One Man’s $1 Million Tax Bill
Pottsville Doctor’s Debt Covers Seven Years
© 1974, The Philadelphia Inquirer
Dr. Robert Morris Erdman, a Pottsville, Pa., physician, onetime bagman in the payoff of a New York judge and the middleman in the alleged fixing of two Federal income-tax-evasion cases, has only kind words for the Internal Revenue Service.
"Have people complained about the IRS?" asks Dr. Erdman. "I mean, do they harass people? They haven't harassed me. They've been very decent about it."
Dr. Erdman is talking about the nearly $1 million is unpaid Federal income taxes that the IRS says he owes for seven years between 1958 and 1965.
Of his lengthy and leisurely negotiations with the IRS – negotiations that have been going on since the early 1960s – Dr. Erdman declares: "I think that they just weren't trying to push things."
According to Federal tax liens filed in New York City, Bergen County, N.J., and Schuylkill County, Pa., Dr. Erdman, an orthopedics specialist who obtained his medical degree in London during World War II, owes $906,451.38, plus interest.
As best as can be determined, IRS agents began looking into Dr. Erdman's tax returns in 1960, but the first tax liens – the only public record of the unpaid taxes – were not filed until five years later in the New York City registers office.
Before establishing what has become a thriving medical practice in Pottsville, the 56-year-old Dr. Erdman had a lucrative insurance company compensation practice in Manhattan, examining injured persons and often testifying in court.
During those years in which the IRS says he was not paying all the income taxes he owed – from the late 1950's until the mid-1960's – the physician's financial condition looked like this:
Who is Dr. Robert Morris Erdman, a surgeon who ran up a million-dollar tax debt, yet speaks so highly of the IR and says confidently that he expects to reach an agreeable settlement with the agency?
He is a man who by his own account picked up and delivered cash payoffs to a New York State supreme Court justice in one case, and attempted to fix two other cases involving friends charged with income tax evasion.
He is a man who was described in a confidential Justice Department memorandum as a person with a "penchant for fixing cases for kicks," at the same time he enjoyed a protective relationship with the Justice Department.
He is a man who was found civilly liable for his role in a scheme to defraud a bankrupt company, while guaranteeing – and later refusing to pay - $50,000 in notes for a business associate convicted in another bankruptcy fraud case.
He is a man who quietly went about obtaining a license to practice medicine in Pennsylvania at the same time that authorities in New York State were preparing to revoke – and eventually did revoke – his medical license there.
He is a man who in legal documents or in appearances before various legal bodies, where he testified or made statements under oath, seemingly was given to relating conflicting stories.
Dr. Erdman stated in an affidavit dated Feb. 10, 1970, and filed in the Bergen County, N.J., surrogate's office in connection with the disposition of his wife's estate, that "I reside at Pottstown, Pa."
He actually lived in Pottsville, Pa., at the time, a coal-mining community about 60 miles and two counties north of Pottstown.
Dr. Erdman told a New York County grand jury on Aug. 13, 1965, when asked his address: "You can get me at Hopkins." Asked if he was on the staff of Johns Hopkins Hospital, he replied: "Yes, I am chief of orthopedics."
A spokesman for Johns Hopkins says that the hospital has no record of Dr. Erdman ever serving on the staff and that the present chief of orthopedic surgery has held that position for the last 20 years.
As good a time as any to pick up Dr. Erdman's life is in the late 1950s, when his medical offices were in New York, his staff numbered about six including a radiologist, and he was specializing in insurance compensation cases.
An executive of one insurance company testified years later that over a 19-year period, Dr. Erdman had made more than 20,000 physical examinations for his company alone.
In addition, he was on the staff of St. Clare's Hospital and the New York University (NYU) Hospital; served as an assistant clinical professor in the orthopedic surgery department at NYU, and worked at Bellevue Hospital.
In addition to his medical practice during those years, Dr. Erdman entered into a number of stock transactions and business deals with a Kings Point neighbor, Joseph Abrams.
Abrams, an accountant, has been convicted of a variety of offenses over the years, including Securities and Exchange Commission law violations, defrauding the government in a military-clothing contract, conspiracy to corrupt a government employe and income-tax evasion.
From about 1956 to 1958, Abrams arranged for Dr. Erdman to purchase stock at below market prices. Dr. Erdman described two typical transactions while testifying in a lawsuit in U.S. District Court in New York in 1970:
"For instance, he (Abrams) came in my office and he had United Profit Sharing. He said, '10,000 shares, I've got it for you for 85 cents. Actually, if you had to buy it, it would be $10,000, not $8,500.'
"And then there was a company, Sports Arena, where he came to the house and gave my wife and myself, I think it was 1,600 shares, or something like that, each, for whatever the price was the expected price was. I think it was a dollar and a half."
