Source: United States Department of Justice Criminal Division
A former Luzerne County, Pennsylvania, attorney pleaded guilty today to tax evasion for calendar year 2016 in connection with substantial legal fees he earned while associated with The Powell Law Group P.C., a Luzerne County-based law firm. Powell was released on an unsecured bond while awaiting his sentencing.
According to court documents and statements made in court, Robert Powell sought to evade a substantial tax that was due and owing the IRS for 2016 by using nominee bank accounts, causing an accountant to file a request for a filing extension that falsely reported zero estimated tax liability for 2016 and making false statements during an IRS audit in 2019.
Powell’s license to practice law was suspended in 2009 and he was subsequently disbarred in 2015. As a result, in 2009, he relinquished his ownership of The Powell Law Group. He nevertheless retained the right to collect 90% of the remainder of any future fees collected by the firm after the payment of firm expenses. Specifically, The Powell Law Group represented thousands of plaintiffs in a mass tort litigation that settled for approximately $5.15 billion in 2015 and The Powell Law Group was expected to receive approximately $120 million in attorneys’ fees from that settlement.
Prior to the attorneys’ fees disbursement, The Powell Law Group and its co-counsel used those future legal fees as collateral to obtain a series of loans totaling over $125 million. Instead of depositing the loan proceeds into The Powell Law Group’s bank accounts and using them to pay firm expenses, Powell directed the loans to nominee bank accounts that were under his control. He then used the loan proceeds for his personal debts and expenses as well as his and his former law partner’s personal benefit.
In June 2016, most of the attorneys’ fees were finally disbursed and the loans were repaid. Nevertheless, Powell did not file a personal income tax return and pay taxes on the receipt of the fees in that year. After the initial disbursement and through October 2019, an additional $12 million in attorneys’ fees was distributed and The Powell Law Group’s share continued to be directed into nominee bank accounts that Powell controlled. Powell personally received an additional $3.6 million of the fees during that time.
For the full period of tax years 2010 through 2022, Powell did not file income tax returns despite receiving and spending other personal income. Rather, he willfully attempted to evade taxes due and owing by him to the United States.
In 2019, when the IRS commenced an audit of his tax liabilities, Powell made false statements to the interviewing revenue agents to conceal his income and expenditures for tax years 2014 through 2016. Namely, Powell falsely stated that his only source of funds were loan advances, that he and his spouse did not have signature authority or control over other bank accounts and that he had no ownership in any corporations.
Ultimately, as alleged by the government, Powell received millions in income over the relevant time period resulting in substantial taxes that were due but not paid to the United States.
In the plea agreement filed with the Court, Powell agreed to pay full restitution to the IRS in an amount to be determined by the Court at a later date.
“Powell engaged in a lengthy scheme to hide his income and not pay taxes,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “And when audited by the IRS, rather than step up, acknowledge his illegal conduct and pay what he owed, he chose to double down and lie to the revenue agents who interviewed him.”
“For over a decade Robert Powell failed to file personal income tax returns and executed a sophisticated scheme to evade paying substantial taxes that were due and owing the IRS from massive legal fees his firm earned,” said U.S. Attorney Gerard M. Karam for the Middle District of Pennsylvania. “The brazenness of his conduct included using nominee bank accounts, reporting zero estimated tax liability for the years in question and repeatedly lying to IRS auditors attempting to unravel the scheme. I want to thank all the IRS agents, prosecutors and support staff for their hard work that will allow justice to be finally served in this important case.”
“Federal income tax compliance should be equally shared among all Americans,” said Acting Special Agent in Charge Denise Leuenberger of the IRS Criminal Investigation (IRS-CI) Philadelphia Field Office. “Defrauding the government with an elaborate scheme to underreport taxable income is unlawful. Mr. Powell’s plea today serves as an important reminder that IRS-CI is committed to bringing to justice those who evade their federal income tax responsibilities.”
IRS-CI is investigating the case.
Trial Attorney Alexandra Fleszar of the Tax Division and Senior Litigation Counsel Phillip J. Caraballo and Criminal Division Chief Bruce D. Brandler for the Middle District of Pennsylvania are prosecuting the case.