Tax day horror story: King of Prussia firm says its accountant failed to file taxes for years
The accountant says it was pressured to be aggressive and now wants changes. A war of words heats up over how and whether international taxes should be paid.
For decades, family-run Purolite has sold specialty resins, gradually expanding sales to more than 30 countries. It is privately owned and doesn’t release financials.
So it was unusual when in February the company’s chief executive updated its website by posting an angry open letter.
“Beware! I want to personally warn you of the gross malpractice and professional misconduct committed against my company, Purolite, by our former accounting firm Citrin Cooperman,” warned Purolite’s Stefan Brodie.
The specific charge: The company’s accountants had failed to properly file Purolite tax returns — and in some years, failed to file returns at all — from 2010 to 2017.
In a tax dispute that’s both sobering and surprising, Purolite and Citrin have gone at it in court and in public, digging deep to fling mud at each other. Complicating matters has been the resignation and silence of the former Citron accountant who once oversaw Purolite’s tax preparation.
In a pending lawsuit in Philadelphia Common Pleas Court, Purolite is demanding $30 million in damages.
Citrin admits mistakes, but blames Purolite, suggesting that the manufacturer pushed to improperly reduce its tax bill from foreign income.
Purolite executives say they find that absurd, noting that Citrin assembled the documents it is now criticizing.
The dispute is another in a long-running controversial tax issue — how American multi-national corporations should account for overseas profits.
An important caveat: The combatants that Purolite paid taxes during the disputed years and the IRS isn’t currently auditing the company. According to court documents and interviews with The Inquirer, Purolite says it paid for all taxes over those years, relying on advice from Citrin about what it owed. Citrin now says the company owes additional taxes.
The fight is now focused in large part over a complex tax issue of whether Purolite owed taxes on money booked by off-shore subsidiaries. This has long been a vexing issue.
In recent days, the Biden administration has proposed plans for a “global minimum tax” to crack down on corporations stashing profits abroad to avoid U.S. taxes. Noting that countries have competed in a “30-year race to the bottom” to slash corporate tax rates, the Biden administration wants to collaborate with other industrialized economies to establish a minimum tax.
How the dispute started
Purolite was founded in 1981 and is currently run by the Brodie brothers, Stefan and Don; sons Howard and Jacob also work at the company.
Purolite makes absorbent resins, tiny beads that purify water and decontaminate solutions for the drug, food, semiconductor and power industries. It does so in plants from China to Romania.
The company runs 40 sales offices worldwide. As a firm that employs 1,200 people around the globe, it files complex tax returns.
For many years, Purolite and Citrin Cooperman accountants worked together in a partnership that began when the older Brodies hired a small accounting firm that was later, in 2007, purchased by Citrin.
For its part, Citrin, based in New York City, now employs 1,350 staff in 19 locations and books $320 million in revenues annually. It operates a large office in Center City Philadelphia.
In the summer of 2019, though, Purolite decided to switch accountants, shifting the work to EY, formerly Ernst & Young. As part of the change, it asked Citrin to pass over the relevant past paperwork.
That’s when Purolite learned that individual returns hadn’t been filed for years. And no state forms were filed from 2015 through 2017.
“Citrin Cooperman falsely represented to me and my company that it had completed and filed all required state, federal, and local tax returns for Purolite and its principals,” Stefan Brodie said in a statement.
“Citrin had prepared but never filed our corporate returns for tax years 2013 through 2017 and had failed to properly file all necessary tax forms for Purolite’s foreign affiliates from 2010 through 2017,” he said.
He also said his firm had paid all taxes that the Citrin firm had advised were owed, and also paid all of the accounting firm’s bills.
Purolite sued in 2019 and filed an amended complaint in 2021. It says its $30 million demand reflects money in federal taxes, interest and penalties they might owe should the IRS audit the firm.
In the years in dispute, the assigned accountant was Mary Brislin, a Citrin partner. According to the court filings, Brislin quit Citrin when questions arose shortly after EY picked up the accounting work.
Purolite “wanted copies of the papers, and then one day she quit without notice,” Joel A. Cooperman, Citrin’s chief executive and co-founder, said in an interview. “Certain returns hadn’t been filed, and that came to light.”
“After they terminated us, we gave them copies of everything they asked for.”
At that time, he said, it was Citrin’s opinion that Purolite “owed a lot more tax than they filed” because of its off-shore affiliates. He added: “They were pressuring our firm to prepare the returns incorrectly, which we refused to do.”
His firm now contends that Purolite’s Brodie brothers owe up to $60 million in taxes, based on revenue that should have been reported to the U.S. government. Cooperman also offered to pay for the preparation cost of Purolite’s corporate returns.
Making the situation even hazier, Brislin has gone mute, declining to talk with either side. “We’ve tried contacting her multiple times,” Cooperman said.
Brislin didn’t respond to The Inquirer, either. Phone and email messages went unanswered. She is currently an accountant for a Boys Scouts organization in Bucks County, according to the group’s website.
» READ MORE: Here’s how to get free help on your 2020 taxes
A disagreement last fall
Last August, Citrin made a presentation to EY, Purolite’s new accounting firm; and to Purolite’s law firm, Skadden. Citrin said it would file for the missing years after all, but insisted that Purolite had to pay more taxes for its overseas operations.
However, Skadden disagreed. The company and its lawyers wouldn’t provide a copy of the Skadden opinion.
The dispute centers on a complex part of the U.S. tax code known as Section 956, which is known as a “minefield” among tax practitioners, said Alice Abreu, professor of law and director of the Temple Center for Tax Law and Public Policy.
In the view of Citrin, Purolite is still pushing for improper returns.
After the Brodies posted their searing letter on their website in February, Citrin lashed back the following month.
“Citrin Cooperman has repeatedly resisted the Brodies’ demands to prepare tax returns ... that we believe would violate our professional standards and government regulations,” the accounting firm said.
Purolite executives, for their part, said Citrin is now in the curious position of denigrating its own work. They say they followed Citrin’s advice and paid taxes — as well as Citrin’s fees. They insist that Citrin file the forms it prepared.
“Inexplicably, Citrin has refused to do so and continues to obfuscate in a blatant attempt to cover up its wrongdoing,” Brodie said in a statement.
He added: “Cooperman’s assertion that Purolite has asked for ‘aggressive accounting’ is ridiculous, considering that Mr. Cooperman’s firm prepared and filed the Brodies’ personal returns based on the very same accounting.”