New York lawyer sued by U.S. over tax shelters

Reuters News
Posted: Jun 04, 2014 8:45 PM

By Nate Raymond

NEW YORK (Reuters) - The U.S. government sued a New York tax lawyer on Wednesday for allegedly cheating the Internal Revenue Service out of $130 million by engineering and concealing from investigators dozens of illegal tax schemes on behalf of clients.

    In a civil lawsuit, U.S. authorities said Harold Levine earned more than $5 million by implementing or participating in at least 90 illegal tax schemes, in which entities he set up improperly deducted more than $515 million in bad debt losses.

    The schemes took place while Levine was a partner at the law firm Herrick Feinstein, according to the lawsuit, which was brought by the office of Manhattan U.S. Attorney Preet Bharara.

Levine left Herrick Feinstein in 2012 to join Moritt Hock & Hamroff, where he chairs the firm's tax practice.

    "This action demonstrates that the IRS will pursue those who cheat the tax system no matter how sophisticated or intricate the transactions may be," said John Dalrymple, deputy commissioner for services and enforcement of the IRS.

In a statement, Herrick Feinstein called Levine a "rogue partner who concealed his activities from all other Herrick lawyers." The firm said it demanded his resignation in 2012 after discovering the activities alleged in the complaint and has been fully cooperating with the IRS, in addition to filing a report with a legal disciplinary committee and commencing its own proceeding against him.

Neither Levine nor a representative for Moritt Hock & Hamroff responded to requests for comment.

    According to his law firm biography, Levine graduated from Lehman College in 1979 and has law degrees from Yeshiva University and New York University.

    He worked at several firms, joining Herrick in 2002, where he became the co-chair of the tax and personal planning department, the lawsuit said.

    According to the complaint, some of the tax shelters Levine promoted involved the illegal avoidance of corporate income taxes on gains received from the sale of corporate assets.

    Others involved helping real estate project owners avoid paying taxes on gains from the sale of transferable state tax credits.

    The lawsuit said Levine set up five entities that would acquire the asset-selling corporations and eliminate their capital gains tax using the entities' phony losses.

    The 90 illegal transactions resulted in more than $129 million in tax losses to the government, the lawsuit said.

    The lawsuit seeks an order barring Levine from organizing, promoting or selling tax shelter transactions and organizing, promoting or selling tax shelters. Levine may also face unspecified future penalties, Bharara said.

    The case is U.S. v. Levine, U.S. District Court, Southern District of New York, No. 14-4057.

(Reporting by Nate Raymond in New York; Editing by Andrew Hay and Mohammad Zargham)