In county courthouses across the country, Federal tax liens are pending against thousands of individuals who the government says owe anywhere from $50,000 to millions of dollars in unpaid back taxes which the Internal Revenue Service has failed to collect. This is the story of one such person.

© 1974, The Philadelphia Inquirer

When he came up for sentencing on a Federal tax-law violation, Seymour Lester Rosenfield could not have asked for a more stirring portrait of himself than the one drawn by his attorney.

Rosenfield, according to Philadelphia lawyer B. Nathaniel Richter, was a "crackerjack" insurance executive who became the "innocent victim" in one of Pennsylvania's largest insurance company failures.

Richter asserted that his client had lost all his savings, was suffering from poor health, and desperately needed a break from the judge to rebuild his career and pay his personal back taxes, which then totaled $1.1 million.

"Mr. Rosenfield has had a very, very unhappy eight or 10 years," Richter told U.S. District Judge Clarence C. Newcomer on April 17, 1972.

Yet at the same time Richter was recounting his client's grim life, Rosenfield's family was living in the plush, new, planned community of Calabasas Park in the San Fernando Valley near Los Angeles, on the site of the old Warner Brothers ranch where classics like "Robin Hood" and "National Velvet" were filmed.

For transportation, the Rosenfield family relied on a green 1972 Cadillac to carry them back and forth between their modern, Spanish-style house overlooking a 21-acre man-made lake and the community's various tennis courts, riding stables and swim club.

When not at home in the Valley, the Rosenfields might be found at their rented $162,500 Malibu beach house, once owned by singer Nat King Cole, along an exquisite stretch of sand and sea where Lee Marvin, Henry Mancini and Debbie Reynolds also maintained homes.

Like most persons convicted of violating tax laws, the 50-year-old Rosenfield did not pay his back taxes. Nor did he go to jail. But that's not because he wasn't sentenced to jail.

Indeed, Judge Newcomer imposed a six-month sentence on Rosenfield, allowing him to go free on his own recognizance pending the outcome of an appeal.

After his conviction was upheld by the U.S. Court of Appeals, Rosenfield was ordered to surrender to the U.S. marshal on Jan. 15, 1973, to begin serving his sentence. He failed to appear.

It was not until May 2, however – more than three months later – that the office of U.S. attorney Robert E. J. Curran in Philadelphia sent a request to the Internal Revenue Service to investigate why Rosenfield had not appeared and where he might be found.

His attorney, Richter, says the last he heard, Rosenfield had fled to Canada.

When U.S. Attorney Curran was asked Monday about the current status of the Rosenfield case, he replied:

"I really don't know. He may have been (arrested). Did he receive a jail sentence?  He may be serving it."

Later in the day, Curran's office told The Inquirer:  "Mr. Rosenfield just can't be found."

Inquirer reporters, though, found that last summer Rosenfield had been in Las Vegas, where he maintained an apartment near the Desert Inn.

Dealt in Millions

To date, Rosenfield remains at large.

Such is the casual way the Federal government – the Justice Department as well as the IRS – handles tax cases of upper-income individuals and corporations.

In a three-year period in the mid-1960s, when Rosenfield's unpaid income taxes already totaled $1.1 million, his income amounted by his own estimate to $400,000.

In fact, over the last 15 years, Rosenfield was involved in one intricate insurance or stock transaction after another, dealing in millions and millions of dollars.

He was also involved, directly or indirectly, in some other things.

There was the overcharging of in-bonds in Chicago. There was the case of the missing insurance company assets in Philadelphia. There was the case of the stolen stock in Gettysburg.

There was the collapse of Empire Mutual Insurance Co. in Philadelphia and Bankers Allied Mutual Insurance Co. in Gettysburg – two of the largest insurance company failures in Pennsylvania history.

There was the overcharging of insurance policyholders in Illinois and the disappearance of $150,000 from a securities sale in Pennsylvania.

Began in Chicago

There were investigations or legal proceedings for years, probing Rosenfield's business activities in Chicago, Philadelphia, New York, New Orleans, the Bahamas and Gettysburg.

