Tax Issues Draw Suspension

A one-year suspension has been imposed by the New York Appellate Division for the First Judicial Department

By petition of charges noticed July 7, 2022, the Attorney Grievance Committee (AGC) alleged that respondent was guilty of professional misconduct due to (1) his failures to file his state and federal income tax returns for the preceding eight years and to pay his state and federal tax liabilities, and (2) his omissions and false statements in personal financial statements that he completed in connection with a line of credit he had at a major financial institution. The AGC and respondent jointly moved, under Rules for Attorney Disciplinary Matters (22 NYCRR) § 1240.8(a)(5), for discipline by consent and requested a six-month suspension. On December 23, 2022, we denied the motion and directed the parties to proceed in accordance with 22 NYCRR 1240.8(a)(5)(iv).

The parties stipulate that respondent was the sole source of income in his household, and was responsible for preparing and filing his and his wife’s joint income tax returns. Following respondent’s failure to file his and his wife’s 2007 federal income tax returns by the due date, the Internal Revenue Service (IRS) opened an investigation into their tax liabilities for 2007. Respondent also failed to timely file his and his wife’s federal income tax returns for tax years 2008 to 2014. Respondent filed their 2015, 2016, and 2017 federal income tax returns either on time or shortly after their respective due dates.

The IRS opened multiple civil examinations into respondent’s tax liabilities. The parties stipulate that respondent untimely filed his and his wife’s New York State income tax returns for tax years 2009 to 2016. As of the date of the parties’ joint affirmation, respondent owed the IRS $10,167,574.66 in tax liability, including interest and penalties. He also accrued New York State income tax liability, including interest and penalties, of $147,915.77. Respondent intentionally omitted his assets and liabilities in connection with a line of credit that he has maintained with the financial institution since 2016 and omitted the IRS audits from his personal financial statements.

Respondent has spent his entire legal career at a major law firm. He has been a partner in its corporate practice group for approximately 14 years. As a longtime partner at the law firm, respondent earned a substantial income during the period in which he failed to file or pay income taxes.

Sanction

As to the sanction to be imposed, we find that a one-year suspension comports with our precedent involving comparable income tax-related misconduct (see Matter of Rich, 157 AD3d 73 [1st Dept 2017]; Matter of Howley, 70 AD3d 218 [1st Dept 2009]). Despite respondent’s failure to pay taxes, his suspension is mitigated by his generosity with his time and money and the lack of venal intent. There is no indication that respondent intended to benefit himself by failing to pay income taxes. Rather, it appears that respondent was motivated by an inordinate desire to benefit others. Respondent has sought mental health assistance, is willing to accept discipline by consent, and does not contest the disciplinary proceeding.

(Mike Frisch)