Doctor Alcoholic not a Fraud


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Fraud and Scams

Doctor Alcoholic not a Fraud

By A.J. Cook

For more than a decade, Dr. W. David Fretz operated pickled in alcohol. He drank a quart of expensive vodka every night before passing out. While his personal life deteriorated, he concentrated on maintaining his professional status. He tried hard to conceal his alcoholism from patients and colleagues while working in Alabama hospitals and clinics.

He didn't care about financial matters, allowing two homes to be foreclosed even though he had large equities. The doctor ignored the Forms 1099 sent to him and the Internal Revenue Service by hospitals and clinics that had paid him.

Even though he hadn't paid taxes or filed returns for 10 years, he didn't take evasive action to thwart the IRS.

Because his name continued to pop up on the agency's computer screen, it stopped by to ask about his financial health.

With the pressure form the taxing agency added to his other problems, Dr. Fretz contemplated suicide. But with the help of his third wife and Alcoholics Anonymous, he began to turn his life around.

He pleaded guilty to willfully failing to file his tax return for one of the 10 years.

The court ordered him to pay $85,666 and placed him under house arrest for six months.

He then started working with the IRS to prepare returns for those years. He filed the returns but didn't have money to pay the taxes. So he petitioned the bankruptcy court to have his tax liability of $1 million discharged.

The IRS, of course, protested. The issue was whether Fretz's attempt to evade taxes, by failing to file, was willful. If yes, his tax debt would not be discharged.

The agency said it was willful: Over the 10 years he had the money to pay and knew he was obligated to pay but didn't.

In court the doctor testified he never intended not to pay but "really didn't care whether taxes or other bills were paid."

The judge said this about Fretz:

He took no active interest in any financial matters.
He didn't live lavishly or accumulate wealth.
He didn't destroy or hide records.
He didn't attempt to hide assets, like in offshore accounts.
He worked with the IRS to prepare his returns.

The court said his initial failure to file returns was part of his general financial irresponsibility caused by severe alcoholism. The judge ruled for the doctor.

Fretz's victory in this case was unusual for two reasons:

He had already pleaded guilty in the criminal case to willfully failing to file a return.
Usually an alcoholic defense doesn't work.

The Moral: Take two shots of vodka and call your tax lawyer in the morning.

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.

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