Amex, Cantor Fitzgerald And Pamela Anderson Land On Cyber-Shame Lists Of Tax Delinquents

Terrence Revere recently discovered that he is part of a notorious group that includes hip-hop star Damon Dash and financial institutions American Express and Cantor Fitzgerald.

As of Friday, the eclectic bunch had been identified as delinquents on New York's tax department website, which publishes a list of the top individual and corporate tax evaders, by amount owed. American Express and Cantor Fitzgerald deny that they belong on the list. Dash didn't respond to a request for comment.

"It's disgusting if you ask me," said Revere, 51, a Long Island construction-business owner with a $1.877 million tax bill that earned him the No. 35 spot on the list of 250 delinquent individuals. "Anyone can go on the Internet and cast a shadow over you." Revere denies that he owed that much. "The numbers are ridiculous," he said.

In July 2010, the New York Supreme Court rejected a series of appeals that Revere and his wife had pursued since their business was audited in 2003. "Petitioners underreported their own income by millions of dollars over a period of several years," Judge Bernard Malone Jr. wrote in a determination. "The record supports ... clear and convincing evidence of fraud."

Welcome to cyber-shaming, the public listing of individuals and companies who don't pay their taxes. The practice is gaining popularity as states struggle to find revenue in a weak economy. New York, New Jersey, Nebraska and Oklahoma in the past three years have joined the ranks of the roughly 30 states that publish "shame lists." The phenomenon gained ground globally in January when Greece, in severe financial distress, decided to publish its list of top tax delinquents.

On Friday morning, California published a new version of its list of those delinquent in paying income tax, the first since its legislature passed a law in October requiring the state to post the names of the 500 owing the most. California's previous list had only 250 names. This listing now includes the names of corporate officers of any businesses listed. Soon, the state will also be able to revoke the driver's and occupational licenses of those listed, according to Denise Azimi, a spokeswoman for the state's Franchise Tax Board. Included on California's list is actress Pamela Anderson who said she is working with the state to pay back the money.

States say that it's near impossible for anyone to end up on a list by mistake. Names are posted only after the debtors have multiple chances to protest and appeal and the amount can no longer be contested in court, according to tax board officials.

Representatives from Cantor Fitzgerald and American Express, two of the biggest companies on New York's list, told The Huffington Post that their inclusion was in error and that they were working to clear up matters.

"The tax department continues to mistakenly believe that there is any tax due from American Express and continues to attempt to collect tax that the Company does not owe," spokeswoman Marina Norville wrote in a statement. The company has been responsive to all tax department inquiries, she added.

"New York State mistakenly characterized this as tax due from payroll, whereas the matter concerned partnership distribution, which is not subject to payroll tax. Cantor earlier had brought this mistake on the part of New York State to its attention," Robert Hubbell, spokesman for Cantor Fitzgerald, wrote in a statement.

Cantor Fitzgerald owes $1.513 million and American Express owes $864,647, according to the list. In 2011, revenues at American Express totaled $30 billion.

"In both of those cases there were multiple letters sent, phone calls made and even field visits paid to the companies," said Geoff Gloak, a spokesman for the New York State Department of Taxation and Finance. "You're dealing with a situation which could have been resolved before it ever got to the warrant state and should have been."

The only way to end up on New York's list by mistake, Gloak said, is to make an error on your tax return. The department will remove names from the list if debtors submit new information; the list of delinquents rarely includes any individuals or businesses actively engaged in trying to clear up their state debt, he said. "In 80 percent of the cases we don't hear from the taxpayer," Gloak said. "They never contact us."

The lists don't apply to companies that employ aggressive tax strategies to reduce their bills or that fight audits in court, said Joshua Blank, a professor of tax law at New York University who has written an article on the efficacy of public shaming. They also don't include anyone in bankruptcy or working with the state to try to settle a case through a payment plan.

