Hotel Tycoon Leona Helmsley Enters Prison for Tax Evasion

Date April 15, 1992

Hotel tycoon Leona Helmsley once declared, “only the little people pay taxes,” words that set off a scandal during her trial for federal tax evasion and other charges in 1989. She was convicted of underpaying taxes and, after losing her appeal, began her eighteen-month prison term in 1992. She died in 2007 and left the bulk of her multibillion-dollar estate to the care and welfare of dogs.

Locale New York, New York

Key Figures

• Leona Helmsley (1920-2007), hotel operator and real-estate investor
• Harry Helmsley (1909-1997), real-estate and hotel investor

Summary of Event

Leona Helmsley came from immigrantroots. She was born to a Polish-Jewish hatmaker in Marbletown, New York. After she had experienced several unsuccessful marriages, she was courted in 1968 by millionaire real estate investor Harry Helmsley, who was married at the time. In 1970, she joined one of his brokerage firms, Brown, Harris & Stevens, and her troubles soon began. In late 1971, she was sued by several clients for forcing apartment tenants to buy condominiums, threatening eviction if they did not buy quickly. She lost the lawsuit and was ordered to pay the tenants and grant them three-year leases. Her real estate license was suspended as well.

In April, 1972, Helmsley married Harry and focused on running his empire of hotels. Together, the two expanded their real estate holdings, building the opulent Helmsley Palace Hotel with more than eleven hundred rooms and standing fifty-one stories on Madison Avenue in Manhattan, New York. The Helmsleys also acquired 230 Park Avenue, the Empire State Building, and the building that became the New York Helmsley Hotel, as well as holdings in other states. Helmsley was featured in advertisements that portrayed her as a demanding manager who worked to achieve only the best for her guests, although rumor maintained that in reality she was even meaner, firing employees over the slightest of infractions.

The Helmsleys also had a habit of disputing payments to contractors and vendors. In 1983, they had bought an eleven-million-dollar Greenwich, Connecticut, mansion to use as a weekend retreat. The mansion, Dunnellen Hall, was located on a twenty-six-acre estate. They disputed a portion of an eight-million-dollar remodeling bill, claiming that the work was inadequate and that they were overbilled by contractors. With the dispute over the overbilling came the question of having to pay taxes on the services as well. The Helmsleys balked. In the course of the resulting legal action in 1985, it was discovered that the remodeling work had been billed to Helmsley Hotels as a business expense. While this was not an uncommon business practice, it was an illegal one. Angry contractors sent overdue invoices to the New York Post, and the resulting story set off a federal investigation. U.S. agents discovered that more than four million dollars in personal expenses had been illegally billed to Helmsley subsidiaries.

In late 1988, the Helmsleys and two associates, Frank Turco and Joseph Licarci, were indicted on 188 counts of tax fraud as well as extortion and mail fraud. The trial was delayed by Helmsley’s attorneys, who made the most of Harry’s health issues, until midway through 1989. Harry had suffered a stroke and mental deterioration a few months before the trial and was ruled mentally and physically unfit to stand trial, leaving Leona Helmsley in the courtroom to face the charges. The trial finally began on June 26 in the court of Federal District judge John M. Walker, Jr.

Helmsley’s reputation as a demanding ruler would end up working against her. The case was followed closely by the media, which dubbed Helmsley the Queen of Mean. Reporters interviewed her employees, uncovering hundreds of accounts of incidents where they had been threatened and verbally abused before being fired, often for slight infractions. Helmsley’s staffers said that she extorted money and services from suppliers and employees and threatened to withdraw the income she provided them.

Her employees appeared in court as well. Elizabeth Baum, a former housekeeper, testified that Helmsley told her in 1983, “We [the rich] don’t pay taxes. Only the little people pay taxes.” Another staff member recalled being fired while Helmsley was being fitted for a dress. One executive was chased down a hallway after telling Helmsley he was quitting. Maids were screamed at and fired over leaving lint on a floor or leaving a lampshade out of alignment.

