SCRANTON, Pa. — A prominent figure in the Luzerne County “Kids-for-Cash” scandal was in federal court Wednesday to plead guilty to tax evasion.
Robert Powell was disbarred nearly a decade ago for his role in the judicial scandal but he still collected fees owed to his former law firm. In court Wednesday, he admitted he did not pay federal taxes on those fees.
"For over a decade, Robert Powell failed to file personal income tax returns and executed a sophisticated scheme to evade paying substantial taxes that were due and owing the (Internal Revenue Service) from massive legal fees his firm earned," U.S. Attorney Gerard Karam said in a statement. "The brazenness of his conduct included using nominee bank accounts, reporting zero estimated tax liability for the years in question and repeatedly lying to IRS auditors attempting to unravel the scheme."
Back in 2009, federal authorities accused Powell, 65, of funneling nearly $1 million to former Luzerne County judges Michael Conahan and Mark Ciavarella to keep a juvenile detention center Powell owned full of children. He ultimately served more than a year in federal prison for tax evasion and another crime.
He might soon find himself back there again for tax evasion.
According to court records, Powell’s firm, the Powell Law Group, was slated to receive $120 million in attorneys’ fees from the settlement of an environmental contamination lawsuit in 2014.
Even though Powell's law license was suspended at the time (he was disbarred in 2015), he still retained the right to collect a sizable amount of the firm’s fees.
Powell's share of the contamination lawsuit was in the millions of dollars, but he did not pay tax on it, prosecutors said. He did not file a tax return at all between 2010 and 2022, they added.
The attorneys' fees were finally disbursed in 2016. However, once the contamination lawsuit settled, the firm started taking out loans totaling $125 million using the promise of the future fee payment as collateral.
Powell directed the loans into nominee bank accounts he controlled and used the proceeds to pay personal debts and expenses, authorities said.
Once the fees were paid in June 2016, the loans were repaid and Powell personally collected another $3.6 million.
However, he did not file a personal income tax return or pay the taxes on the receipt of his fees.
The IRS in 2019 started an audit of his tax liabilities and sat down with Powell for an interview. Powell lied about his income and expenditures, authorities said.
“Powell engaged in a lengthy scheme to hide his income and not pay taxes. And when audited by the IRS, rather than step up, acknowledge his illegal conduct and pay what he owed, he chose to double down and lie to the revenue agents who interviewed him," said Stuart Goldberg, acting deputy assistant attorney general in the Justice Department’s tax division,.
As part of his plea, Powell agreed to pay restitution to the IRS in an amount yet to be decided by the court. He’s free on unsecured bond while he’s awaiting sentencing and is facing a potential maximum penalty of five years in prison.
Powell's attorney could not immediately be reached for comment.