FORMER PARTNER AT INTERNATIONAL LAW FIRM SENTENCED IN MANHATTAN FEDERAL COURT TO 28 MONTHS IN PRISON FOR FAILING TO PAY TAXES ON OVER $10 MILLION OF INCOME
FOR IMMEDIATE RELEASE
Wednesday January 11, 2012
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOHN J. O’BRIEN, a former partner at Sullivan & Cromwell (“S&C”), an international law firm, was sentenced today in Manhattan federal court to 28 months in prison for failing to file tax returns and pay taxes on over $10 million in income, resulting in over $2.5 million in tax losses to the Internal Revenue Service (“IRS”). O’BRIEN was sentenced today by U.S. Magistrate Judge Henry B. Pitman.
Manhattan U.S. Attorney Preet Bharara said: “As a partner at a prominent law firm, John O’Brien received millions of dollars for advising his clients about compliance with the law, while, at the same time, he was breaking it. O’Brien certainly knew about his legal obligation to pay taxes, like every other American, and now he will pay for his decision to do otherwise.”
According to the Information and statements made during court proceedings:
From 2001 through March 2009, O’BRIEN was a partner at S&C, a Wall Street law firm with offices in New York City, where he handled corporate mergers and acquisitions. Every year, S&C provided O’BRIEN and other partners with an IRS Schedule K-1 form, which reported each partner’s share of the firm’s income, deductions, and credits. With the K-1 form, the firm’s accountants sent a cover letter explaining that the information should be used to file individual tax returns. S&C also requested that all partners complete a certification form indicating that he or she was in compliance with all income tax requirements. Between 2001 and 2008, O’BRIEN, who was aware of that policy, received copies of the certification form but never completed it.
From 2001 to 2008, O’BRIEN failed to file tax returns, notwithstanding S&C’s effort to ensure partners were in compliance with the law. During this time period, he received over $10.8 million in partnership income and owed over $2.5 million in taxes. Instead of paying his taxes, O’BRIEN paid for various personal expenses, including funding an antique books business that he partly-owned, renovating his lakeside weekend home in the Adirondacks, and traveling internationally. S&C learned of O’BRIEN’s failure to file returns and to pay taxes to the IRS and the states of California and New York in March 2009. He formally resigned his partnership at S&C on March 31, 2009.
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O’BRIEN, 48, of Caroga Lake, New York, pled guilty on August 4, 2011 to two counts of failing to file tax returns and two counts of willfully failing to pay taxes. In addition to his prison term, he was sentenced to one year of supervised release and was ordered to pay $2,866,832 in restitution to the IRS. O’BRIEN was directed to surrender to the Bureau of Prisons on February 27, 2012.
At the sentencing, Judge Pitman said: “It’s imperative that all citizens understand that if a citizen commits a crime, it has a serious impact on the government, a serious economic impact on the public fisc, that that defendant is going to go to jail, whether the defendant is a Wall Street lawyer who fails to pay his taxes, whether it’s the owner of a deli engaging in food stamp fraud, or whether it’s a defense contractor padding expenses.”
Mr. Bharara praised the work of the Internal Revenue Service, Criminal Investigation Division.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Stanley J. Okula, Jr. is in charge of the prosecution.