But it was in Chicago that the investigations started.

An insurance broker or executive most of his career, Rosenfield became a fire insurance underwriter after World War II in his native Chicago.

By the 1950s, he operated two agencies, the Stephen & Reid Agency, named for his two sons, and the Foremost Insurance Agency, Inc. His wife, the former Geraldine Strike, whom he married in 1948, was a partner in both agencies.

In 1957, Rosenfield formed a partnership with two other Chicago insurance men to funnel high-risk casualty insurance through one of Rosenfield's agencies, which in turn was to place the policies with a British insurance company.

But six months later, one partner, whose own insurance license later was revoked by Illinois, filed suit against Rosenfield, charging that Rosenfield had refused to pay him commissions on several hundred policies.

The same British company turned up again in a lawsuit filed by a Chicago contractor who charged that Rosenfield had fraudulently executed a performance bond covering the work of a subcontractor.

He charged that Rosenfield had no authority to execute the bond, executed it without the knowledge of the British company and did not forward the premiums he collected.

By the late 1950s, Rosenfield's activities were coming to the attention of Illinois insurance officials.

Policies Altered

Early in 1959, the Lincoln Casualty Co. of Springfield, Ill., filed a complaint with the Illinois Insurance Department stating that Rosenfield was overcharging property owners for their fire insurance policies.

In confirming the companys' charges following an investigation, the insurance department reported that it found a number of cases in which insurance policies sold by Rosenfield had been altered and "the premium amount changed."

The Insurance Department said Rosenfield, who was selling policies for Lincoln Casualty, was charging property owners a higher premium than he was returning to the company – presumably pocketing the difference.

At the same time Rosenfield was under investigation for overcharging on fire premiums, he was setting up new casualty insurance company called General Union Mutual Insurance Co. in Chicago. He was president and treasurer. His wife was assistant secretary.

After General Union was licensed to operate in June 1959, the company wrote about $250,000 in insurance business over the next 18 months.

In the meantime, though, Rosenfield moved on to Philadelphia in 1960 to become president of an existing insurance company called Empire Mutual Insurance Co. with offices at 1604 Walnut St.

Interestingly, the Chicago and Philadelphia insurance companies Rosenfield headed shared the same management agent, a company called General Mutual, Inc.

The president of General Mutual, Inc., of course, was Rosenfield.

Under the management agent system, General Mutual ran the insurance company business in return for a percentage of the premiums.

2 Firms Collapsed

The agreement with Empire provided that General Mutual would receive a management fee equaling 20 percent of the premiums on policies written by Empire.

In addition to sharing the same management agency and the same president, the Chicago and Philadelphia insurance companies also shared the same end:  They both collapsed under peculiar circumstances.

And Illinois Insurance Department audit of the books of General Union Mutual showed that the company's assets dropped from $113,000 when it started operations in June, 1959, to $60,000 about 18 months later.

General Union subsequently was seized and ordered liquidated by Illinois insurance officials in 1962. By then, Rosenfield was well established in Philadelphia.

It was from this early 1960s period that Rosenfield's tax problems would later arise. The money he earned from 1960 to 1963 later led the IRS to assess him for $1,122,516 in unpaid personal income taxes.

An additional assessment of $968,971 was levied against his General Mutual, Inc., for unpaid corporate income taxes due in 1962 – bringing the total Federal taxes the IRS said he owed to $2,091,587.

But these assessments by the IRS were not made until years later. During the intervening period, Rosenfield continued to earn substantial sums of money.

IRS records indicate that the only taxes he paid from 1964 through 1967 was $14,091 withheld from various paychecks. But the same records indicate that his taxable income during the period was $618,777.

Judgment Unpaid

During the time he had insurance operations in both Illinois and Pennsylvania, Rosenfield negotiated a $185,000 loan from a New Orleans bank in connection with yet another insurance company he had set up in the Bahamas.

After the bank filed suit when no payments were made on the loan, Rosenfield tried to convince a jury hearing the case in Philadelphia he knew nothing about the transaction.