How did Abrams happen to start making the investments for his neighbor? The doctor explained:
"He didn't like to see me work so hard, and I couldn't save the money from my practice that I could make on investments."
Abrams offered another version. In 1956, Abrams said he entered into an informal agreement with Dr. Erdman in which the doctor agreed to use his insurance company contacts to help Abrams' brother, then a beginning radiologist, expand his medical practice. In turn, Abrams said he agreed to make investments for Dr. Erdman.
In subsequent litigation, Dr. Erdman maintained that he lost money on the stock transactions and business deals, while Abrams insisted that the doctor made money and never accounted for some of the profits.
Failed to Pay Tax
Be that as it may, 1958 was the first year, at least on the public record, that the IRS said Dr. Erdman failed to pay all his income taxes.
A tax lien on file in the Schuylkill County protnonotary's office in Pottsville, along with similar liens recorded in New York City and Hackensack, N.J., listed the doctor's unpaid taxes for 1958 at $624,258.
The assessment for the unpaid taxes was not made by the IRS until Oct. 14, 1966, a curiously long delay. But the IRS won't say why it delayed; the department refuses to discuss specific cases. Generally, assessments are made a year or two after the period for which the tax is owed.
The first lien notice was filed on January 25, 1967, in the New York City register's office, nine years after the tax was due and six years after the IRS made its initial audit.
It was sometime in 1960 at the latest – the IRS won't disclose and Dr. Erdman doesn't recall the exact date when IRS agents began examining the doctor's tax returns.
While the tax audit was going on, FBI agents began visiting Dr. Erdman at his office, in a five-story townhouse at 127 E. 61st St. in New York City.
The agents were especially interested in a join $50,000 investment Dr. Erdman had made in Ace Manufacturing Co., Inc., a Glen Burnie, Md., slot-machine manufacturer.
Dr. Erdman told the agents that his partners in the venture were Sanford J. Moor, a onetime New York City policeman and jukebox operator convicted of bankruptcy fraud, and Gabe Forman, an associate of Moore who was then importing and selling slot machines in Great Britain.
Each of the men invested about $17,000 and they hired a Long Island man, Harry Kay, to move to Glen Burnie and look after their holdings.
Kay (FBI No.: 553452) had a string of arrests running at that time from 1930 to 1960. He had served time in prison, charged with offenses ranging from Mann Act violations in Tulsa, Okla., in 1933, to grand larceny in Mineola, N.Y., in 1960.
Dr. Erdman was optimistic about his investment, telling FBI agents on June 19, 1961, that he was negotiating for the placement of slot machines on ocean liners.
Plans Went Awry
Then, too, he said, there was another new product Ace was about to market for fishermen, "a combination of a fish scraper, a fish cleaner, can opener and a bottle opener."
But the doctor's enthusiastic plans for Ace apparently went awry. Two years later, the company was forced into involuntary bankruptcy, although not before Forman disappeared with about $35,000 in proceeds from a sale.
About the time FBI agents were talking with Dr. Erdman about his investments, they were questioning Moore about an entirely different matter – an alleged attempt to fix the outcome of a criminal case against him in Federal court.
Moore said it all started when he visited Dr. Erdman's office shortly after he was indicted and told the doctor about fraud charges brought against him involving the bankruptcy of his Long Island jukebox company.
Moore told FBI agents that Dr. Erdman had this reaction to this story:
"In his (Dr. Erdman's) opinion, he told me that there was nothing to this, it was ridiculous and that he could straighten this whole thing out without too much of a problem." Later, Moore said, the doctor told him that it would cost $35,000 to fix his case.
That was the beginning of what turned out to be one of the most sensational court-fixing trials in New York State history. Indictments charging conspiracy to obstruct justice were returned on Dec. 7, 1961, against Dr. Erdman and four of his friends. They were:
Then New York State Supreme Court Justice James Vincent Keogh; former Chief Assistant United States Attorney Elliott Kananer; Antonio (Tony Ducks) Corallo, a labor racketeer, and Moore, the jukebox distributor.
From the very beginning, there were some reservations in the Justice Department about the case against Keogh, who was the brother of then Congressman Eugene Keogh, a powerful Brooklyn Democrat.
Some two weeks before the indictments were handed down, William G. Hundley, at the time a member of the Justice Department's organized crime task force, sent a 13-page memorandum to then Attorney General Robert F. Kennedy.
No Doubt on Proof
The memorandum, dated Nov. 22, 1961, stated in part:
"There is no question as to the proof of the involvement of Erdman, Moore and Kahaner…The case against Corallo is just fair. It depends entirely on Erdman and Moore and Moore is still dragging his feet.
"On Keogh there is only one witness to the payment of fix money – Erdman…Erdman is an enigma and on cross-examination will be vulnerable because of his extra-professional interests in a slot-machine company, psychiatric treatment and his penchant for fixing cases for 'kicks.'"
