IN RE: Francis J. O'Reilly (2026)

OPINION & ORDER

PER CURIAM.  On December 18, 2019, the respondent pleaded guilty in the United States District Court for the Southern District of New York to attempt to evade or defeat tax, in violation of 26 USC § 7201, and willful failure to collect or pay over tax, in violation of 26 USC § 7202.  His plea allocution was formally entered pursuant to an order of United States District Court Judge Kenneth M. Karas dated August 28, 2020.  On September 9, 2020, the respondent was sentenced to a term of imprisonment of 18 months, commencing on or about March 31, 2021, to be followed by two years of supervised release.  He was directed to pay restitution in the sum of $801,969 and an assessment in the sum of $200.

By decision and order on motion dated May 2, 2022, this Court, pursuant to 22 NYCRR 1240.12(c)(2)(iv), referred the matter to the Honorable Alfred J. Weiner, as Special Referee, to hear and report, including to make a recommendation as to whether the respondent demonstrated why a final order of public discipline should not be made based on his conviction on December 18, 2019, of attempt to evade or defeat tax, in violation of 26 USC § 7201, and willful failure to collect or pay over tax, in violation of 26 USC § 7202.  After a prehearing conference conducted on June 2, 2023, and a hearing conducted on October 20, 2023, the Special Referee filed a report dated December 19, 2023, setting forth his findings.  The Grievance Committee for the Ninth Judicial District now moves to confirm the Special Referee's report, in which he found that the respondent's serious crime convictions constitute professional misconduct and that there were aggravating factors present, and to impose such discipline as the Court may deem just and proper.  The respondent has not submitted a response to the Grievance Committee's motion.

The record shows that the respondent was charged by an information filed on December 18, 2019, in the United States District Court for the Southern District of New York with the two federal felonies.  The first count of the information alleged that the respondent withheld required payroll taxes from the salaries of some of the employees at his law firm and filed the required tax forms stating as much, but he failed to pay over those withheld payroll taxes and, instead, spent those funds on personal and business expenses.  Between January 1, 2015, and January 31, 2016, the respondent failed to pay the approximate sum of $27,823 in federal payroll taxes to the Internal Revenue Service (hereinafter the IRS) as required.  The information also alleged that the respondent failed to pay the employer's portion of the payroll taxes.  The second count of the information alleged that in April 2016, the respondent filed an individual tax return in which he falsely and fraudulently omitted substantial income that was realized from his attorney trust account and, therefore, indicated a tax liability that was substantially lower than his actual liability.  The respondent declared the approximate sum of $58,223 in income, with a corresponding tax liability in the approximate sum of $14,403.  Yet, the respondent removed the approximate sum of $119,000 from his attorney trust account for his personal use during 2015.  Despite declaring this improperly reduced amount, he failed to pay any taxes in 2015.  In late 2016, the respondent submitted forms to the IRS attempting to settle his outstanding tax liabilities, including with regard to his personal taxes for the period of 2002 through 2015 and his payroll tax liabilities for the period of 2006 through 2015.  In this offer in compromise, the respondent proposed settling at least $691,561 in tax liabilities for the sum of $12,400.  Although the respondent signed the offer in compromise under penalty of perjury, he made several material misstatements and omissions regarding his income and assets, including his failure to disclose (1) the existence of his attorney trust account, from which he drew substantial income, (2) real property and land he owned in New Mexico, and (3) the recent purchase of a vehicle for the approximate sum of $16,000.  The information therefore alleged that the respondent had willfully attempted to evade and defeat a substantial part of the income taxes that he owed for 2015 by, inter alia, filing false tax forms that substantially understated his income and making material false statements to the IRS in an attempt to conceal the extent of his income and assets.

During his plea allocution, the respondent admitted that between January 1, 2015, and January 31, 2016, he knew that he was required to withhold and remit payroll taxes from the earnings of his law practice employees to the IRS, but he knowingly and willfully failed to pay these taxes.  With regard to count two, the respondent admitted that for the tax year 2015, he prepared his tax returns and knowingly and willfully failed to report all of his income, thereby failing to pay all of the taxes that he owed to the IRS and committing at least one affirmative act of tax evasion.  He further acknowledged that he failed to pay the full amount of the tax liability that he did declare.  He understood that his conduct was unlawful, regretted his actions, and conceded that he owed restitution in the sum of at least $801,969.

The Hearing and the Hearing Record

The respondent fully admitted his misconduct and testified to mitigating factors.  The record shows that the respondent earned a bachelor's degree in business administration with a concentration in accounting and a master of business administration in taxation, in addition to his law degree.  He later developed a bankruptcy practice, where he helped others get out of significant debt.  He had previously worked as a bookkeeper and a certified public accountant (hereinafter CPA), and he admitted that as a tax professional, he was at all times aware of his obligations to properly report his income and pay his taxes.

The respondent explained that he had problems paying his taxes because his law practice was “undercapitalized” and he did not have sufficient funds, including to pay his payroll, office and home rents, and the most basic living expenses.  He admitted that at the time, he was building a house in New Mexico and inappropriately diverted funds to that project that he should have used to pay his taxes, claiming that the diverted funds were his earnings only and did not belong to his clients.  He denied that he harmed any clients but acknowledged that diverting these funds was a crime and that his priorities were “clearly wrong.”  He claimed that as soon as he entered his plea, he closed his law practice and made sure that all of his clients were properly taken care of.  The respondent testified that he “lost everything,” including the New Mexico house, in his divorce from his second wife.

