Jack and Wanda Bernstein sell toys on North Milwaukee Avenue. Everybody loves toys. The Bernsteins also pay income and sales taxes. Nobody likes that, though the couple may have unwittingly given the State of Illinois some powerful new tools to catch cheats.
Every year, businesses rob the state of millions by underreporting sales used to compute tax liability. But two decisions by the Illinois Appellate Court would, if upheld, ”revolutionize our prosecutorial program,” said Edward Carter, special assistant attorney general in the revenue prosecution unit.
For starters, a case won by Carter and Joseph Claps, who heads the trial division, would drastically alter a traditional relationship between accountant and client in Illinois.
Since 1943, Illinois has had a confidentiality provision for accountants. It shields an accountant from ”divulging information or evidence which has been obtained in his confidential capacity.”
In a decision written by Judge Daniel McNamara, the court rules, however, that because much of the information turned over by a client to an accountant is required on an income tax form, the client has little expectation that the information will remain private. Therefore, information provided for a tax return is not privileged and must be turned over under a proper grand jury subpoena.
A second opinion, also written by McNamara, seems more far-reaching. It holds that business owners may be forced to turn over financial documents under a grant of limited immunity, but the immunity does not shield them from prosecution for the underlying crimes of income tax or sales tax fraud.
Both rulings involve the Bernsteins, who run a children`s toy and clothing shop and an electronics shop. They were cited for contempt by Cook County Circuit Judge James Bailey when they refused to turn over records in connection with a tax investigation. They haven`t been charged with any crimes.
Their attorneys, Allen Engerman and Carlo Poli, are set to go to the Illinois Supreme Court. They contend that the ruling nullifying the accountant`s privilege will have ”a tremendously pernicious effect” upon the accountant-client relationship.
Winston & Strawn`s Kimball Anderson has been hired by the Illinois Certified Public Accountants Society to seek permission from the Illinois Supreme Court to file a friend-of-the-court brief if it hears the case.
Tax fraud is big business in Illinois. Last year, Claps said his unit recovered $1.3 million in court-ordered restitution in criminal cases. Millions more are recovered in civil cases.
NEW MALPRACTICE CONTROVERSY
Robert Golding, one of three partners at tony Winston & Strawn whose actions led to a $7.3 million settlement of a malpractice suit against the firm, is embroiled in another malpractice controversy.
It seems that only some of Golding`s woes were soothed when Winston`s insurer agreed to cough up $7.3 million, after charges that he and two other Winston partners, John Gaines III and Richard Youhn, gave bad legal advice to Churchfield Management & Investment Inc., a Chicago area apartment developer that went bankrupt in 1984 and left 1,400 investors holding the bag.
Golding faces civil claims in Cook County Circuit Court that he and two other men defrauded Joseph Keating, an Arlington Heights developer, out of a share of profits from the sale of Deep Lake Hermitage Apartments, a 144-unit complex in Lake Villa.
Keating, who seeks $600,000 in damages from Golding and Winston & Strawn, says that he was a silent partner in Deep Lake, that Golding acted as his lawyer in the deal and that Golding and the two other men have stiffed him.
Golding`s lawyer, the ubiquitous William J. Harte, denies Keating`s allegations. Harte said Keating breached his own agreement to handle construction of Deep Lake, canceling Keating`s interest in the project, and has refused to pay $54,000 in legal fees to Winston & Strawn. Still, some might see similarities between the Deep Lake and Churchfield allegations.
In the Churchfield case, Golding, Youhn and Gaines were accused of hiding the role of Churchfield`s organizer, Thomas J. Connelly Jr. III, when they set up Churchfield in 1980. Actions of Connelly and Winston lawyers, including Daniel Weil, a longtime confidant of Gov. James Thompson, are under scrutiny by a federal grand jury.
Keating`s suit, pending before Circuit Judge Albert Green, charges that in 1978 Golding and two others, Louis Allocco and Joseph Marrin, decided to develop the project and Keating made an oral agreement to transfer his interest in a piece of property to Golding and the two others.
Golding had represented Keating in other matters, including a federal grand jury investigation of whether Keating had misused Department of Housing and Urban Development funds.
Keating says he was a silent partner in the development because, in 1978, HUD would not approve financing while the grand jury cloud hovered. Keating contends that Golding prepared no documents showing him as a silent partner.
The project was built with government financing but, in 1980, when Keating was cleared by HUD, Golding, Allocco and Marrin refused to cut him in on his 25 percent share, the suit says. By the late fall of 1984, a sale of the complex for $2.8 million was arranged and Keating sued.
BRIEFS: The paternity suit against Cook County Circuit Judge Irwin Cohen, which prompted use of an out-of-county judge and then was dismissed by Judge Dennis Berkbigler of Effingham, ain`t over. Acting on a motion from the Legal Assistance Foundation of Chicago, Berkbigler has now reversed himself and the suit is alive. . . . The Riviera Hotel in Las Vegas filed suit here to recover $100,000 advanced on Jan. 1, 1985, to attorney Dean Wolfson, who`s serving a 7 1/2-year sentence for Greylord-related bribery. . . . Attorney Howard Brandstein was sentenced to one year and a day in prison last week for paying bribes to court personnel who steered him clients in the courtroom of Judge Raymond Sodini. The sentence was imposed despite letters from friends, including Irv Kupcinet. . . . Gary Chico, research manager for the City Council Finance Committee, leaves to handle legislative matters for Sidley & Austin.
In a surprise, the Illinois Appellate Court rejected a lower court finding that a self-styled Waukegan minister whose singing group made national appearances was a public figure and reinstated a libel suit against then News- Sun reporter Adrienne Drell, now with the Sun-Times. The suit stems from a 1980 series alleging, in part, that Rev. L.R. Davis` religious sect lured sailors from Great Lakes Naval Base into homosexual encounters and urged them to desert. The court admits ”the issues here are close,” and the paper will appeal. . . . Commendations are awarded by Chief Deputy Sheriff Neil Sullivan to deputies James Kaczanowski, Walter Sparkman and Edward Petrik for stopping prisoner Robert Knox, convicted of two Class X felonies and facing trial in a third, from hanging himself from bars in back of Criminal Judge Thomas Hett`s courtroom. . . . Sixteen partners, 16 associates, 20 secretaries and 2 paralegals left Peterson Ross Schloerb & Seidel to form McCulloch, Campbell & Lane, with one saying the desire is merely to work in a ”smaller environment.”
An ABA Journal survey of 1,800 lawyers younger than 35 shows that more than half have household incomes of $30,000 to $70,000, 64 percent own a house or condominium, 67 percent own a microwave and 23 percent own a sports car. Does work affect their love life? Sixty-seven percent said it does, and, of those, 85 percent said it affects it negatively. And get this: 30 percent feel guilty about ”watching TV when I should be working out.” . . . Will the other big firms in town follow Kirkland & Ellis and jack up pay for associates just out of law school to $60,000 from $50,000? So far, raised eyebrows and no decisions from the likes of Isham Lincoln & Beale, Mayer Brown & Platt, Winston & Strawn and Sidley & Austin. . . . The Council of Lawyers` Monday luncheon included awards for being courageous souls in Greylord to Terrance Hake, former assistant state`s attorney who posed as a corrupt lawyer, and former Downstate Judge Brocton Lockwood, who posed as a crooked jurist in Traffic Court.
