GREENBELT, MD. – On September 1, 2011, Stanley Needleman, age 68, of Pikesville, Maryland, pled guilty to tax evasion and structuring financial transactions to avoid reporting large cash receipts and deposits.
The guilty plea was announced by Special Agent in Charge Ava Cooper-Davis of the Drug Enforcement Administration Washington Field Division, United States Attorney for the District of Maryland Rod J. Rosenstein; and Acting Special Agent in Charge Jeannine A. Hammett of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.
“The DEA and IRS investigation of Criminal Defense Attorney Stanley Needleman was a long term, highly complex effort,” stated Ava A. Cooper-Davis. “Mr. Needleman now has to face the Federal Court system for his disposition. No one is above the law, no one,” added Cooper-Davis.
“Stanley Needleman committed tax evasion by omitting $1.5 million of income from his federal tax returns over five years, and he concealed his tax fraud by failing to report large cash receipts from his clients and by breaking up his own up large bank deposits into smaller amounts in an effort to avoid bank reporting requirements,” stated U.S. Attorney Rod J. Rosenstein. “People who defraud the IRS shift the cost to honest taxpayers, and businesspeople who evade financial reporting requirements allow other criminals to spend their illegal proceeds without being detected by authorities.”
"Fulfilling individual tax obligations is a legal requirement and those who willfully evade that responsibility will be prosecuted," said Jeannine Hammett, Acting IRS Special Agent in Charge, Washington DC Field Office.
According to his plea agreement, Needleman is a criminal defense attorney, practicing law for more than 30 years in state and federal court. Clients mailed or delivered payment to the Law Office of Stanley Needleman on North Calvert Street in Baltimore. Clients made payments mostly in cash, which was kept in a large bank envelope. At the end of each business day, Needleman took the bank envelope with the day’s receipts home with him. No one at the office tallied the daily receipts or completed bank deposit slips. The next day, Needleman would return the bank envelope to the office empty.
During the covert phase of the investigation, federal investigators reviewed Needleman’s tax returns and bank records for the years 2005 to 2009 to determine how much money he deposited and how much income he reported. Upon examining the number and types of federal and state cases in which Needleman had entered his appearance as the attorney of record for the years 2006 to 2010, investigators concluded that the amount of legal fees Needleman collected for those cases must have been substantially more than what he had deposited into his bank account and reported as gross income on his tax returns.
On April 14, 2011, DEA agents executed search warrants at Needleman’s law office and home. In the basement of his home, agents found two safes containing cash totaling $1,153,660, and ledgers in Needleman’s handwriting that chronicled the legal fees paid by hundreds of his clients for the period 2005 to 2010. The cash was either found bundled or in containers and bags.
In entering his guilty plea, Needleman admitted to three types of financial violations.
FAILURE TO REPORT TAXABLE INCOME
The ledgers show that most of Needleman’s legal fees were paid in cash and much of the cash was not deposited into Needleman’s business and personal bank accounts. For example, the ledgers indicated that of the $802,662 in gross receipts collected in 2009, $327,533.30, or 40%, was not deposited into Needleman’s bank accounts.
Needleman intentionally failed to report on his tax returns the substantial amounts of cash that he received from his clients and hoarded in his basement. As a result, for tax years 2005 to 2009, Needleman failed to report $1,517,369 in income, resulting in a total of $543,695 in federal taxes owed, and $117,319 in state taxes owed.
FAILURE TO REPORT RECEIPT OF MORE THAN $10,000 CASH FROM CLIENT
Needleman charged each client facing felony drug charges in federal court a one-time fee of between $10,000 and $30,000 or more, with payment usually due in full before Needleman entered his court appearance for the client.
Like all businessmen, Needleman knew that he was required to file a Form 8300 each time he received more than $10,000 in cash from a customer. Although he received one-time fees of over $10,000 in cash from many clients, Needleman failed to file Forms 8300. Needleman choose to file a Form 8300 only once, and in that instance it was only after he had received a federal subpoena seeking information about payments made by that one client.
STRUCTURING DEPOSITS TO CAUSE BANKS NOT TO FILE CURRENCY TRANSATION REPORTS
Needleman also knew that banks are required to file a Currency Transaction Report for each cash transaction in excess of $10,000. To conceal his ongoing scheme of evading taxes by diverting cash from the law practice, Needleman structured the cash that he did deposit in the bank by breaking it into smaller bank deposits of less than $10,000 each time and depositing it over multiple days. This caused the bank not to file Currency Transaction Reports.
Every one of the 115 cash deposits made over the five years since January 1, 2006 was less than $10,000. During this time period, the average total cash deposits per year was approximately $250,000. Accordingly, Needleman’s pattern of structuring the deposit of cash receipts resulted in more than $100,000 being illegally structured in a 12 months span over the five year period.
As part of the plea agreement, Needleman has consented to disbarment prior to his sentencing. He faces a maximum penalty of five years in prison for tax evasion and 10 years in prison for structuring financial transactions. As part of his plea agreement, Needleman has agreed to pay restitution of $543,695 for tax losses incurred by the IRS and $117,319 for tax losses incurred by the State of Maryland. In addition to paying restitution, the plea agreement calls for Needleman to forfeit $492,464 to DEA as the proceeds illegally derived from the structuring scheme. U.S. District Judge Alexander Williams, Jr. has scheduled sentencing for December 15, 2011 at 11:00 a.m.