Fraudster's Wife Cleared Of Wrongdoing In Key Tax Case

by Glen Shapiro, LawAndTax-News.com, New York

31 December 2004

Ruling on attempts by the New York Division of Taxation to collect $2.5 million in taxes from the wife of a convicted fraudster, the Tax Appeals Tribunal this week invoked the "innocent spouse" defence.

In 2000, Patrick R. Bennett was charged with running massive pyramid schemes, cheating investors in his family-run companies, and siphoning cash from his employees' pension funds. Mr Bennett was eventually convicted of securities fraud, bank fraud, and money laundering, and in addition to being obliged to pay the government more than $109 million, was given a custodial sentence of 30 years, later reduced to 22.

Speaking following the delivery of the verdict, Southern District Judge John S. Martin suggested that Mr Bennett's wife, Gwen, was likely involved in her husband's schemes, and in protecting his assets. This assertion led the New York Tax authorities to pursue Mrs Bennett for unpaid taxes.

However, according to a New York Law Journal report, the Tax Appeals Tribunal argued this week that it would be "inequitable to hold Gwen Bennett liable for the additional tax", due to her lack of involvement in her husband's business activities, and her high-school educated status.

"Gwen Bennett did not question, or have the ability to question, the content of the long and complex returns filed on behalf of her and Patrick Bennett during the audited years," the Tribunal observed, continuing: "She knew very little of her husband's business dealings. The extent of her involvement was to accompany him to social functions on occasion."

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