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NYC Mayor: As Many as 700 Municipal Employees May Have Dodged Taxes

July 18, 1996

NEW YORK (AP) _ As many as 700 municipal employees may be avoiding taxes, the mayor said after the arrest of 15 police officers who claimed they didn’t have to pay taxes because New York is not part of the United States.

Some of the officers arrested Wednesday had sent letters to the IRS declaring themselves outside the sovereignty of the United States, and therefore not subject to tax codes, U.S. Attorney Mary Jo White said.

Since 1992, the officers have avoided paying roughly $450,000 on $1.6 million in income, authorities said. They were charged with tax evasion, failure to file and conspiracy to defraud the government.

While it might sound like militia rhetoric, the officers were driven by dollars, not ideology, authorities said.

``This is pure out-and-out cheating,″ Mayor Rudolph Giuliani said. ``If they were ideologically concerned, they would have quit their jobs, rather than trying to cheat the United States and the state out of taxes.″

The investigation into the alleged tax-dodging scheme also uncovered evidence that ``groups″ of city workers _ up to 700 _ in other agencies were similarly evading taxes, he said, declining to name the agencies.

Prosecutors are conducting an undercover investigation to determine whether some employees may have collaborated on the scheme, Giuliani told The New York Times.

The mayor would not say whether, or how, the groups may be linked.

From now on, he said, the tax records of all city employees will be scrutinized much more carefully.

When the officers appeared in court late Wednesday, Detective Barton Adams, 34, an alleged ringleader, told Magistrate Judge Douglas Eaton: ``I was brought here against my will. I don’t understand what’s going on.″

Another detective, Jose Lugo, said: ``I have been brought here by the use of coercion and threats. ... This court has no jurisdiction and I request to be released.″

The alleged tax evasion began in 1992, when two of the accused _ Adams and Officer Frank Sambula, 34 _ began peddling tax-dodging ``packages″ to fellow officers, authorities said. They allegedly charged $900 to $2,000 per officer.

During off-duty meetings, officers learned how to eliminate their federal and state paycheck deductions by claiming 98 or 99 dependents, authorities said. They also were told to skip filing returns and to sign a form letter to the IRS declaring themselves tax-exempt.

The scheme went unnoticed for nearly four years because the defunct Housing Police Department _ for which 14 of the 15 defendants once worked _ failed to alert the IRS that no deductions were being made on their wages, which ranged from $30,000 to $50,000 a year.

The boondoggle was spotted last year when housing police prepared to merge with the New York Police Department. An internal affairs investigation led to the arrests.

Three of the defendants are no longer on the force. The others were suspended.

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