Hotel ‘Queen’ Helmsley Convicted of Tax Fraud

NEW YORK —  A federal jury Wednesday in effect informed hotel “queen” Leona Helmsley that it’s not only the little people who are obliged to pay taxes.

After deliberating for just over four days, the jury found Helmsley, 69, guilty of 33 felony counts, including tax evasion, filing false tax returns and mail fraud. Helmsley, renowned from magazine ads as the perfectionist queen who reigned over the Helmsley Hotel chain, was convicted of evading $1.2 million in federal income taxes by charging personal expenses to Helmsley-controlled companies.

One of the more dramatic moments in the trial’s eight weeks of testimony came when Elizabeth Baum, a former housekeeper at the estate, said that Helmsley once snapped at her: “We don’t pay taxes; the little people pay taxes.”

Helmsley faces a maximum sentence of $7 million in fines, and up to 124 years in prison. But legal experts said she is unlikely to be sentenced to more than five years in prison.

The jury acquitted Helmsley on eight other counts, including conspiracy to commit extortion by taking kickbacks from suppliers to the hotel chain. Her husband, Harry, 80, a billionaire real estate and hotel magnate, also had been charged. But he was later declared mentally unfit to stand trial because his memory is failing. Two former Helmsley executives, Frank J. Turco and Joseph V. Licari, were also convicted Wednesday, on tax-related charges.

A U.S. Internal Revenue Service official said that under standard procedure in such cases, the Helmsleys would now be liable for back taxes plus penalties and interest.

Much of the trial focused on references to the Helmsleys’ luxurious style of living and Leona’s imperious personality. There were tales of Helmsley dismissing servants in fits of temper; Helmsley charging underwear, a leg waxing job and jade artwork to the Helmsley companies; and telling a recalcitrant executive who refused to approve false invoices: “You (expletive), you’re not my partner. You don’t tell me how to spend my money. You sign what you’re told to sign.”

Gerald Feffer, Helmsley’s lawyer, resorted to an unorthodox strategy in an effort to blunt the impact of testimony about Helmsley’s cavalier treatment of her employees. In opening arguments, he referred to his own client as “a tough bitch.” But he said her personality was not on trial, and urged the jury to focus only on the evidence.

In brief comments as they left court Wednesday, several jurors said they had done just that. “We just dealt with the facts,” said Alvin Taylor, 26, the jury foreman. A letter carrier for the U.S. Postal Service, Taylor said: “The personality had nothing to do with it.”

Another juror, Donald B. Isaacs, 43, a New York City sanitation department employee, said: “Leona Helmsley’s character was irrelevant.”

Slumps in Chair

As Taylor began reading the verdict, Helmsley, wearing an olive and black print dress, sat stiff and expressionless. But after the first few “guilty” verdicts, she slumped back in her chair. Helmsley remained in the courtroom for a long time after the proceedings ended while her lawyers, a niece and grandson comforted her. Free on her own recognizance, she then left the courtroom through a back door without saying anything to a throng of waiting reporters and departed in a limousine.

Sentencing was tentatively set for Nov. 14.

Feffer refused to comment on the verdict, but said: “Mrs. Helmsley will be filing an appeal.” Licari’s lawyer, Joseph R. Benfante, also said he will appeal.

Benito Romano, the acting U.S. attorney in Manhattan, acknowledged during a press conference Wednesday that the cost to the government of prosecuting the case may have exceeded the $1.2 million in taxes the Helmsleys allegedly evaded. But he said the case was an important one because it showed that “no one is free to flout the tax laws.” Romano said he hopes the verdict “discourages the cynicism that unfortunately is shared by many that the rich are above the law.”

Harry and Leona Helmsley, who together presided over a real estate and hotel empire worth about $5 billion, still face state criminal charges in New York for allegedly maintaining false business records and evading state taxes. No ruling has been made yet on whether Harry is fit to stand trial on the state charges.

During the federal trial, extensive evidence was introduced that personal expenses were charged to the Helmsley companies, but not reported by the Helmsleys on their taxes as income. Among the personal items were more than $1 million for the enclosure of one of two swimming pools on the Helmsley’s lavish Connecticut estate, Dunnellen Hall, credit card expenses for underwear, girdles and other clothing from department stores, a $130,000 indoor/outdoor stereo system modeled on something Leona had seen at Disney World, and a $45,000 silver clock specially designed in the shape of the Helmsley Building in New York. The latter was a birthday present from Leona to Harry.

