Cheat the IRS and Receive Community Service Time

[poke_sally]

http://query.nytimes.com/gst/fullpage.html?res=940DE4D6143CF930A25751C0A96E948260


Financier Avoids Jail in Deal to Aid Homeless

By JON NORDHEIMER, SPECIAL TO THE NEW YORK TIMES
Published: February 13, 1988

LEAD: The financier Victor Posner avoided a jail sentence today on Federal tax evasion charges when he agreed to spend $3 million to help homeless men, women and children in south Florida and to devote 20 hours a week for five years to working with them.

Federal District Judge Eugene Spellman set those terms in sentencing Mr. Posner to five years' probation. He also ordered him to pay fines, penalties and interest, expected to total $3.8 million. Mr. Posner pleaded no contest on Sept. 29 to 10 counts of tax evasion.

Federal prosecutors had asked for a prison sentence for Mr. Posner, 69 years old. The Miami Beach industrialist was accused of evading more than $1.2 million in Federal income taxes by inflating the value of land donated to Miami Christian College. Faced 40 Years in Prison

Assistant United States Attorney Neil Cartusciello told the court: ''Mr. Posner lied to the Internal Revenue Service and he corrupted others. In his statement to the probation officers he makes the same claims and tells the same lies. He doesn't show he's remorseful, that he's sorry.''

With a no-contest plea, a defendant does not admit guilt but indicates he will offer no defense. For sentencing purposes it is the same as a guilty plea or conviction.

Mr. Posner (pronounced PAHZ-ner) faced a maximum sentence of 40 years in prison, the prosecutors said.

Judge Spellman said that if he had decided on a prison sentence, Mr. Posner would have served no more than six to nine months because of his age.

Instead, Mr. Posner was given 60 days to develop a plan to help the homeless. The $3 million he will spend carrying out that plan will not be tax deductible, the judge said. In addition, he must provide a total of 5,000 hours of community service.

''It was a unique settlement to a unique case,'' said Edward Bennett Williams of Washington, Mr. Posner's chief defense counsel. Judge Spellman indicated during today's hearing that Mr. Williams had proposed the unusual alternative sentence privately last month.

Judge Spellman sternly warned Mr. Posner not to challenge the terms of his probation and asked him if he understood that once he agreed to it terms the sentence was ''non-negotiable and unappealable.''

Mr. Posner responded, ''Yes, Your Honor.''

If Mr. Posner attempts to challenge the terms - for instance, by filing for bankruptcy protection - he will go to prison, the judge said.

Mr. Posner will have to repay the $1.2 million in taxes, as well as a $600,000 penalty and interest that is expected to be about $2 million. In addition he was fined $75,000. He must also pay the costs of his prosecution, which may reach $1 million, Federal officials said.

The defendant, a short man with wavy silver hair and a ruddy complexion, responded softly and affirmatively when Judge Spellman asked him if, as an alternative to going to prison, he would allow the court to order that he pay a sum of money far beyond the limits set by law to finance the project for the homeless.

Mr. Posner, one of the highest-paid American executives, with a salary estimated at $8.5 million in 1986, controls 40 public companies. His personal fortune has been estimated at $180 million. Some Posner Holdings

Among his diverse holdings are the Chesapeake Financial Corporation, which owns the Royal Crown Companies and Arby's Inc.; the DWG Corporation; the NVF Corporation and the Pennsylvania Engineering Corporation. He also holds controlling interests in Sharon Steel, an NVF unit, and the Graniteville Company, a DWG textile unit.

Sharon has filed for Federal bankruptcy protection, as has Mr. Posner's Evans Products Company.

Mr. Posner's 1985 takeover of the Fischbach Corporation is being studied by Federal investigators to determine whether improper insider trading took place.

The son of a Russian immigrant, Mr. Posner dropped out of high school and started his business career selling real estate in Baltimore. He was a millionaire by the age of 25. A Nine-Year Legal Battle

The sentencing ended a nine-year legal battle. Mr. Williams contended today that Mr. Posner's case was the only instance in the 75-year history of the graduated Federal income tax in which a taxpayer had been prosecuted for overstating the value of a charitable gift.

Mr. Posner and William Scharrer, a Miami real estate broker, were charged with conspiring to set a false appraisal of $125,000 an acre on a 16-acre tract of land Mr. Posner donated to Miami Christian College in 1975. Records showed that he had purchased the tract for $2,500 an acre in 1967.

Mr. Scharrer was convicted of aiding and abetting in tax violations in 1984 and was sentenced to 18 months in prison, an outcome he is appealing. Mr. Posner was tried separately and convicted in 1986, but Judge Spellman set aside the verdict and declared a mistrial when it was learned that jurors were exposed to prejudicial information during the trial, including newspaper accounts of the proceedings. Problems of Homeless Cited

During today's hearing, Judge Spellman said that the problems of the homeless were worsening daily and that thousands of children were without shelter or day care. He then outlined his plan.

He ordered Mr. Posner to develop a proposal within 60 days on ways to address the problems of the homeless, submit it to an advisory committee of community leaders for approval and then be prepared to spend ''at least $3 million'' to implement it.

''It is contemplated,'' the judge said, ''that your personal participation over the five-year period will be 5,000 community hours - about 20 hours a week.'' Employee Assistance Ruled Out

Mr. Posner was cautioned not to use current or former employees to assist him in the project, which the judge described as ''one you personally and financially take part in.''

The judge directed that Mr. Posner spend five hours a day for one day in each of the next eight weeks at Camillus House, a downtown Miami mission for the homeless.

He said Mr. Posner could put in his community service in Dade County, where Miami is situated; Broward County, which contains Fort Lauderdale, or Palm Beach County.

Outside the courtroom Mr. Posner would not comment on the sentence other than to say he had a long history of contributing to charities.

''He is very enthusiastic about this work,'' Mr. Williams said as his client smiled.

[poke_sally]

http://en.wikipedia.org/wiki/Victor_Posner


The late 1980s were the start of his downfall:

In 1987, Sharon Steel operated in Chapter 11 bankruptcy protection.
DWG was the target of a takeover attempt by Granada Investments.
Evans Products, operated in Chapter 11 and did not emerge until vendors and lenders were assured that Posner would leave the company.
In 1988 he pleaded no contest to tax evasion and fraud for inflating the value of land he donated to Miami Christian College in 1975. He was ordered to pay more than $6 million in costs and fines and to devote 20 hours a week for five years to working with the homeless.
Also in 1988, the SEC sued Drexel Burnham Lambert and charged Victor Posner and Steven Posner with scheming to conceal the Posner's purchase of stock the electrical contractor, Fishbach Corporation.
Again, in 1988 a bankruptcy judge ordered him to return several original Norman Rockwell paintings to the Sharon Steel Corporation, which he had removed from the company's headquarters when he acquired the company.
In 1993 both he and Steven were barred from being an officer or director of a public company by the SEC.
In 1995, Steven sued his father over alleged mismanagement of his company, Security Management Corporation, claiming that the elder Posner was paying himself too much money and had wrongly removed Steven as a company director. They settled the suit by flipping a coin over the share of more than $200 million worth of property. [3]
Posner died of pneumonia after suffering from declining health for several years