Helmsley’s team of lawyers was led by Gerald A. Feffer, who was an expert in tax-fraud litigation. Assistant U.S. attorney James DeVita headed the prosecuting team. DeVita pointed to years of false invoices, tax fraud, extortion, and kickbacks on the part of the Helmsleys. Feffer claimed that Leona Helmsley had no knowledge of the falsified invoices, which had been created by Turco and Licarci because they wanted to pay the house-remodeling contractors without her knowledge. Turco’s and Licarci’s lawyers insisted at trial that Helmsley was indeed aware of the falsified invoices.

On August 30, 1989, Helmsley was acquitted of extortion. She was, however, convicted on one count to defraud the United States, three counts of tax evasion, three counts of filing false personal tax returns, sixteen counts of assisting in filing false corporate and partnership tax returns, and ten counts of mail fraud for sending fraudulent invoices via the U.S. postal service. Overall, the convictions could have added up to more than one century in prison. Helmsley initially received a sentence of sixteen years but, eventually, all but eight charges were dropped. She was fined more than seven million dollars. Licarci received a sentence of thirty months in prison, three years probation, and a seventy-five million dollar fine, while Turco was sentenced to twenty-four months in prison and three years of probation and was fined fifty thousand dollars.

Helmsley collapsed outside the courthouse on the day the verdicts were read and was subsequently diagnosed with hypertension and a heart problem. She appealed to the New York State Supreme Court and succeeded in having her sentence minimized. She served eighteen months in a federal prison beginning on April 15 (tax day), 1992.

Helmsley died of congestive heart failure on August 20, 2007, at the age of eighty-seven and nearly forgotten by the media and public. Former New York City mayor Edward I. Koch reportedly referred to her as the “wicked witch of the West,” while entrepreneur Donald Trump said she was “the meanest woman in history.” She was buried in Sleepy Hollow Cemetery in Westchester County, New York, near other public figures, such as Washington Irving and Andrew Carnegie, in a Greek-style mausoleum of thirteen-hundred square feet that features custom stained-glass windows of the New York skyline.

Impact

After her time in federal prison, Helmsley spent most of the rest of her life in isolation. Harry died in 1997, leaving to her his fortune of more than five billion dollars. In 2002, she was sued by a former employee, Charles Bell, who alleged that she had fired him because he is gay. A jury found in his favor and ordered Helmsley to pay him more than ten million dollars in damages, an amount later reduced by a judge to just over one-half million dollars.

In her later years, Helmsley was generous to charities, including the Red Cross in the aftermath of Hurricane Katrina in 2005, to African American churches that had been the victims of arsonists, and to numerous hospitals and medical centers. She donated twenty-five million dollars to New York’s Presbyterian Hospital for medical research and contributed five million dollars to a fund for the families of firefighters killed following the terrorist attacks of September 11, 2001. Upon her death, the majority of her estate was left to a charitable trust, although twelve million dollars was reserved as a trust fund for her Maltese dog, Trouble. (This amount was later reduced to two million by the court.) In July, 2008, the Helmsley estate executors announced that Helmsley willed the bulk of her fortune, between five and eight billion dollars, to the care and welfare of dogs. She was far less generous with the majority of her family, with whom she had a long tumultuous relationship. She left fifteen million for her brother and left nothing for two of her four grandchildren. The two left out subsequently received a few million by order of the courts.

Bibliography

Hammer, Richard. The Helmsleys: The Rise and Fall of Harry and Leona. New York: Signet, 1991. Describes the careers of the Helmsleys, the federal trial, and the trial’s tribulations.

Moss, Michael. Palace Coup: The Inside Story of Harry and Leona Helmsley. New York: Doubleday, 1989. Written by a former employee of Leona Helmsley, this book describes events before and up to the time of the trial.

Pierson, Randall. The Queen of Mean: Leona Helmsley. New York: Bantam Books, 1989. Focuses on the people who had worked with Helmsley.

Randall, Stephen, ed. The “Playboy” Interviews: Movers and Shakers. Milwaukie, Oreg.: M Press, 2007. Includes a November, 1990, interview of Leona Helmsley by Glenn Plaskin. Revealing in its content. Part of the Playboy Interviews series.

Strom, Stephanie. “Helmsley Left Dogs Billions in Her Will.” The New York Times, July 2, 2008. The news story about Helmsley leaving the majority of her estate to the care and welfare of dogs.