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Lawyer sentenced to tax evasion

By Michael P. Tremoglie | Jan 16, 2012

NEW YORK -- A former partner at an international law firm has been sentenced for failing to file tax returns and pay taxes on more than $10 million in income.

The U.S. Attorney for Southern New York said John J. O'Brien of Sullivan & Cromwell (S&C), was sentenced Jan. 11 to 28 months in federal prison for failing to file tax returns and pay taxes on over $10 million in income, resulting in over $2.5 million in tax losses to the Internal Revenue Service ("IRS").

"As a partner at a prominent law firm, John O'Brien received millions of dollars for advising his clients about compliance with the law, while, at the same time, he was breaking it," Manhattan U.S. Attorney Preet Bharara said. "O'Brien certainly knew about his legal obligation to pay taxes, like every other American, and now he will pay for his decision to do otherwise."

According to the announcement from 2001 through March 2009, O'Brien handled corporate mergers and acquisitions. Every year, S&C provided him and other partners with an IRS Schedule K-1 form, which reported each partner's share of the firm's income, deductions, and credits.

With the K-1 form, the firm's accountants sent a cover letter explaining that the information should be used to file individual tax returns. S&C also requested that all partners complete a certification form indicating that he or she was in compliance with all income tax requirements.

O'Brien was aware of that policy, received copies of the certification form but never completed it. He failed to file tax returns from 2001 to 2008, despite his firm's effort to ensure partners were in compliance with the law.

During this time period, he received over $10.8 million in partnership income and owed over $2.5 million in taxes. Instead of paying his
taxes, O'Brien paid for various personal expenses, including funding an antique books business that he partly-owned, renovating his lakeside weekend home in the Adirondacks, and traveling internationally.

S&C learned of his failure to file returns and to pay taxes to the IRS
and to the states of California and New York in March 2009. He formally resigned from the firm on March 31, 2009.

At the sentencing, the judge said: "It's imperative that all citizens understand that if a citizen commits a crime, it has a serious impact on the government, a serious economic impact on the public that that defendant is going to go to jail, whether the defendant is a Wall Street lawyer who fails to pay his taxes, whether it's the owner of a deli engaging in food stamp fraud, or whether it's a defense contractor padding expenses."

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