A jury sitting in Albuquerque made swift work of a week of courtroom testimony on complex tax codes, returns and laws, convicting an heir to an Abruzzo-family trust account of two federal crimes for failing to pay taxes on his inherited fortune.
Victor Kearney was convicted in U.S. District Court in Albuquerque of making and subscribing a false tax return and a conspiracy charge after a jury found he wasn’t paying taxes on hundreds of thousands of dollars of annual income he was receiving from two trust accounts left to him by his then-wife, Mary Pat Abruzzo Kearney, who died unexpectedly at age 31.
On Friday, it took a jury about three hours — including a lunch break — to find him guilty of the two charges after a trial that started Monday before U.S. District Judge James Browning.
The conspiracy charge carries a maximum penalty of five years in prison and the tax offense is punishable by up to three years.
Kearney remained on release after the verdict was read – he declined to comment while leaving the courtroom – and his sentencing hearing hasn’t been scheduled.
“The jury saw clearly what we’ve been seeing and dealing with all these years,” Louis Abruzzo, Mary Pat’s brother, said after the verdict was read. “It’s great to see the wheels of justice, although trying, work.”
Heated civil case
Kearney, who is bald and shaved and wore a gray suit during Friday’s proceedings, showed little emotion, other than to close his eyes for extended periods, as the verdict against him was read.
For about a decade, Kearney and the Abruzzo family have been locked in a heated civil case after Kearney unsuccessfully alleged in court his former in-laws had breached their fiduciary duties, which reduced Kearney’s trust account income.
The trust was funded, at least in part, by Alvarado Realty Co., or ARCO, the Abruzzo family company that developed Sandia Peak Tramway and the ski areas in Santa Fe and Albuquerque.
Kearney was the beneficiary of two trusts set up by his wife, which paid Kearney about $16 million from 1998 to 2018, according to court records.
Louis Abruzzo said legal expenses the family incurred battling that lawsuit drained his late sister’s trust accounts of a significant percentage of their principal.
“It has affected our family’s lives, and our ability to work with our companies at 100% with this going on,” he said. “All of this for what? Greed. Squandering. Gambling. I just don’t understand this type of behavior.”
‘He trusts people’
Paul Linnenburger, Kearney’s attorney, argued in court that his client was naive and “misplaced trust” in an unsavory tax lawyer.
After ARCO restructured to an S corporation in 2006, Kearney’s annual trust payments skyrocketed by hundreds of thousands of dollars, but so did his tax liability. So he hired Robert Fiser, a certified public account and lawyer, who prosecutors said had a history of tax evasion, drug use and soliciting prostitutes.
Linnenburger said Fiser had been recommended to Kearney, and all indicators were that Fiser could help Kearney sift through his new tax obligations.
“Put your trust in Robert Fiser, and it will always be misplaced,” Linnenburger said during his closing. “Victor Kearney learned that the hard way.”
Several of Kearney’s former business partners were called to the stand. They had collaborated with him to create software programs and nonprofit businesses over the years.
They said that Kearney was often full of grandiose ideas for the projects, but that he struggled to write with proper grammar and needed to have things read or explained to him, including a young-adult book that accompanied a game Kearney and others were trying to create.
“He needs his co-workers to sit on a couch and read a children’s book to him,” Linnenburger said. “That’s what Victor does, he relies on people. He trusts people.”
Fiser, who was indicted as a co-defendant in the case, previously pleaded guilty and last month was sentenced to 15 months in prison.
Prosecutors, meanwhile, argued that Kearney sought out Fiser specifically because he wanted to avoid paying taxes on his trust income.
Tax returns
In an ironic twist, it was the civil action Kearney took against the Abruzzos that partly set in motion the events that led to this week’s criminal case.
During his closing argument, Assistant U.S. Attorney Sean Sullivan asked the jury to focus on several choices that Kearney made over a period of years to find him guilty of a crime.
One of those was hiring Fiser, but another came to light as part of the civil case Kearney brought against the Abruzzos.
It was during discovery in that case in October 2013 that Abruzzo family attorneys requested Kearney’s tax returns. Those returns would show that Kearney hasn’t been reporting the income he received from those trust accounts, Sullivan said.
“Victor Kearney couldn’t have this happen,” he said.
Sullivan said amended tax returns from several years were provided as part of that discovery.
But over the course of the civil case, it was uncovered that those amended returns hadn’t been filed with the Internal Revenue Service, indicating Kearney was trying to cover up that those returns showed he wasn’t reporting trust income.
As part of that case, District Judge Alan Malott in July 2017 notified the IRS and the New Mexico Taxation & Revenue Department that evidence arose during a trial showing Kearney “has not properly reported income he has received, did not file required tax returns in multiple years, and unilaterally altered” income tax reporting forms issued to him by third parties.
Kearney was indicted in August 2019.
The conspiracy charges were connected with Kearney’s tax returns from 2007 to 2011, and he was also convicted of a tax offense specific to the 2011 return.
Tax professionals testify
Dozens of Abruzzo family members, spouses and longtime friends attended nearly every moment of the weeklong trial. They were the only members of the public (other than the Journal) who attended the proceedings.
Prosecutors called an IRS agent and numerous tax professionals, who testified for hours about the intricacies of tax law and regulations and how different things can lead to various deductions and liabilities.
On one particular evening, the cross examination of a senior tax manager from Moss Adams lasted several hours as Kearney’s tax returns from various years were displayed line by line and then referenced with different exhibits entered to the case.
Jurors yawned, popped sodas, took their glasses off to pinch the bridge of their nose and one might have nodded off briefly. But they all followed along the case and it didn’t take long on Friday for the eight men and four women to find Kearney guilty.
After the verdict was read, Browning invited all jurors to his chambers for a certificate and a mug to commemorate their public service.
