Crime, Lawyer of the Day, Tax Law, White-Collar Crime

Lawyers of the Week: A Trio of Tax Suspects

tax headaches tax evasion taxation tax crimes.JPG‘Tis the season for… W-2s. When you get that handy-dandy form from your employer, we suggest that you file it with your federal income tax return — in timely fashion. [FN1]
And don’t forget to file any applicable state and local tax returns, too. Otherwise you could find yourself in deep doo-doo. From the Long Island Press:

Three attorneys, an accountant and a doctor were arrested Tuesday for failing to file a combined total of more than $365,000 in state personal income taxes, Nassau prosecutors said. The arrests were part of a statewide sweep by the New York State Department of Taxation and Finance (NYSDTF).

Arresting someone on a failure-to-file charge? Seems a bit extreme. But if the authorities wanted to send a message about how seriously they take tax crimes, they succeeded.

The attorneys who were charged with failure to file a personal income tax return include 47-year-old David Mollon of Great Neck, 50-year-old Kelly Talcott of Sea Cliff and Dennis O’Leary, 57, of Westbury. Facing the same charge is 53-year-old Gerald Gartner of Lawrence, a certified public accountant, and 62-year-old Avelino Rosales of Cedarhurst, a physician.

O’Leary is a personal injury lawyer — res ipsa loquitur. But Mollon and Talcott are (or were) partners at large law firms, places whose names you’d recognize.
Find out which firms, as well as how much Mollon and Talcott earned during the tax years in question, after the jump.

We find it surprising when Biglaw partners run into tax troubles. As we previously wrote with regard to John O’Brien, the former Sullivan & Cromwell partner who allegedly left the firm because of a tax problem:

It also seems odd for a corporate — er, “general practice” — partner at S&C to get in trouble over a tax matter. First, and most obviously, one would expect a corporate partner at a top-tier firm to know a lot about — and follow — the law. Second, Biglaw partners usually receive a great deal of assistance in preparing their tax returns from the administrative / accounting staff at their firms (especially since they must file in all jurisdictions where the partnership does business).

We were speaking in O’Brien’s case about a transactional lawyer, but our point about expecting lawyers (especially ones at top firms) to know and follow the law applies more generally.
Returning to the cases of David Mollon and Kelly Talcott, the New York Law Journal reports:

Mr. Mollon, a partner in Winston & Strawn, was charged with third-degree criminal tax fraud and failure to file a personal income tax return for 2008. According to prosecutors, he failed to file state tax returns from 2006 to 2008, during which time he earned more than $1.79 million and failed to pay more than $117,000 in taxes.

So it appears that Mollon earned $1.8 million over three tax years, for an average of $600,000 a year — not too shabby. But we’re guessing that Mollon was earning less than the average equity partner at Winston & Strawn (and we hear that Mollon was an equity rather than non-equity partner). In 2008, Winston’s average profits per equity partner clocked in at $1.285 million, according to the Am Law 100 survey.
Although his LinkedIn profile indicates that he is still a partner at Winston, his professional home for the past decade or so, we understand that Mollon has left the building. According to Michael Elkin, managing partner of Winston’s New York office, Mollon resigned from the firm last week. Elkin also noted that the allegations against Mollon are “purely personal” in nature (i.e., unrelated to Mollon’s work for the firm).
Kelly Talcott, the other arrested Biglaw partner, allegedly missed more years in terms of his tax filings:

Mr. Talcott, a partner in Edwards Angell Palmer & Dodge, was charged with third-degree criminal tax fraud and repeated failure to file personal income taxes. Prosecutors say he failed to file state tax returns from 2002 to 2005 and again in 2008. During that time he earned more than $2.68 million and failed to pay more than $111,000 in taxes.

If you take $2.7 million and divide it out over five tax years, you get $540,000 — also a tidy sum.
Like David Mollon, Kelly Talcott is also no longer a partner at his firm. From a spokesperson at EAPD:

Kelly Talcott, who had been a partner in Edwards Angell Palmer & Dodge since September 2008, has resigned from the firm. Because of the pending legal proceedings involving Mr. Talcott, the Firm will not make any further statement regarding this matter.

Prior to Edward Angell, Talcott was a partner at Pennie & Edmonds, the dearly departed IP boutique.
None of the three lawyers had to spend time in the pokey. According to the NYLJ, they all pleaded not guilty and were released on their own recognizance.
Still, it seems unfortunate to have a successful legal career, along with a lucrative partnership at a leading law firm, derailed by tax accusations. Let this be a lesson to us all (as the authorities surely intended).
Moral of the story: CHECK YOU TAXES.
[FN1] ATL does not advise on any personal income tax requirements or issues. This commentary is for general information only and does not represent personal tax advice, either express or implied. You are encouraged to seek professional tax advice for personal income tax questions and assistance.
To the extent that this post concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Thank you.
DA: 5 Men Failed to Pay Income Taxes [Long Island Press]
Three Attorneys Arrested for Alleged Tax Failures [New York Law Journal]
Prominent Lawyers Charged with Failing to File Personal Income Tax Returns [ABA Journal]

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