, 2001 terrorist attacks on the World Trade Center and, as a result, his depression returned but he did not seek professional help. Instead, he dealt with his feelings by immersing himself in his law practice and his study of money and taxation.
Respondent recently started seeing a psychiatrist; however, he did not offer any expert testimony or report evincing that he was diagnosed with a mental illness which contributed to his protracted failure to meet his tax obligations.
It is obvious that the issue of sanctions for tax related misconduct is very fact dependent. The facts in this case appear most similar to those in Matter of Racht, and thus, under all the circumstances presented herein, including the mitigating factors presented by respondent, we find that the deterrent effect of a six-month suspension as recommended by the Referee is an appropriate penalty.
Accordingly, the Committee's petition is granted to the extent of confirming the Hearing Panel's findings of fact and conclusions of law, but is denied as to the recommendation as to sanction, and respondent is suspended from the practice of law for a period of six months as recommended by the Referee, and until further order of this Court.
Any application for reinstatement should include documentary proof that respondent has entered into agreements with the IRS and New York State tax authorities for payment of any outstanding tax debts.