Harold Levine, the head of Moritt Hock & Hamroff’s tax practice group, has been sued by federal authorities to block his promotion of abusive tax shelters like the ones he allegedly promoted while chairing the tax practice group at Herrick Feinstein.
Levine was accused in a complaint filed by the government in the Southern District with forming or using five corporations or “promoter entities” to acquire asset-selling companies and then eliminate their capital gains taxes using the phony losses of the promoter entity.
“This office will not tolerate those who unlawfully seek to game the system in order to evade their tax obligations,” U.S. Attorney Preet Bharara said Wednesday in announcing the lawsuit along with John Dalrymple, the Internal Revenue Service’s deputy commissioner for services and enforcement.
Bharara said his office is asking the court to ban Levine from “organizing, promoting or selling any tax shelters that allegedly use an intermediary-type transaction or state tax credits designed to reduce or eliminate tax liabilities in the future, as well as any other plans or arrangements intended to secure tax benefits or unlawfully evade tax liabilities in exchange for fees.”
“Levine may be subject to penalties in the future based on the fraudulent tax shelter conduct alleged in the complaint,” Bharara said in the statement.
Levine could not be immediately reached for comment. A Moritt Hock spokesman said Thursday that Levine remained with the firm.
“Every one of the alleged incident cited in the lawsuit occurred before Mr. Levine joined Morritt Hock,” the spokesman said. “Although charges like these are concerning, we firmly believe in Mr. Levine and our legal system.”
Levine joined the 54-lawyer firm in November 2012, two months after Herrick demanded his resignation because of the allegations contained in Wednesday’s complaint, according to a statement issued by Herrick.
“Harold Levine was a rogue partner who concealed his activities from all other Herrick lawyers,” the statement read. “The firm has been fully cooperating with the IRS in its investigation of Harold Levine.”
“The firm has also initiated a report to the bar disciplinary committee against Harold Levine and commenced a proceeding against him.”
Levine, who was at Herrick for 10 years beginning in 2002, allegedly earned $5 million in fees while promoting the shelters.
Levine is a 1983 graduate of Benjamin N. Cardozo School of Law with an LL.M. in taxation from New York University in 1984.
There were 90 unlawful transactions charged in the complaint leading to $515 million in improperly deducted bad debt losses on tax returns—causing the government to lose some $129 million, not including penalties on interest, that it will never collect because of a lack of assets left in the tax-avoiding companies.
The complaint said the abusive tax shelters that Levine promoted included more than a dozen “intermediary transactions,” where corporate income taxes on the gains from the sale of corporate assets are avoided to benefit shareholders, and 75 “state tax credit transactions” on real estate projects, where the project owner avoids paying taxes on the sale of transferrable state tax credits.
“In an attempt to disguise the illegitimacy of these transactions, Levine knowingly told lies or caused the corporations involved in these unlawful transactions to tell lies concerning the supposed tax benefits of these transactions,” according to the complaint.
Assistant U.S. Attorneys Alicia Simmons and Tara La Morte of the U.S. Attorney’s Tax and Bankruptcy Unit are handling the case of United States v. Levine, 14 cv 4057. Judge George Daniels is presiding.