Law360 previously reported that resigned New York Chief Judge Janet DiFiore's court officer detail continued even after she resigned in August while facing unrelated ethics charges, apparently in violation of state court policies barring personal use of state vehicles, outraging Albany lawmakers. (AP Photo/Hans Pennink)
"They didn't declare this as income, and the regulation says you have to declare it as income," said Daniel L. Feldman, an attorney and veteran of the state comptroller's office with expertise in investigations and oversight, reviewing data obtained by Law360. If the judges omit that personal use from their taxes, he said, "they violated the IRS requirements, plain and simple."
Failing to report all compensation to tax authorities can result in civil penalties or, if done willfully, criminal charges.
A spokesperson for the New York State Unified Court System's Office of Court Administration declined to comment or to answer any questions about the taxable value of the chief judges' chauffeur perks.
New York State Comptroller Thomas P. DiNapoli's office is "looking into the tax issue," a spokesperson told Law360 in response to questions, but clarified Monday that she could not confirm or deny if any formal inquiry was underway. The comptroller requires court officials to report these perks to his office to ensure accurate income is reported to state tax authorities.
Law360 previously reported that DiFiore's court officer detail continued even after she resigned in August while facing unrelated ethics charges, apparently in violation of state court policies barring personal use of state vehicles and outraging Albany lawmakers, who have vowed to look into the expense. Past chief judges did not receive such perks after they left.
"What seems particularly egregious is when DiFiore was out of the office," Feldman said, regarding the apparent failure to report that as compensation. "Those are some giant red flags."
Experts told Law360 that DiFiore almost certainly had taxable car and driver benefits last year, given that she enjoyed the perks for most of the year as a government official and then for months more as a private citizen. The declaration of $0 is in stark contrast to past years, where DiFiore valued her annual personal use of her 24/7 mobile security at an average of $580.
Before he became acting chief judge, Judge Cannataro valued his personal use of court vehicles at about $650 in 2019, $2,300 in 2020 and $2,500 in 2021. But the state comptroller's office certified it had no record of him or DiFiore reporting a penny of personal use for 2022, weeks after the filing deadline passed.
"It just doesn't seem to add up," said David M. Shapiro, a former FBI agent and expert in forensic accounting and financial crimes at John Jay College of Criminal Justice. "The top-line takeaway seems to be that the accounting for the fringe benefits wasn't entirely accountable."
After reviewing the data, Shapiro said he believed court officials had failed to meet IRS reporting requirements.
"We don't know whether the entire plan was not accountable, but it certainly seems nonaccountable with respect to DiFiore," Shapiro said.
That, Shapiro said, could carry harsh tax implications. Under federal tax law, all use of an employer's car and drivers is taxable income for the employee unless a business use is properly documented.
The Office of Court Administration spokesperson pointed to OCA attorneys' responses to Law360's requests under New York's Freedom of Information Law. In those responses, court lawyers certified OCA "has no records" logging where court officers drove DiFiore for the months after she resigned. The worksheets showing how she computed her taxable personal use were also missing for 2022, 2019, 2018, 2017 and 2016.
OCA disclosed two sheets of paper from incomplete taxable use forms for 2020 and 2021. They show that DiFiore was driven 54,000 miles in total and that she did not reimburse the state for any personal use expenses.
Court officials declined to answer a detailed list of questions about why the judges didn't report benefits last year, how the judges calculated their past benefits or what the tax implications are for the missing records.
Without backup documentation, Shapiro said, "that entire vehicle use becomes taxable to the judge. The IRS could take that position."
DiFiore's robust detail first began when she was Westchester County district attorney for a decade between 2006 and 2016, but county finance officials told Law360 "there are no records of any amounts for 'personal use of an employer provided vehicle' associated with Janet DiFiore" during that time. A rotating in-house team of about 12 district attorney investigators guarded her, records show.
Court officials say DiFiore's court officer detail is based on a security threat assessment from Westchester, but county officials refused to confirm or deny the existence of any such record.
