U.S. v. Helmsley: 1989

Defendant: Leona Helmsley
Crimes Charged: 47 criminal offenses concerning conspiracy, tax evasion, filing false tax returns, mail fraud, and extortion
Chief Defense Lawyer: Gerald A. Feffer
Chief Prosecutors: James R. DeVita and Rudolph Giuliani
Judge: John M. Walker
Place: New York, New York
Dates of Trial: June 26-August 30, 1989
Verdict: Guilty on 33 counts
Sentence: 4 years in prison and more than $7 million in fines

SIGNIFICANCE: The Leona Helmsley prosecution signaled a new determination by the government to prosecute brazen tax evaders, regardless of their wealth or power.

Leona Helmsley, whose full name is Leona Mindy Rosenthal Roberts Panzirer Lubin Helmsley, married into money. Her husband, Harry Brakmann Helmsley, had been in the real estate business for decades. By the 1980s, his collection of hotels, office buildings, and other properties stretched across more than a dozen states and was worth at least $5 billion.

In 1980, Harry brought Leona into his business activities. He built the massive Helmsley Palace hotel in Manhattan, which became the flagship of the Helmsley Hotels corporation, and handed it over to Leona to manage. Leona not only managed the hotel successfully, but in short order she became the president of Helmsley Hotels, overseeing all 26 of Harry's hotels. As a reward, in 1983, Harry bought Leona an estate called Dunnellen Hall in Greenwich, Connecticut. Dunnellen Hall contained an enormous mansion situated on 26 carefully landscaped acres. Harry gave Leona carte blanche to redecorate it as she saw fit, and that's when her troubles began.

Leona had expensive tastes. She spent millions having a marble dance floor and a custom-built swimming pool installed, on antiques and art for decoration, and on everything from gardening to her personal wardrobe to make Dunnellen Hall live up to her vision of a dream house. Although the cost of remaking Dunnellen Hall was less than one percent of the value of the Helmsleys' fortune, Leona paid the bills through the various Helmsley corporations so that they could be deducted as business expenses. To help cover her tracks, Leona forced suppliers to submit their invoices with phony work descriptions on them under the threat of losing all Helmsley business.

A regional newspaper, the New York Post, learned about some of Leona's dubious activities and published an article about her on December 2, 1986. Assistant U.S. Attorney James R. DeVita happened to read the article and promptly initiated an investigation. For the next 2-4 years, the federal prosecutors and their counterparts in the office of New York State Attorney General Robert Abrams pored over the Helmsleys' personal and business records, questioned their employees, and went to the various suppliers and contractors involved. The prosecution's efforts resulted in an indictment against Leona for 47 violations of federal law, relating to her evasion of more than $4 million in taxes from 1983 to 1986, as the result of illegally writing off the estate renovations as business expenses. Leona was even charged with extortion, for having forced suppliers to provide phony paperwork.