Tax Agents Say State Has a Vendetta

ALBANY, N.Y. (CN) - Five enforcement agents asked a state judge for help to get records they believe will show that the state Department of Taxation and Finance is trying to discredit them through audits.

The agents' complaint includes an affidavit from a retired tax official who says he knows firsthand of telephone, email and in-person discussions between his former boss and "a group of high-ranking officials within the DTF [Department of Taxation and Finance]" about "using taxpayer records to investigate and audit personnel" in the state Office of Tax Enforcement.

"It was, and still is, my understanding that the use of taxpayer records for employee administrative purposes is a violation of both federal and New York State law," Emanuel Urzi says in his affidavit.

The complaint in Albany County Supreme Court seeks to compel the tax department to turn over documents under New York's Freedom of Information Law on the decision to audit the agents' personal income tax returns.

Each received a "notice of delinquency" alleging they owe taxes, according to the complaint.

Plaintiffs Matthew J. Anderson, Gregory Aurigemma, Thomas M. Fedele, Arturo Ramirez-Calle and Alec Zef turned to the court after their FOIL requests and appeals were denied by the tax department.

Their attorney, Barry Leibowicz of Great Neck, also is a plaintiff. He unsuccessfully sought copies of the so-called income tax desk audit manual, which he says is important to his clients' contesting their alleged tax delinquencies before the department's Bureau of Conciliation and Mediation Services on Nov. 13.

The manual typically includes "pre-audit analysis notes, phone call notes and notes on the review of the taxpayer's tax returns under audit," Leibowicz says in the complaint. "It defies logic that an audit occurred and a notice of deficiency was issued without a single document created, email sent or record kept of a telephone call made."

The agents' initial FOIL requests, made to the tax department in May, were for "any and all records related in any way to the audit and subsequent assessment of income tax," the complaint states. When the department offered a "partial response" that the plaintiffs deemed "defective," they appealed.

Their appeals were denied in July. The department claimed it had "produced all responsive records, and any records that were withheld or redacted were done so properly," according to the complaint.

But the plaintiffs say the department's response "is inadequate in that it failed to acknowledge the existence of additional records responsive to the ... FOIL request," particularly electronic ones.

They claim more records do exist, and cite the affidavit of Urzi, who retired in 2011 as special assistant to Peter Farrell, deputy commissioner for enforcement at the tax department.

"Based on my direct and personal knowledge, respondents do have records which are responsive to petitioners' FOIL request that they apparently failed to disclose," the affidavit states.

Urzi lists a handful of tax department officials by name - a deputy inspector general, the director of human resources, the director of personnel, a deputy commissioner - who tussled with Farrell, his boss, over "using the department's taxpayer records in an effort to discredit members of the Criminal Investigations Division," where the plaintiff enforcement agents worked.

When Farrell "became aware of these improper investigations and audits, a large number of in-person, telephone and email communications ensued ... relating to the impropriety of using taxpayer data to investigate department employees," the affidavit states.

Urzi says he participated in many of the meetings and telephone conferences as Farrell's assistant.

"I know these communications did and must still exist," he says in the affidavit.

The affidavit claims the state recently seized from a tax official a computer that likely contained "files and messages which relate to the improper use of taxpayer records to investigate and audit department employees, including the petitioners."

The Albany Times Union identified the plaintiffs as part of a team that worked undercover to catch traffickers in untaxed petroleum, alcohol and tobacco. The newspaper quoted the former head of the team as saying the audits may be connected to a probe into whether some of the money seized in stings disappeared.

Attorney Leibowicz called the audits a "vendetta."

He told the Times Union he will make a federal case for civil rights violations if any of the records he seeks show the department used its audit powers improperly.

For now, the plaintiffs ask "that the court direct respondents to produce the withheld documents for copying and inspection, as well as any and all other documents or records relating to this matter not fitting within a specific FOIL exemption."

They also seek attorney's fees.

"By awarding petitioners' attorney's fees, the court will establish precedent and ensure that the New York State DTF does not abuse the disclosure provisions of the Public Officers Law or the strong public policy of open government, which serves as its foundation," the complaint states.

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