Lawyers arrested for evading limits on bank deposits

Two New Jersey lawyers have been arrested and charged with circumventing bank reporting requirements by breaking down $354,000 in client funds into attorney trust account deposits of less than $10,000 each.

Goldie Sommer and Edward Engelhart of Fairfield's Sommer & Engelhart surrendered Wednesday to Internal Revenue Service agents. Magistrate Judge Joseph Dickson in Newark set each one's bail at $100,000.

The partners in the two-lawyer firm face identical charges of conspiring to violate and violating a federal law that prohibits "structuring" — slicing bank deposits into amounts of less than $10,000, the threshold for triggering a requirement that the bank file a currency transaction report with the IRS.

The prohibition is meant to prevent people involved in illegal activities such as drug trafficking, money laundering and tax evasion from evading the reporting requirement.

The criminal complaint filed on Nov. 4 alleges that during a six-week period between Aug. 13 and Sept. 22, 2010, $118,000 in U.S. currency was deposited into the firm's trust account with TD Bank.

All the deposits were allegedly for large, even-dollar amounts of less than $10,000, with multiple deposits made on some days adding up to more than $10,000.

During that same time, an unspecified amount also was put into the trust account using several cashier's checks, according to the complaint.

In addition, currency deposits similar to those that went into the trust account allegedly went into the personal accounts of Sommer, Engelhart and "other individuals associated with [them]."

Checks written on those accounts went into the trust account, bringing the total of the allegedly structured funds to $354,000.

The complaint, signed by IRS Task Force Officer Keith Cregan, describes a June 16 meeting with Sommer and Engelhart, during which they allegedly admitted that "they had agreed with each other to structure U.S. currency into the Trust Account for the purpose of evading the filing of any forms with the Internal Revenue Service."

They also allegedly admitted that the source of the money was a client and that they "inferred that the client wished that the funds would be deposited into a bank without the filing of any forms" with the IRS.

Violation of the structuring law, 31 U.S.C. 5324, can carry up to five years in prison, and as much as a $250,000 fine plus forfeiture of the structured funds. The sentence and fine can be doubled in "aggravated cases" — where the structuring is done in conjunction with another crime or as part of a pattern of an illegal activity involving more than $100,000 in a 12-month period.

Sommer, of Montville, a Seton Hall School of Law graduate admitted to practice in 1975, is represented by Jack Arseneault of Arseneault, Whipple, Farmer, Fassett & Azzarello in Chatham.

Rockaway resident Engelhart, also a Seton Hall alumnus and a lawyer since 1979, has retained Howard Brownstein of Union City as defense counsel.

The Sommer & Engelhart website says the firm concentrates on real estate matters and short sales, residential tax appeals, personal injury and worker's compensation cases, family law and municipal law.

Sommer, Engelhart, Arsenealt and Brownstein did not return calls by press time.

The prosecutor handling the case is Assistant U.S. Attorney Evan Weitz in Newark.

U.S. Attorney's Office spokesman Matthew Reilly declines to provide the names of the other people whose accounts were allegedly used for the structuring or to disclose whether it was the Office of Attorney Ethics that discovered the deposits through its audits of attorney trust accounts.

In 2002, John Richardson, then a Superior Court judge in Somerset County, was charged with a similar but lesser offense — failing to report to the IRS $160,000 in cash fees he had received from a real estate client while in private practice in 1998.

He deposited the money into his trust account without complying with an Internal Revenue Code requirement to report the receipt of more than $10,000 in cash from a trade or business.

Richardson pleaded guilty to a single misdemeanor charge on Feb. 8, 2002, and was sentenced to one year of probation and a $2,500 fine. The deal also required him to resign from the bench, which he did a week before entering the plea. The state Supreme Court reprimanded him in July 2003.

Richardson, now the municipal judge in Hillsborough and of counsel with Nee Beacham & Gantner in that town, declines comment.

Source: Daily Business Review

by Mary Pat Gallagher