A former partner at a top international law firm has been sentenced to 28 months in prison for failing to pay taxes on over $10 million in income.
John J. O’Brien, a former partner at New York-based Sullivan & Cromwell, was sentenced Wednesday in a federal court in Manhattan by U.S. Magistrate Judge Henry B. Pitman. His failure to pay taxes resulted in an estimated loss of over $2.5 million to the IRS.
O’Brien, 48, of Caroga Lake, N.Y., pleaded guilty last August 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.
“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,” said Manhattan U.S. Attorney Preet Bharara in a statement. “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.”
O’Brien was a partner at Sullivan & Cromwell from 2001 to 2009, where he handled corporate mergers and acquisitions. Every year, S&C provided O’Brien and other partners at the Wall Street-area firm 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, according to prosecutors.
From 2001 to 2008, O’Brien failed to file tax returns, notwithstanding the law firm’s effort to ensure partners were in compliance with the law. During that time, he received over $10.8 million in partnership income and owed over $2.5 million in taxes. Instead of paying his taxes, O’Brien allegedly 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 the firm on March 31, 2009.
He was directed by Judge Pitman to surrender to the Bureau of Prisons at the end of next month.
At the sentencing, 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.”
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