In a letter to Judge Karas, who sentenced the respondent, the respondent admitted that he distinctly remembered preparing his fraudulent 2015 tax returns and the feeling of guilt as he mailed them to the IRS. He stated that he did so “in order to reduce [his] tax liability for the year so that in ten years, when the statute of limitations on collections had expired on the preceding years, [he] would be able to satisfy the 2015 liability and hopefully retire.”  The respondent testified at the hearing that he had begun working at various nonlegal jobs upon his release from incarceration and began paying restitution at a rate of least 10% of his earnings, beginning his payments sooner and at a higher rate than required by his sentence.  Over the course of approximately 23 months, the respondent made at least 46 restitution payments totaling at least $9,600.  At the time of his hearing, he owed approximately $788,000 in restitution, including interest and penalties, which reflected unpaid taxes that he admitted went back as far as 1997.

The record indicates that the respondent suffered from several health problems, including heart problems and ongoing complications from COVID–19.  It likewise shows that the respondent was involved in the New York Guard and held a leadership role in a nonprofit organization dedicated to the making of telescopes.  The respondent testified that he made the best of his incarceration, staying productive, learning a great deal, avoiding any disciplinary infractions, and earning an early release from probation.  The respondent asked the Court to consider, among other things, that he had taken responsibility for his actions, rehabilitated himself, and promised that he would not engage in this misconduct in the future.

In a report dated December 19, 2023, the Special Referee noted in mitigation, inter alia, the respondent's forthright admissions and remorse regarding his misconduct, his rehabilitation, and his restitution payments.  In aggravation, the Special Referee noted, among other things, that the respondent was aware of his tax obligations and knowingly violated them, signing a fraudulent written statement under penalty of perjury to the IRS, essentially for his own self-interest.  The Special Referee also noted that the respondent's tax evasion went on for almost 20 years, causing him to amass an unpaid tax liability of more than $800,000.

The Grievance Committee now moves to confirm the Special Referee's report, in which he found that the respondent's serious crime convictions constitute professional misconduct and that there were aggravating factors present, and to impose such discipline upon the respondent as this Court may deem just and proper.  The Grievance Committee notes that the respondent has a prior Letter of Caution from February 2010 related to his attorney registration and argues that the respondent has failed to show why a final order of public discipline should not be made.  The respondent has not submitted a response to the Grievance Committee's motion.

Findings and Conclusion

In view of the evidence adduced, the Court finds that the respondent failed to demonstrate why a final order of public discipline should not be made, and the Grievance Committee's motion to confirm the Special Referee's report is granted.  We find that the respondent used his experience as a CPA and a tax professional to intentionally avoid his tax obligations for almost 20 years, for his own personal benefit.  This seriously calls into question his character as a lawyer and his ability to serve as a fiduciary handling client funds.  Under the totality of the circumstances, including evidence of the respondent's cooperation and forthright admissions, as well as his efforts at restitution, the respondent is suspended from the practice of law for a period of three years.

LASALLE, P.J., DILLON, DUFFY, BARROS and BRATHWAITE NELSON, JJ., concur.

ORDERED that the Grievance Committee's motion to confirm the Special Referee's report is granted;  and it is further,

ORDERED that the respondent, Francis J. O'Reilly, is suspended from the practice of law for a period of three years, effective immediately, and continuing until further order of this Court.  The respondent shall not apply for reinstatement earlier than February 12, 2029.  In such application (see 22 NYCRR 1240.16), the respondent shall furnish satisfactory proof that during the period of suspension, he (1) refrained from practicing or attempting to practice law, (2) fully complied with this opinion and order and with the terms and provisions of the rules governing the conduct of disbarred or suspended attorneys (see id. § 1240.15), (3) complied with the applicable continuing legal education requirements of 22 NYCRR 691.11(a), and (4) otherwise properly conducted himself;  and it is further,

ORDERED that the respondent, Francis J. O'Reilly, shall continue to comply with the rules governing the conduct of disbarred or suspended attorneys (see id. § 1240.15);  and it is further,

ORDERED that pursuant to Judiciary Law § 90, during the period of suspension and until the further order of this Court, the respondent, Francis J. O'Reilly, shall continue to desist and refrain from (1) practicing law in any form, either as principal or as agent, clerk, or employee of another, (2) appearing as an attorney or counselor-at-law before any court, Judge, Justice, board, commission, or other public authority, (3) giving to another an opinion as to the law or its application or any advice in relation thereto, and (4) holding himself out in any way as an attorney and counselor-at-law;  and it is further,

ORDERED that if the respondent, Francis J. O'Reilly, has been issued a secure pass by the Office of Court Administration, it shall be returned forthwith to the issuing agency, and the respondent shall certify to the same in his affidavit of compliance pursuant to 22 NYCRR 1240.15(f).

ENTER:

Darrell M. Joseph

Clerk of the Court