GREENBELT , MD. - U.S. District Judge Roger W. Titus sentenced Stanley Needleman, 69, of Pikesville, Maryland, to a year and a day in prison, followed by three years of supervised release for tax evasion and structuring financial transactions to avoid reporting large cash receipts and deposits. Needleman has been disbarred from practicing law. Judge Titus also ordered Needleman: 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; and to forfeit $492,464 to Drug Enforcement Administration (DEA) as illegal proceeds.
The sentence 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.
“Today’s sentencing closes the door on the career of a prominent Baltimore attorney,” stated Ava Cooper-Davis, Special Agent in Charge of the Drug Enforcement Administration. “Greed seemed to have gotten the best of Mr. Needleman. The DEA and IRS investigation of criminal defense attorney Stanley Needleman was a long term, highly complex effort. Nobody is above the law.” 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 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 business people who evade financial reporting requirements allow other criminals to spend their illegal proceeds without being detected by authorities.”
“Tax violations have been erroneously referred to as victimless crimes, but it's the honest law abiding citizen who is harmed when someone tries to manipulate our nation's tax system,” said Jeannine A Hammett, Acting Special Agent in Charge-IRS-Criminal Investigation, Washington DC Field Office. “The courts have overwhelmingly and consistently shown that you will be held accountable for such actions, and today's sentencing is a costly reminder.”
According to his plea agreement and statements at today’s sentencing hearing, Needleman, a criminal defense attorney, practiced law for more than 40 years in state and federal court. Clients mailed or delivered payment to the Law Office of Stanley Needleman on North Calvert Street in Baltimore. Many of his clients were drug traffickers who made payments 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 was 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. In that particular instance, Needleman also did not deposit the cash that he had received from the client.
STRUCTURING DEPOSITS TO CAUSE BANKS NOT TO FILE CURRENCY TRANSACTION 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.
According to evidence presented at the Sentencing, Needleman also funneled cash into family member’s accounts. On two occasions he cashed checks for over $10,000 for convicted drug traffickers at a local liquor store but did not deposit the monies received. He also used $30,000 in cash of his own money to post bail for a client in violation Maryland Rules of Professional Conduct.
In sentencing Needleman below the advisory Sentencing Guidelines, Judge Titus cited the testimony of character witnesses of several members of the bar and the fact that Needleman voluntarily resigned from the bar as part of the plea agreement.