Attorney Held Liable for Client’s Company Tax Debt
In U.S. v Neuberger, the U.S. District Court for the District of Maryland (Oct. 23, 2025) held that an attorney was personally liable for the outstanding tax liability of a holding company established as part of a client’s broad investment plans. The entity, Lehcim Holdings, Inc., was one of many formed for and by the Konig family under the counsel of Isaac Neuberger, their attorney. Isaac was the sole director of Lehcim and able to act unilaterally without any direction from its shareholders. It was part of a web of various investment entities that held assets worldwide. Several of the entities were run and managed by Isaac and his team. As the opinion details, there were frequent transactions between the various entities. Most were characterized as loans, but the terms of the loans were lacking: there were no repayment terms, except for noting it as a demand loan to be paid in U.S. currency.
The payments between entities were often made under Isaac’s direction and effected on paper only, by noting transfers in and out on ledgers. Balance sheets were created for filing tax returns, but not used for other purposes. The Internal Revenue Service ultimately audited the company and determined that the loans weren’t bona fide, and so the interest deductions were improper. The IRS issued a notice of deficiency and sent it to Isaac and his team. They didn’t challenge the notice.
They did, however, continue to implement a “repayment plan” to transfer funds from other entities to pay off Lehcim’s loans payable to other Konig entities at Isaac’s direction. At the same time, Lehcim submitted a Collection Information Statement Form to the IRS stating that it had no cash on hand or in banks, no investments and no available credits or receivables.
The IRS continued to pursue Isaac and served Notices of Levy on his firm in two different capacities and two other Konig family entities. The federal government then retained a forensic accountant to evaluate Lehcim’s solvency. After wading through the tangled web of transactions, she determined it was insolvent in the years in question.
The government sought repayment under the Federal Priority Statute, 31 U.S.C. Section 3713(b), which holds a representative liable to the extent of the payment made if they transfer debtor assets before paying a government claim if the debtor is insolvent, and the representative has knowledge or notice of the claim. The court determined that Isaac transferred significant sums from Lehcim to pay purported loans to various entities, rather than paying the amounts due to the IRS. Isaac’s status as Lehcim’s sole director, president and treasurer qualified him as a “representative” under Section 3713(b). As a representative of Lehcim, he decided to implement the “repayment plan.” Then he distributed Lehcim’s assets when it was insolvent to a third party despite being aware of the amounts owed to the United States on the Notices of Deficiency. As a result, he’s personally liable for the outstanding tax liability.