Not So Safe

September 2nd, 2011 Leave a comment Go to comments

We all know why people keep a safe in their homes. We also all know that a safe doesn’t completely¬†protect one’s valuables from damage, destruction, or theft. Criminal defense attorney Stanley Needleman not only lost valuables stored in his safe, but also will very likely lose something invaluable: His freedom.

Yesterday, Mr. Needleman pleaded guilty in federal court to income tax evasion and structuring financial transactions, and consented to disbarment. Needleman practiced law in Maryland.

Needleman implemented the following billing structure with his clients: He required a one-time, up front “engagement fee” for representation. The fee was not tailored to the amount of work involved.

The “engagement fee” is not the same as a “retainer fee.” The difference is that the funds from the latter are typically applied to invoices as services are provided. If, at the conclusion of the matter, a balance of the retainer fee remains, the client may obtain a refund. The engagement fee, at least in the case of Mr. Needleman, however, was a nonrefundable payment up front.

Clearly, Needleman was required to report as income his “engagement fee” upon receipt. The problem: He often didn’t.

According to authorities, Needleman vastly underreported his income earned from engagement fees, and took steps to conceal the income. Instead of living a lavish lifestyle with his underreported income, he stored large amounts of the cash in a safe in his basement. In addition, over several years, he made various bank deposits in amounts slightly less than $10,000 in order to avoid the bank from issuing Currency Transaction Reports. That is known as “structuring,” and is against the law.

Ultimately, he broke the law (by structuring cash transactions) in an attempt to avoid getting caught for breaking another law (income tax evasion). That’s quite the lose-lose situation for a criminal defense attorney. Actually, it’s lose-lose-lose in this case, as he can no longer practice law.

Needleman faces up to five years of imprisonment for income tax evasion, and up to ten years for structuring financial transactions. His sentencing is scheduled for December 15.

(Hat Tip: The Blog of LegalTimes)

Categories: Department of Justice, Tax Fraud Tags:
  1. Will Lewis
    September 7th, 2011 at 23:36 | #1

    Question: What’s the law and cite on structuring? Is it something black letter, or, what if, say, you got a $15k cash payment and wanted to keep some cash on hand for a fur and jewelry shopping spree while having the rest kept conveniently in the bank, and you put $9.5k in the bank while hitting the streets with $5.5k?

    • September 8th, 2011 at 11:39 | #2

      Good questions.

      The cite for structuring is 31 U.S.C. 5324. 5324(d) makes it a crime.

      Regarding your hypothetical, the CTR requirement does not seem to be triggered, because there is no deposit or withdrawal with the bank exceeding $10,000. Note that 31 CFR 103.22 requires banks to treat multiple currency transactions as a single currency transaction if the bank knows that the transactions are made by the same person and the total of the transactions exceed $10,000.

      I should add that although a CTR would not be issued in your hypothetical, a Form 8300 may have to be, depending on the nature of the $15k cash payment.

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