There was also evidence in the trial that liquor salesmen and other suppliers to the Helmsley hotels had delivered envelopes of cash to Leona as kickbacks, and a supplier of television sets, on demand, gave her three free TVs. But during deliberations the jury asked U.S. District Judge John M. Walker Jr. to clarify the extortion law, especially whether money paid to get new business could be considered extortion. He told them that it could not. The jury acquitted Helmsley and Turco of extortion conspiracy, the count in the indictment that carried the harshest potential penalty, a 20-year prison sentence.

The publicity surrounding the trial reportedly took a toll on the Helmsley Hotel chain, which includes several of the best-known hotels in New York. Reservations at the luxurious Helmsley Palace in New York and other Helmsley hotels were said to have dropped substantially. The chain continued throughout the trial to run the magazine ads featuring Leona. A typical ad showed her in a bathroom of the Helmsley Palace, with the caption, “Spotless. But not to Leona Helmsley. Can you see why?”

But the chain’s advertising agency, Taylor-Gordon, Aarons & Co., chose the middle of the trial to announce that it had dumped Helmsley as a client. The agency said she was behind in her bills and had demanded a 40% reduction in fees. Larry Aarons, a partner in the firm, said after the verdict Wednesday, “my own personal feeling is that I feel sorry for her.” But he added: “I’m sorry she went out and did what she did.”

The government’s investigation was sparked two years ago by a series of articles in the New York Post, which had been tipped to the Helmsleys’ alleged tax law violations by a disgruntled former Helmsley employee.

In a last-ditch effort to stave off conviction by the jury of six men and six women, Feffer at the very end of the trial introduced evidence from two accounting firms that the Helmsleys had actually overpaid their taxes by $591,000 from 1983-1985, the years covered in the indictment. But Assistant U.S. Atty. James R. DeVita, who led the prosecution, apparently convinced the jury that the new accounting was untrustworthy and irrelevant.

Asked by reporters what had persuaded him to vote for conviction, juror Stephen Maier, 39, an electrician, said: “The evidence. Let’s face it. It was there.”

“Mrs. Helmsley and her friends didn’t have a chance,” said juror Michael Clark, 42. “Their fingerprints, their signatures, were on every piece of paper. Whether they knew what they were signing or not, their names were on everything.

“I guess if there’s a moral to the case, it’s this,” Clark said. “If you’re going to diddle the IRS, you better pull an Oliver North and buy yourself a couple of shredders; don’t sign anything at all.”

THE HELMSLEY TRIAL VERDICT

The three defendants were Leona Helmsley, 69; Joseph V. Licari, 53, former senior vice president and chief financial officer of Helmsley Enterprises Inc.; and Frank J. Turco, 46, former vice president and chief of financial services for Helmsley Hotels Inc. GUILTY: One count of conspiracy to defraud the Internal Revenue Service. All defendants guilty. Three counts of tax evasion, for years 1983-1985. All three defendants guilty. Three counts of aiding and abetting tax evasion, years 1983-1985. Turco and Licari guilty on each. Three counts of making and submitting false tax returns, for years 1983-1985. Leona Helmsley, only defendant named in these counts, guilty. Three counts, aiding and assisting filing of false tax returns of Harry and Leona Helmsley, years 1983-1985. Turco and Licari guilty on each. Sixteen counts of aiding and assisting the filing of false tax returns for various Helmsley-controlled companies and partnerships, years 1983-1985. All defendants guilty. Ten counts of mail fraud, in connection with defrauding the New York State Department of Taxation on state income taxes. All defendants guilty. ACQUITTED: Seven counts of mail fraud in connection with an alleged scheme to defraud the minority shareholders of a Helmsley-controlled company, Realesco Equities Corp. All defendants acquitted. One count of conspiracy to commit extortion, in connection with alleged kickbacks demanded from vendors and contractors who did business with the Helmsley Hotels. Leona Helmsley and Turco acquitted. Licari was not named in this count.