United States Attorney's Office District of Connecticut
Press Release

FORMER PRESIDENT AND COO OF PARSONS & WHITTEMORE PLEADS GUILTY TO MAKING FALSE STATEMENTS TO THE IRS

Kevin J. O’Connor, United States Attorney for the District of Connecticut, announced that ARTHUR L. SCHWARTZ, age 64, of 21 Wedgewood Drive, West Orange, New Jersey, the former President and Chief Operating Officer of Parsons & Whittemore, Inc., waived indictment and pleaded guilty this morning before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport to two counts of making false statements to the Internal Revenue Service during the course of two separate audits at Parsons & Whittemore. Parsons & Whittemore, which has its principal place of business in Rye Brook, New York, is a privately-owned company that owns and operates pulp mills in the United States and Canada.

According to documents filed with the Court and statements made in court, SCHWARTZ was responsible for overseeing Parsons & Whittemore’s financial activities and its personnel, insurance, legal and tax matters. SCHWARTZ was a tax lawyer by training, and served as a tax attorney with the U.S. Department of the Treasury and a New York law firm prior to joining Parsons & Whittemore as its in-house tax counsel in, approximately, the late 1970s. SCHWARTZ reported to the Chairman of the Board and the Chief Executive Officer.

In March 1999, an IRS Revenue Agent who was conducting a civil audit at Parsons & Whittemore requested copies of the CEO’s individual federal income tax returns for the tax years 1995, 1996, and 1997. SCHWARTZ today admitted that he falsely told the Revenue Agent that the CEO’s tax returns for those years had been filed when he knew that they had not been filed. Also, SCHWARTZ stated that he would provide the IRS with copies of the returns when he knew that none existed because the returns at issue had not been filed. From March 1999 to January 2001, SCHWARTZ continued to falsely represent to the IRS that the tax returns had been filed when he knew they had not been.

Several years earlier, in November 1996, during the course of a separate IRS civil audit at Parsons & Whittemore, an IRS Revenue Agent asked SCHWARTZ to provide copies of the federal individual income tax returns that SCHWARTZ had filed for the years 1992 and 1993. SCHWARTZ provided copies of his 1992 and 1993 returns to the IRS Revenue Agent, representing that they were copies of the tax returns he had filed with the IRS for those two years. The copies that SCHWARTZ provided to the IRS Revenue Agent disclosed dividend and capital gain income attributable to an entity identified as “Louarte,” while the 1992 and 1993 individual income tax returns he had previously filed with the IRS contained no reference to “Louarte” or reported any income from a source bearing that name. SCHWARTZ today admitted that he was aware of these differences when he provided the copies of the returns to the IRS Revenue Agent, and he knew that, notwithstanding his representation to the contrary, they were not copies of the returns he had filed with the IRS.

“This prosecution demonstrates that individuals who do not deal with the IRS in an honest and straightforward manner violate federal law and face significant penalties,” U.S. Attorney O’Connor stated.

SCHWARTZ will be sentenced by United States District Judge Janet C. Hall on March 23, 2006, at which time he faces a maximum term of imprisonment of ten years and fine up to $500,000.

The case was investigated by the Internal Revenue Service – Criminal Investigation. The case is being prosecuted by Assistant United States Attorney Eric J. Glover.

CONTACT:

U.S. ATTORNEY'S OFFICE
Tom Carson
(203) 821-3722
thomas.carson@usdoj.gov