August 4, 2011 6:32 PM

Ex–S&C M&A Partner Admits Failing to Pay $2.8 Million in Taxes

Posted by Dan Kaplan

John O'Brien, a former partner and M&A specialist at Sullivan & Cromwell, pleaded guilty Thursday to charges that he failed to pay $2.8 million in federal taxes, reports sibling publication the New York Law Journal.

O'Brien, who left Sullivan & Cromwell in 2009, was charged Wednesday with two counts of failure to file U.S. income tax returns and two counts of failure to pay taxes, according to a complaint filed in federal court in Manhattan. 

The government alleged that O'Brien failed to pay taxes on $10.8 million in partnership income from Sullivan & Cromwell between 2001 and 2008. The four federal charges, all misdemeanors, related to the years 2004 through 2007. O'Brien pleaded guilty to all four counts, the NYLJ reports. Under a plea agreement reached with prosecutors, O'Brien is to make restitution of at least $2.8 million.

In a document outlining the charges against O'Brien, federal prosecutors said he used unreported partnership income for personal expenses, including a weekend home, international travel, and funding for a rare books business. O'Brien made more than $3 million in capital contributions to his rare book business between 2004 and 2008 rather than paying his income taxes, according to the complaint. 

Sullivan & Cromwell did not respond to requests for comment. O'Brien, who is being represented by solo practitioner Russell Neufeld, couldn't be reached for comment. (Click here for a copy of O'Brien's plea agreement.)

As the NYLJ notes, O'Brien is the second lawyer from a large firm to be charged with federal tax violations in the past month.

In July, former Kirkland & Ellis senior partner Theodore Freedman pleaded not guilty to four counts of income tax fraud stemming from allegations that he misrepresented more than $2 million in partnership income from the firm.

Freedman, a bankruptcy specialist who left Kirkland in 2010, is charged with cheating the IRS out of more than $1 million, including $542,358 in expenses for a nonexistent sole proprietorship law practice.


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