Hundley's reference to Dr. Erdman's fixing cases for "kicks" apparently concerned, at least in part, two, other judicial bribery incidents in which the doctor implicated himself when he appeared before the grand jury.
The Hundley memorandum tells about two separate tax-fixing cases in which two friends of Dr. Erdman – one a neighbor, the other a dentist – asked the doctor to use his influence in the criminal tax cases pending against them.
The memorandum indicates that Dr. Erdman acknowledged serving as a middleman, bringing the defendants together with the assistant U.S. attorney prosecuting the cases, and also allowing his medical office to be used as a drop for one of the payoffs.
No charges ever were brought against Dr. Erdman or the participants in the alleged tax-fixing cases. The neighbor claimed that in his case, the doctor's story about the fix was untrue. The dentist refused to talk unless granted immunity – a request the Justice Department refused.
That, then, was the background of the Federal government's star witness, Dr. Erdman, as the Justice Department prepared to go to trial against Justice Keogh, Kahaner and Corallo.
The trial started on May 14, 1962, and it is worth noting that by then Dr. Erdman's bill for unpaid Federal income taxes had climbed to $847,853.58 for the years 1958 through 1961.
And in two of those years, 1959 and 1960, with his income from medical fees running well above $100,000 each year, the doctor's tax returns show that he reported to the IRS that he owed no income tax at all.
How Fix Worked
Simply recounted, the court-fixing case was this:
Dr. Erdman was accused of delivering $35,000 in payoff money from Moore, who was seeking to be placed on probation for his bankruptcy fraud conviction, to Justice Keogh and Kahaner. Corallo helped Moore raise the money.
In return for his share of the money ($22,500), Justice Keogh, a state court judge, was to intercede on Moore's behalf with the Federal judge who was to impose the sentence. Kahaner was to use his influence in the prosecutor's office.
Keogh, Kahaner and Corallo all were convicted in the jury trial. The jury at first reported that it was deadlocked but was ordered by the judge to resume deliberations. Keogh's conviction came solely on the testimony of Dr. Erdman.
The court record is unclear, but Moore apparently never was brought to trial. After he agreed to testify, the original three-year prison sentence handed down in his bankruptcy case was reduced on the recommendation of the Justice Department.
Dr. Erdman later pleaded guilty to the conspiracy charge on June 1, 1964 and a month later – following a strong recommendation for leniency by the Justice Department – was placed on probation for five years and fined $5,000.
Justice Keogh, who has continued to maintain his innocence over the years, served eight months of a two-year sentence in a Federal prison and was disbarred.
What was Dr. Erdman's attitude toward his role in the payoffs? During the trial, he said he saw nothing improper in what he did, testifying:
"I am confessing what I did. Whether it was morally wrong, I say no, because you cannot control morality by passing any legal laws or you don't control my morality by breaking a legal statute, otherwise you would have had the Eighteenth Amendment existing today."
The doctor then had this exchange with a defense attorney concerning his guilt:
Q. – Tell me, please, are you guilty or not guilty of the charge of conspiring to obstruct justice and making a fix in the case in Brooklyn which concerned Moore?
A. – I am guilty in so far as what I did, I did, I do not feel I was morally wrong.
Q. – Doctor, you have not answered me. Were you guilty or not guilty?
A. – I don't think you can answer yes or no on this question.
About the same time in 1964 that Dr. Erdman pleaded guilty to the conspiracy charge in the Keogh payoff, the New York State Department of Education served notice on the doctor that the state intended to revoke his medical license.
Citing the Keogh case, the state charged Dr. Erdman "with unprofessional conduct," saying he entered into a conspiracy to violate Federal laws "by corruptly influencing, obstructing and impeding…the due administration of justice."
There were several hearings during 1964 on the revocation petition. One of the witnesses who testified on Dr. Erdman's behalf – in addition to former patients who told of his charitable acts and refusal to accept payment for medical care – was the Justice Department's Hundley.
Hundley, then chief of the department's organized crime and racketeering section, told the medical grievance committee conducting the hearings that Dr. Erdman "was the principal witness for the government."
"We could not have gone ahead without him," Hundley said. "There could not have been a conviction in that case unless the jury believed Dr. Erdman."
As for the doctor's future prospects, Hundley added:
"If you want my opinion, I don't think Dr. Erdman would get involved in fixing any more cases. This is just my opinion, sir."
That was on Sept. 18, 1964.
A little more than one month later, in a letter dated Oct. 26, 1961, a copy of which was examined by The Inquirer, Dr. Erdman wrote to Hundley about his continuing problems with New York State authorities and the outlook for keeping his medical license.
Dr. Erdman said he thought he would visit a Philadelphia lawyer who he believed was in a position to help him retain his New York license.
