Leona Helmsley, who inspired a biography called Queen of Mean, was convicted of tax fraud and sentenced to four years in prison, three years of probation, a fine more than $7 million and ordered to pay the entire prosecution cost plus taxes owed with interest. An appeals court affirmed the conviction but sent the case back to a lower court to redetermine the sentence, which should reduce it somewhat. Mrs. Helmsley's attorneys say they will appeal.

The conviction confirmation capped years of legal maneuvering by the Helmsleys.

Mrs. Helmsley and husband, Harry, presided over a network of businesses based principally in New York City including real estate, insurance and 27 hotels from Ohio to Florida.

After a grand jury had indicted the Helmsleys, their lawyers asked a court to dismiss the indictment. They said the government improperly allowed publicity to leak from secret jury hearings. Request denied.

The attorneys then asked a court to postpone Helmsley's trial. A doctor testified that Helmsley's strokes caused brain damage that reduced his memory and rendered him unable to withstand hostile cross examination. The court allowed the postponement, conceding that given his age, 80, and health, this probably equated a dismissal.

In another legal maneuver, Mrs. Helmsley asked to move her trial to Philadelphia, claiming publicity would prevent a fair trial in New York. To back this up, her lawyers submitted hundreds of newspaper stories and magazine articles. But the judge discovered most failed to support their theory. Some were in publications not widely read in New York -- such as The Los Angeles Herald Examiner; others mentioned only the hotels, not the owners; others didn't mention the Helmsleys or the hotels. Request denied. The judge, clearly irritated, warned other litigants who send in large volumes of documents they, too, take the risk that he might actually read them.

What did the model, turned hotel billionairess, do that was so terrible and how did the tax collector find out about it?

The IRS said the Helmsleys understated taxable income on their personal returns by more than $2.5 million over three years. The case revolves around the renovation of Dunnellen Hall, the couple's $11 million, 28-room estate in Greenwich, Conn. This included a $2 million addition enclosing one of their two swimming pools, featuring a rooftop marble dance floor and four jade art pieces costing $500,000. The IRS said the Helmsleys' businesses paid for and deducted much of the renovation work. The tax dodge also included purchases of personal items such as designer dresses. The couple concealed this by having company payments disguised as legitimate business expenses.

Ironically, her mistreatment of employees, whom she talked down to and fired on a whim, brought down the queen. Many subjects eagerly stepped forward to snitch on their former boss. One executive she had fired gave information for a story in a New York newspaper that triggered the IRS audit. He then gave the government copies of documents, such as falsified invoices, relating to the subterfuge plus names of other employees familiar with the improper deductions. Another employee gave the IRS specific details, a virtual roadmap for its investigation, like the work purportedly done on a Helmsley building on New York's Park Avenue which was actually work done on Dunnellen Hall.

Now her highness, who reportedly said "only little people pay taxes," will pay the highest price of all -- her freedom.

The Moral:  Don't be mean.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

Copyright © 1987-2001 A.J. Cook All Rights Reserved
This information is not intended for use without professional advise.
Disclaimer
Released 10-14-91