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Ex-N.Y. Official Stein Pleads Guilty to Tax Charge

Dec. 1 (Bloomberg) -- Former Manhattan Borough President Andrew Stein pleaded guilty to a misdemeanor charge of failure to pay income taxes for 2008 and according to a prosecutor faces up to 12 months in prison.

Stein, who also served as New York City Council President from 1985 to 1994, was arrested in May along with investment adviser Kenneth Ira Starr, charged with committing a tax crime and with lying to investigators. Stein wasn’t charged in Starr’s investment-fraud scheme.

The former office-holder today admitted one count of failing to pay his taxes knowing that he “had taxable income in excess of $1 million for such year,” according to the charging document.

“I was wrong, your honor,” Stein told U.S. Magistrate Judge Ronald Ellis. Stein said he filed his tax return and never paid the taxes due.

“I stupidly did not pay the taxes for that year, and I take full responsibility for it,” he said.

“You should have been setting money aside to pay your income taxes, and instead you spent money on other things?” Ellis asked, after a prosecutor said Stein had to acknowledge that he acted willfully and intentionally.

“Yes, yes, sir,” Stein said. “It was wrong. It was 100 percent wrong not to pay it and I’m sorry. I filed correctly. I had responsibility for it. I intended to pay some part of it. It’s absolutely correct that I did not pay.” He added later, “I was 100 percent wrong and 100 percent sorry.”

Felony Punishment

Assistant U.S. Attorney William Harrington said conviction of a felony tax charge would have exposed Stein to as long as 37 months in prison. He faces as long as one year in prison when he is sentenced March 1 under the plea agreement, the prosecutor said in court.

“We have had time to evaluate the defendant and the circumstances of the crime,” Harrington said. “I do think he’s not a risk of flight.” The government didn’t object to Stein’s being released today on his own recognizance.

Starr, the investment adviser, routed investor funds to entities including Wind River LLC, a shell company created by Stein, according to the complaint filed in May.

Stein was originally charged with two felonies: making false statements in an IRS filing and making a false statement to federal investigators for when questioned about Wind River.

At a bail hearing in May, Harrington said prosecutors were probing Stein’s use of Wind River before coming across Starr’s alleged fraud. He said investigators questioned Starr about Stein before beginning to suspect that Starr broke the law.

Starr, 66, whose celebrity clients included actors Sylvester Stallone and Wesley Snipes, pleaded guilty in September to defrauding his clients out of as much as $50 million. He faces as long as 151 months in prison when he is sentenced Feb. 2.

The case is U.S. v. Stein, 1:10-cr-01171, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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