Compared with other measures, like raising taxes, cyber-shaming has proved a relatively noncontroversial way for strapped states to raise money. California collected $27.9 million as a result of its list last year, according to Azimi. This sum could theoretically fund the 730 firefighting jobs eliminated last year because of budget shortfalls.

California sends all those nominated for its list a last warning letter at least 30 days in advance, a strategy that helps the state receive payments before names are posted online. The mere threat of public humiliation is often enough to ferret out people who have dropped off the map, saving the state the trouble of trying to seize personal property by filing a warrant or lien.

While getting on California's list is difficult, exiting it can be harder. Simply mailing in a payment won't do it, according to Daniel Tahara, another spokesman for California's Franchise Tax Board. To get their names removed, people have to either pay in full, enter into a binding payment plan, agree to a compromise offer or declare bankruptcy, he said. Sometimes, people prefer to make small payments on their own, even if it means their name stays on the list, he said.

This is the case for actress Anderson, who owes California $524,241 according to Friday's list. On Thursday, Anderson had been listed as owing $607,861. In a statement released through her brand manager, Anderson told The Huffington Post that she was working with the state agency to make payments and that the issue was being resolved.

Critics say that the lists could violate taxpayer confidentiality, which is explicitly protected by federal law through the IRS tax code. While trumpeting the names of lawbreakers is not illegal -- some local governments even broadcast photos of convicted johns on TV -- issues of due process arise if a state doesn't do a meticulous job in proving that those named did break the law.

In the past, states like Louisiana and Illinois have suspended their lists because they couldn't afford to keep them current, according to Verenda Smith, assistant director at the Federation of Tax Administrators, an organization of state tax officials. "You've got to have the staff keep this thing clean," she said. "You don't want to be wasting your time with an angry citizen on the phone if you've published something unfairly."

Of course, the most outspoken critics of the lists tend to be those named, who frequently say that the information is inaccurate. Most of the 11 listed people reached by The Huffington Post claimed that they were fighting the debt or even denied knowledge of it.

"It's embarrassing," said Blank, the tax professor. "Paying taxes resonates with our shared moral norms. People fear this sort of publicity could have a negative effect on their professional -- and perhaps even personal -- relationships." Blank noted that the lists tend to work better for individuals than for businesses, as people are more likely to be held personally responsible by their peers.

Still, there are some individuals not easily shamed. New York's top 250 list of individuals, which was first posted online in June 2010, is today composed mostly of repeat offenders, with some of their warrants dating from 1992.

Sometimes this is because people literally can't pay what they owe. A handful of individuals on the list are in jail. Lawrence Salander, an art dealer convicted of grand larceny in 2010 owes New York $849,640. Other listed individuals, like Revere, owe taxes discovered through audits of previous years' income but might have already spent those earnings.

Other times the evasion is more willful. "There are people [on the list] who won't pay or don't want to pay," said California spokeswoman Azimi. For some, the lists and even the accompanying warrants allowing tax departments to seize homes, empty bank accounts and garnish wages have little effect. "They could be hiding assets somewhere that we can't find," she said.

Some disagree with taxes ideologically. Sunil Hirani, a finance executive and the founder of the financial startup trueSEF, a swap-execution facility, has spoken publicly about how New York's high tax rate harms entrepreneurship. In September, Hirani debuted on New York's list of individuals at No. 123, owing $748,462.

Hirani did not respond to The Huffington Post's requests for comment.

But for most people, the threat of public humiliation looms large, which is why the tactic has a long and effective history, according to Smith of the Federation of Tax Administrators. In the 1700s, newspapers, or "broadsheets" as they were then called, printed the names of property tax delinquents. The practice grew up with the Internet, with Connecticut becoming the first state to post a list online in 1997.

"We don't put people in stocks in front of the courthouse and throw rotten tomatoes at them, but we have our own way of doing that these days," Smith said.

Bonnie Kavoussi and D.M. Levine contributed reporting.

UPDATE: This story has been updated to include a statement from Cantor Fitzgerald.