Bennett law firm failed to pay taxes

October 22, 1994|By Marina Sarris | Marina Sarris,Sun Staff Writer

A defunct law firm run by former top federal prosecutor Richard D. Bennett, a candidate for Maryland attorney general, failed to pay thousands of dollars in federal taxes for years, according to the Internal Revenue Service.

The Republican settled the matter this summer, paying $2,000 of the $59,000 in taxes the law firm had owed since 1988, and the government erased the debt, said IRS spokesman Domenic J. LaPonzina.

The IRS accepted the offer because it had no other hope of collecting from the disbanded firm, said Mr. LaPonzina, who spoke with Mr. Bennett's permission.

The bill arose from a 1988 tax dispute between the IRS and the law partnership Marr & Bennett.

Mr. Bennett disagreed with the IRS, saying the firm paid its tax bill in 1990, shortly before he was appointed U.S. attorney for Maryland.

Mr. Bennett said he heard nothing from the IRS until May of this year, which the IRS confirmed. At that point, the candidate said, he decided to offer $2,000 to resolve the matter, even though he thought the IRS was wrong.

He and the IRS do agree on one point: Mr. Bennett was not personally responsible for paying the bill.

The Maryland Democratic Party lost no time in criticizing Mr. Bennett, who is trying to unseat Democratic Attorney General J. Joseph Curran Jr. as the state's top lawyer.

"If he's not following the tax laws, what kind of attorney general would he be?" asked Kate Head, the party's executive director. "If he can't manage a two-partner law firm, what makes him think he'll be able to manage a state office with hundreds of employees."

Mr. Curran said he found the tax problems of the law firm "troubling."

"How can a candidate for attorney general, the chief law enforcement officer of the state, expect other people to follow the law if he doesn't," Mr. Curran said. "The thing that's more troubling is that some of these taxes were outstanding when he was U.S. attorney and charged with collecting citizens' taxes."

Mr. Bennett accused the Democrats of dredging up the issue to discredit him. "It's not a coincidence that the false charges on this tax issue have been raised in the same week as a poll that shows I'm close to upsetting Joe Curran in the race for attorney general. This is nothing more than an effort to distract the voters," the challenger said.

The tax disagreement, which began six years ago, centered on money withheld by the firm for employee taxes. Mr. Bennett said problems arose when the firm added lawyers, formed a new partnership and received a new tax number.

The firm contended that it owed about $40,000; the IRS said the amount was about twice that. The firm refused to turn over any money until the matter was resolved, Mr. Bennett said.

The firm disbanded in 1988 and two years later paid $52,000 to the IRS, believing the debt to be settled, Mr. Bennett said.

The government, however, maintained that Marr & Bennett still owed $36,000, mainly for the employer's share of Social Security taxes and penalties.

In 1991, Mr. Bennett became U.S. attorney for Maryland, a job that involves prosecuting tax violations, among other things. Mr. Bennett said he told the FBI about the tax dispute when that agency checked him out for the job.

The $36,000 debt remained on the books and continued to accrue interest and penalties until it reached $59,000 this year. Since the statute of limitations was running out on the debt, the IRS automatically filed a tax lien against the law firm in Baltimore Circuit Court in May.

Efforts to reach Michael E. Marr, Mr. Bennett's former partner, were unsuccessful yesterday.

The state filed against the firm in 1989 for $2,100 in unpaid state taxes that were later paid, said Marvin Bond, spokesman for the Maryland comptroller.

The Democrats also criticized Mr. Bennett for failing to reveal the debt on the financial disclosure form he filed with the State Ethics Commission in June.

John E. O'Donnell, executive director of the Ethics Commission, said a candidate for state office does not have to disclose a debt owed to state and federal governments.

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