"There is a chance that he (the Philadelphia lawyer) shall be successful in getting my license," wrote Dr. Erdman. "Now that he had two major members sewed up."
Dr. Erdman then named the two physicians he believed to be "sewed up" by the Philadelphia lawyer and added: "The latter one you will find is on the same bank board (as the attorney)."
When it came time to put the matter to a vote on Feb. 25, 1965, though, the state authorities recommended revocation of Dr. Erdman's medical license.
Dr. Erdman appealed the decision through the courts. There was a series of legal arguments during 1965, with each court upholding the revocation.
Finally, in the Summer of 1965, about the time the appellate division of the New York State Supreme Court upheld the revocation of the medical license, Dr. Erdman moved his family out of New York City and found a new job.
He purchased a home for his wife and two sons in Gloucester, N.J., on July 15, 1965, and went to work at the Veterans Administration (VA) Hospital at Fort Howard (Baltimore), Md.
By the Spring of 1966, when Dr. Erdman had to surrender his New York medical license after exhausting all appeals unsuccessfully, he already had obtained a new medical license – this one from the state of Pennsylvania, issued Feb. 17, 1966.
According to a spokesman for the VA, Dr. Erdman remained at the Fort Howard VA Hospital until early September 1966, when he transferred to another VA Hospital in New Orleans.
While in New Orleans, he also served as a clinical associate professor of surgery in the orthopedics section of the Tulane University School of Medicine.
But Dr. Erdman didn't remain at his $20,000-a-year VA post long, leaving the New Orleans hospital and Tulane University in April 1967.
He next turned up in Pottsville, Pa. (population: 19,715), a mining town that is perhaps best known as the hometown of author John O'Hara.
Since arriving in Pottsville, Dr. Erdman has established a flourishing medical practice with an associate, Dr. Landis C. Heistand, under the name Pottsville Orthopedics Associates.
He also has continued what public records in three states indicate is a long-standing tradition: He owns no real estate in his own name, a practice that makes real estate seizure difficult, if not impossible.
The doctor's medical offices are on the ground floor of a three-story rowhouse at 309 W. Market St., which is owned by the Joden Corp.
Interestingly, a three-story rowhouse adjoining the medical offices at 311 W. Market St. is owned by a company called the Inden Corp.
Joden Corp. was chartered by the state on March 16, 1970, and its first officers were John Theodore Erdman, president, and Dennis Robert Erdman, secretary, the doctor's two sons.
Inden Corp. was chartered by the state on Aug. 11, 1972, and its first officers were Inez Matus, president, and Dennis Erdman, secretary. Ms. Matus is a medical assistant who works in the doctor's office.
The combined value of the two properties is more than $40,000.
Dr. Erdman's former $50,000 home in Closter, N.J., and his $90,000 home in New York, as well as his Manhattan office building, all either were owned in trust or by a corporation.
It was last Oct. 29 when Inquirer reporters visited Dr. Erdman in his office, where a steady stream of patients was passing through his examining rooms.
Dr. Erdman, who looks younger than his 56 years, is about 5 feet, 8 inches tall, weighs about 155 pounds, wears glasses and has light brown hair.
The doctor said he would appreciate it if the newspaper would not write about his unpaid taxes.
"Between you and me, we're just about ready to settle," he said of his ongoing negotiations with the IRS. "They're about ready to compromise. Give me six weeks, and I'll contact you myself."
Dr. Erdman allowed that he did indeed owe the back taxes, although he said the amount was in dispute and he did not agree with the IRS calculations.
"I owe them and I want to pay," he asserted, "but I feel we have a pretty good situation. It's a question of interpreting something as income and not capital gains. There were certain deposits they said were income, and I did not treat them as income."
'We're Very Nice'
When asked if the IRS ever had exerted any pressure on him to pay the back taxes, Dr. Erdman replied:
"No, because we've been trying to straighten it out. They just weren't trying to push me. They didn't squeeze me. They were very nice."
An Inquirer reported contacted Dr. Erdman again last Thursday – nearly six months after he said he was just about ready to settle with IRS – and asked how the negotiations were coming along.
"We're just about settling it," declared the doctor. "I spoke to the accountant, actually yesterday, and we expect a final figure within the next week or so."
There is one footnote to this story:
Later this month, at a Tax Court proceeding in U.S. District Court in New York, James Vincent Keogh, the former New York State Supreme Court justice, will contest an IRS claim that he owes $14,609.51 in back income taxes, plus a civil fraud penalty of $6,550.42.
The bulk of that money, $13,100.85, the IRS says, represents the tax on the $22,500 in payoff money that Keogh was convicted of receiving from Dr. Erdman.
But Keogh contends he never received the $22,500 and thus owes no taxes.
NEXT: The Unpaid Taxes of an Illinois-Pennsylvania-California insurance executive.