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Felonious CPA Seeks Millions In Lawsuits Involving Jorge Perez, Stephen Ross

While President Donald Trump is fighting efforts to bring his tax returns and financial history into the light, there’s another real estate billionaire whose taxes are wanted in court: Miami “condo king” Jorge Perez, the founder, chairman and CEO of Related Group.

As part of two civil lawsuits he filed in Florida’s 11th Circuit Court in Miami-Dade County, Ronald Katz, a former certified public accountant, is seeking to depose Perez and obtain copies of his tax returns. The cases have potential to expose the finances and tax maneuverings of one of real estate’s richest men.

Related Group CEO Jorge Perez at Bisnow's South Florida 2016 Forecast

Lawyers for Related Group called Katz's case a “fishing expedition” and wrote that even if there were an issue, Perez’s financial details should be protected by accountant-client privilege. In a Motion for Protective Order, Related Group’s attorneys said that Katz’s attempt to depose Perez “is but a transparent attempt to delve into Mr. Perez’s and his family’s personal tax matters for no other purpose than to generate leverage in this litigation … to harass and intimidate Mr. Perez on issues that have no bearing to this case.”

Katz was a CPA based in New York and Boca Raton. His high-profile clients included two of the most powerful developers in the country: Perez and Stephen Ross, founder of New York-based Related Cos. Ross and Perez have been best friends and business partners since the 1970s; they run separate businesses, but Related Cos. owns a stake in Related Group. 

In 2017, Ross, through a business entity, was found to have overstated the value of a charitable donation made to the University of Michigan by $30M. He and business partners in 2003 donated to the school their interest in a California property. The donation was worth $3.4M, but they claimed an inflated tax deduction of $33M.

In federal tax court, Ross testified that Katz had engineered the deal and that Howard Levine, an attorney whom Katz often worked with, assured Ross it was legal. The IRS ultimately denied the tax deduction and issued a civil penalty.

Around the time authorities were investigating Ross’s deal, they were also looking into Katz and Levine. While Levine helped clients set up tax shelters through his law firm, he routed payments to a partnership entity he co-owned with Katz, according to the Department of Justice. Levine failed to report $3M in income over a six-year period, and Katz hid $1.2M, federal prosecutors alleged.

The two men pled guilty to felony obstruction and tax evasion and each were sentenced to 24 months in prison.

In documents filed in his Miami lawsuit, Katz claims that between 2002 and the time he was indicted in 2015, he had served as a trustee on two family trusts for Jorge Perez, but was never compensated for that role. Before heading off to prison, Katz filed for bankruptcy in 2016. In his bankruptcy filings, he stated that he had a claim against The Jorge Perez Family Trust for unpaid compensation, against Ross and/or his affiliated entities for matters including unpaid wages, and against Related Group for $100K.

Seeking that back pay, he filed the two Miami lawsuits in 2017. One lawsuit is against the two current trustees of The Jorge Perez Family Trust. Those trustees are Matthew Gorson, senior chairman of the Greenberg Traurig law firm, and Ross.

If he is successful, Katz could walk away with millions of dollars from that case. Katz claims he is entitled to reasonable compensation for the time he served as trustee. In an amended complaint, he valued the assets of the trust at $300M in 2012, $310M in 2013 and $560M in 2014. Calculating that he's entitled to an annual trustee fee based on 1% of the asset value, he should be paid $11.7M for those years alone, he argued.

Ross and Gorson are scheduled to be deposed in September and October.

Katz’s second lawsuit is against Related Group for an annual fee for his work on Perez’s trust and taxes. Katz claimed that beginning in 2009, Perez's company engaged him as a consultant and paid him $50K per year for work on the CEO's tax returns. In a recent motion, Katz specified that his services “were provided directly to Jorge Perez, individually, and Jorge Perez’s children at the request of Jorge Perez,” but paid for by Related Group.

Katz claims that he was paid this $50K fee annually through 2013, but is still owed for two more years of work. He formally demanded payment in 2017 and was rebuffed by Related. This amounts to theft of professional services and breach of contract, he argued in his complaint. He asked to be awarded $300K for treble damages for the alleged theft and $100K for the alleged breach of contract, plus attorney’s fees and costs.

Related acknowledged in court filings that Katz “was invited to sporadic tax planning meetings in 2013 and 2014” but said that Perez’s personal tax returns are prepared by a separate accounting firm.

The case against Related went to mediation this June, but no agreement was reached, and it is slated to go to trial in September. Katz is also seeking to depose Perez and to obtain copies of Perez’s tax returns, as well as communications between Perez and Katz's old accounting firm, New York-based Mazars USA. Mazars is the same firm that handled Trump’s tax returns, for which it has been subpoenaed by federal prosecutors in an effort to investigate the president's financial dealings.

From about 2004 to 2009, Katz worked at an accounting firm called M.R. Weiser & Co, which acquired the firm that had long handled Trump's taxes, and in 2010 Weiser merged with Mazars.

George Taylor is a partner in Brinkley Morgan’s Estate and Trust Litigation and Business Litigation practice groups.

So far, judges in both cases have issued orders that allow any party to designate material as confidential. Such documents can be shared among the parties outside of the online court filing system so they don’t become public record.

Separately, Katz, Levine and their former firms — Herrick Feinstein LLP, Morritt Hock & Hamroff, and Mazars — are being sued in New York by Stuart Boesky and Alan Hirmes, former executives with Related Cos. who, like Ross, allege that Katz advised them to use tax strategies that were later found to be illegal — they claimed $14M in deductions on his advice. 

Related Group and Stuart Boesky declined to comment for this story. Attorneys for Katz, Ross and Gorson did not respond to requests for comment. 

George Taylor, a partner in Florida-based Brinkley Morgan’s Estate and Trust Litigation and Business Litigation practice groups, said that when a trustee's compensation is not specified in written agreements, courts will look at what a trustee was brought in to do — such as reduce tax liability or manage investments — and whether he accomplished that.

The court will likely note Katz's criminal record, Taylor said, but between 2002 and 2015, "He wasn't fired, he wasn't removed, so he must have been doing something right."

Taylor, who reviewed the case but is not directly involved, said it's likely Katz will be awarded some compensation, but 1% of trust assets would be "incredibly rich ... I think that's a reach."

Stanley Langbein, a professor at University of Miami School of Law, said Katz's cases illuminate how the American system protects the wealthy. He noted that with Katz and Levine, it was the CPA and the lawyer, rather than the billionaire clients who benefited from their strategies, who ultimately went to prison.

"The Southern District of New York has a tremendous reputation, like they're great prosecutors, but they protect the very powerful," Langbein said. "They seek publicity, but they will not prosecute the very powerful."

He said of outspoken former U.S. Attorney Preet Bharara — who led the prosecution of Levine in 2014, was later fired by Donald Trump, and has since become an outspoken critic of the current administration — "We call him Preen Bharara."

Regarding Katz's civil cases, Langbein said, "If you say 'The felon is suing [Ross and Perez],' it puts it in one light. If you say 'The fall guy is suing them,' it puts it in another light. The SDNY is great for finding fall guys."

In January, Harvard economist and former Treasury Secretary Lawrence Summers, in a paper issued with other experts through the Brookings Institution, put forward a proposal to deter illegal tax evasion and close loopholes that wealthy people use to lower their tax liabilities. This could bring $4 trillion into the U.S. Treasury, the paper said. Bill Gates and Warren Buffett have criticized the sort of dynastic wealth that is often built up and protected with trusts