While it’s illegal to embezzle money from your employers, it’s apparently OK to deduct the legal fees from your taxes once you get caught, according to a 2009 court decision.
The case, Gordon v. United States, was highlighted recently by tax expert Robert Willens on
Oddly enough, the court agreed that he could deduct the fees, relying on a Supreme Court decision in the case of Tellier v. Commissioner. The court found the legal fees to be ordinary and necessary business expenses because Gordon’s falsification of the books and records actually helped Merrill sell Gordon’s energy-trading division for a higher price to Allegheny Energy Supply.
He may have been ripping off the company, but he ultimately helped Merrill inflate the value of its Global Energy Markets division. It wouldn’t be surprising if Enron’s former executives and their attorneys are paying close attention to this decision.