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New York state’s Tax Appeals Tribunal has rejected as valueless dicta the comments of a federal judge in a case involving one of the largest securities frauds in U.S. history. The tribunal gave no weight to the remarks of Southern District Judge John S. Martin who, in sentencing Patrick R. Bennett for fraud and money laundering in 2000, suggested that his wife was involved in hiding assets, even though she was never charged. New York’s Division of Taxation had relied largely on Martin’s comments in seeking to hold Gwen K. Bennett liable for taxes owed by her husband. But the Tax Appeals Tribunal, invoking the innocent spouse rule, said there is no indication Mrs. Bennett had any involvement in her husband’s misdeeds, regardless of the opinion of Judge Martin, who has since left the bench. In a decision by President Donald C. DeWitt and Commissioner Carroll R. Jenkins, the tribunal upheld the findings of an administrative law judge. It agreed that it would be “inequitable to hold Gwen Bennett liable for the additional tax, penalty and interest owing as a result of her husband’s substantial understatement of income for the years 1991-1994.” Mrs. Bennett, the tribunal said, was a high school-educated housewife who apparently had nothing to do with her husband’s scams. “Even if Gwen Bennett became aware of the activities of her husband which ultimately led to his conviction for criminal actions, there is no evidence that she was involved in his activities, no evidence of any criminal charges having been brought against her and no evidence that, at the time the tax returns in question were filed, she was aware that monies diverted by her husband were improperly excluded from tax returns,” the tribunal said in Matter of Bennett, 818612/ 818613. Mr. Bennett was the chief executive officer of a family-run business empire, Bennett Management and Development Corp., and was an officer in the Bennett Funding Group. The businesses primarily leased office equipment, largely to state and local governments. In 1996, the Securities and Exchange Commission accused the company and Mr. Bennett of orchestrating massive pyramid schemes. Mr. Bennett and others were arrested and charged with cheating investors and siphoning money from the company’s pension, profit sharing and 401(k) plans. Nine defendants pleaded guilty to taking part in the fraud or a cover-up. Mr. Bennett was convicted of bank fraud, securities fraud and money laundering. A special verdict of forfeiture required him to turn over more than $109 million to the federal government. Judge Martin imposed a 30-year term on Mr. Bennett, enhancing the penalty because his wife refused to surrender properties to which she claimed ownership. The 2nd U.S. Circuit Court of Appeals upheld the conviction but vacated the sentence, and Mr. Bennett was resentenced to 22 years. Martin opined at sentencing that Mr. Bennett had funneled illegal gains through his wife. Based largely on those remarks, the state sought to collect more than $2.5 million in taxes from Mrs. Bennett. But the tribunal held that Mrs. Bennett had no authority or control over her husband’s financial affairs and cannot be held liable. “Gwen Bennett did not question, or have the ability to question, the content of the long and complex returns filed on behalf of her and Patrick Bennett during the audited years,” the tribunal said. “She knew very little of her husband’s business dealings. The extent of her involvement was to accompany him to social functions on occasion.” Mrs. Bennett was represented before the tribunal by her accountant, Harry L. Hood. Kevin R. Law appeared for the Division of Taxation.

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