Former court officials told Law360 that they could not recall any internal threat review being conducted when DiFiore took office. An independent assessment was brushed off, one said.
In response to Law360's records request appeal, OCA affirmed for the first time last week that records exist that "provide an assessment, guidance and recommendations to OCA personnel in determining the legitimacy of security risks to, inter alia, former Chief Judge Janet DiFiore and any response thereto." OCA refused to release any part of any security assessment record, arguing that disclosure could put its "employees at risk of danger, including former Chief Judge Janet DiFiore and security personnel assigned to her."
Judicial security experts have cast doubt on the idea that any threat could justify DiFiore's seven-year constant security detail. But even with a bona fide security threat, tax regulations are clear that protected judges must consider all commuting as personal compensation for tax purposes, in addition to any personal trips that are not explicitly approved by the security assessment.
A chauffeur's time also factors in the compensation calculation, IRS rules state. A security detail without proper justification and documentation would similarly become taxable personal income.
Underreporting compensation to tax authorities affects personal income tax as well as payroll taxes for state, local, Social Security and Medicare taxes.
Law360 previously estimated that DiFiore's court officer detail cost the state $3.5 million to $6.5 million over seven years, and her Westchester district attorney investigator detail cost about $5 million over 10 years — a total of $8.5 million to $11.5 million worth of taxpayer funded benefits.
"You spent a couple million bucks on this thing, and you have no record of it? Come on," Feldman said. "Whoever is responsible for this failure, whoever authorized this at OCA, also has some liability here."
There is a strong public interest in ensuring that the judiciary is not misspending public funds, good government advocates told Law360.
"It's highly suspect," said Reinvent Albany executive director John Kaehny of DiFiore's post-resignation security detail. OCA must clearly identify an individual responsible for justifying DiFiore's security detail, he added, "otherwise, it opens the door for unlimited abuse of state resources for anyone with the political juice" to give themselves a chauffeur and cite vague security reasons.
"These shouldn't be a Praetorian Guard to drive her around wherever she has to go," said Blair Horner of the New York Public Interest Research Group, referencing the imperial bodyguards of ancient Rome. "The public deserves an accounting for the protection, if she needs it."
"The public also has a right to know how much it costs," Horner added. "The opportunity to explore this in public will be during the budget hearings when the judiciary testifies."
Court spokesperson Lucian Chalfen previously refused to confirm the cost of the former chief judge's detail and called the issue "academic," as "these are employees who were on the payroll regardless and that was their assignment."
But concern about the misuse of these types of public resources by high-ranking New York state officials is not simply academic, others noted.
"There is a history in Albany of political leaders and government officials misusing drivers and security details for personal purposes," said Howard Master, counsel at global investigations firm Nardello & Co. and a former federal prosecutor who helped win the conviction of former state Assembly Speaker Sheldon Silver for bribery.
Master also cited the case of Alan Hevesi, a state comptroller who tasked his taxpayer-funded chauffeur with driving his wife around. An inquiry found there was no security justification for the detail. Hevesi pled guilty to felony fraud in 2006 and resigned. The New York attorney general calculated that he owed the state $206,000.
Former U.S. Surgeon General and state Health Commissioner Antonia Novello pled guilty in 2009 to a felony charge for using her staff as chauffeurs and making them run personal errands. Prosecutors said she cost taxpayers $48,000.
On the flip side, in New York City, despite a finding by the Department of Investigation that former Mayor Bill de Blasio abused his New York Police Department protective detail by ordering them to drive his children around, no criminal charges or penalties were ever levied.
A public legislative budget hearing is set for Tuesday morning, with newly appointed Chief Administrative Judge Tamiko Amaker set to testify.
"I anticipate that on Tuesday there will be many pointed questions for the Office of Court Administration from legislators," said state Senate Finance Committee Chair Liz Krueger, D-Manhattan, responding to Law360's previous reporting.
--Editing by Alanna Weissman.
For a reprint of this article, please contact reprints@law360.com.