Friday, March 10, 2017

Personal Injury And Medical Malpractice Lawyer Charged With Tax Evasion


   Preet Bharara, the United States Attorney for the Southern District of New York, and Kathy Enstrom, Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that HERBERT LINDENBAUM, a Manhattan personal injury and medical malpractice attorney, voluntarily surrendered today in Manhattan federal court. LINDENBAUM is charged in a six-count Indictment with engaging in a nearly two-decade-long tax evasion scheme that involved his failure to pay more than $3.3 million in back taxes, penalties, fees, and interest to the IRS.
Mr. Bharara said: “As an attorney, Herbert Lindenbaum should have known better. But as alleged, rather than abide by the law, Lindenbaum engaged in a nearly two-decade scheme to divert and evade millions of dollar in taxes.”
IRS-CI Acting Special Agent-in-Charge Kathy Enstrom said: “As alleged in the indictment, Mr. Lindenbaum intentionally evaded his tax obligations for well over a decade, failing to pay millions he owed in taxes. Fulfilling individual tax obligations is a legal requirement and those who willfully evade that responsibility will be prosecuted.”
According to the allegations in the Indictment[1] returned today in Manhattan federal court:
From 1999 through the present, HERBERT LINDENBAUM has been a personal injury and medical malpractice lawyer in New York, New York. For tax years 1999 through 2013, LINDENBAUM reported to the IRS that he owed taxes of more than $2.5 million, but voluntarily paid to the IRS only $85,000. Including penalties, fees, and interest, LINDENBAUM currently owes the IRS more than $3.3 million.
To evade paying the IRS, LINDENBAUM engaged in at least five tactics to conceal the extent of his and his law firms’ income from the IRS. First, LINDENBAUM caused business checks for his legal work to be deposited directly into his wife’s personal bank accounts.
Second, LINDENBAUM used his law firms’ bank accounts like his own personal coffers by paying his personal expenses directly from those accounts. He paid approximately $85,000 in alimony, $75,000 in personal loan repayments, $425,000 in apartment rental and utility payments, $25,000 in luxury car payments and parking expenses, $50,000 in tuition and other expenses for his children, and $10,000 in medical expenses directly from his business bank accounts. Some of these business bank accounts were Interest on Lawyer, or “IOLA,” accounts. New York law requires that IOLA accounts hold only client funds. Still, LINDENBAUM used at least two IOLA accounts to pay his personal expenses.
Third, LINDENBAUM paid his son and his wife nearly $150,000 for work for his law firms that they did not actually perform. Fourth, LINDENBAUM cashed checks totaling more than $325,000 made payable to himself from his business accounts.
Finally, in September 2010, the IRS levied two of LINDENBAUM’s business bank accounts, which permitted the IRS to take involuntary payments of LINDENBAUM’s tax liabilities from those accounts. To avoid this levy, LINDENBAUM opened at least two personal bank accounts and deposited more than $160,000 of business receipts into those accounts.
LINDENBAUM’s actions over the course of nearly 20 years have prevented the IRS from collecting the more than $3.3 million that he owed the IRS.
LINDENBAUM, 78, of New York, New York, was arraigned in Manhattan federal court today before Magistrate Judge Ronald L. Ellis. The case is assigned to United States District Judge Paul A. Crotty.
LINDENBAUM, who was charged with one count each of obstructing the IRS and tax evasion, and four counts of failure to pay the IRS, faces the following penalties if convicted:
Statute Violated
Counts
Description
Maximum Sentence
26 U.S.C. § 7201
1
Tax Evasion
Five years in prison
18 U.S.C. § 7203
2 to 5
Failure to pay taxes – 2010 to 2013 tax years
One year in prison on each count
  26 U.S.C. § 7212(a)
  6
Corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue Laws
Three years in prison

The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the Court.
Mr. Bharara praised the outstanding investigative work of the IRS.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Jennifer L. Beidel is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

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