He said he signed blank papers at the National American Bank of New Orleans on instructions from a Boston financier, who he claimed had worked out all the details.

Rosenfield, who had been dealing with millions of dollars as an insurance executive, told the jury:  "The mechanics of working out this particular transaction were completely beyond me."

The jury didn't believe him, especially after bank officers testified that Rosenfield signed papers that clearly spelled out his liability. A judgment for $186,902 was entered against him. It remains unpaid.

When the jury announced its verdict, Rosenfield hastily scribbled a list of questions concerning the case. He handed them to three unidentified associates – two women and a man – who, calling themselves Citizens for Better Government, unsuccessfully tried to interview jury members about how they reached their verdict.

Rosenfield's unorthodox polling of the jury drew this response from Judge William C. Kraft Jr., who heard the case in U.S. District Court in Philadelphia:

"We don't propose to take any action about it. We are going to file this document with the court reporter…But we want you to understand that we take a very dim view about this practice."

$1.8 Million Deficit

Time and again, Rosenfield relied on the argument he used in the New Orleans bank case – that he was victimized by his own associates. Such was also the case when the Empire Mutual Insurance Co. collapsed in 1963.

An audit that year by the Pennsylvania Insurance Department disclosed that the Rosenfield-run Empire was in deep trouble, unable to meet its losses or pay claims, and running a deficit of $1.8 million.

The state discovered that a $2 million deposit to Empire's account at the former Broad Street Co. – a deposit made as part of Empire's required reserves to sell insurance in Pennsylvania – really didn't belong to Empire.

Through a complicated series of financial transactions, with the money passing from New Orleans, to New York and finally on to Philadelphia, the $2 million deposit was made to appear as though it was controlled by Empire, when in fact the money belonged to two other companies.

In later court actions, Rosenfield's attorneys attributed the financial maneuvering that led to Empire's collapse to a Rosenfield business associate who had died in the interim.

In April, 1965, two years after Empire went out of business, a Philadelphia grand jury indicted Rosenfield for perjury and embezzling $4.5 million in stocks and bonds from Empire.

The perjury indictment stemmed from a December, 1962, statement Rosenfield signed and sent to the State Insurance Department, listing the $2 million Broad Street Trust deposit as an Empire asset. The state said Rosenfield knowingly made a false statement.

He subsequently was convicted of perjury on Sept. 20, 1968, for submitting a falsified financial statement.

A year later, in imposing a tough two to-seven-year jail sentence on Rosenfield, Common Pleas Court Judge Edmund B. Spaeth Jr. took the insurance executive to task for his financial manipulations.

He Denied Guilt

"The record indicates you are a man of great financial abilities," Spaeth told Rosenfield on Sept. 29, 1969. "The scheme, as the jury found it to be, was a brilliant scheme. You have sadly misused your financial abilities, and you have done it to the sorrow of many people…You have misused your considerable talents, deliberately exploiting the poor."

Rosenfield replied:  "I am not guilty in this case, your honor. When you say exploit the poor, I have never exploited the poor. When I first came to Philadelphia, it was my endeavor to make this company alive…

"I have many cruel enemies. I'm willing to admit that. But I know your integrity and your uprightness will prevail to preserve me in this case, your honor."

Spaeth said he did not believe Rosenfield had done anyone a favor by keeping a company "alive" to take money "from people who couldn't afford it."

"I do not regard your intentions as honorable," Judge Spaeth concluded.

But Rosenfield never served a day of Spaeth's two- to seven-year sentence, either. The Superior Court overturned the conviction on a legal technicality – the district attorney's office had failed to inform Rosenfield when his case would be presented to the grand jury for indictment.

As for Empire Mutual itself, the state suspended the company early in 1964 and a Harrisburg court ordered the company liquidated.

The collapse left 70,000 policyholders without protection, mainly fire insurance. Eventually, the state determined there were about 1,300 claims totaling $5.5 million against Empire.

Not Out of Business

Although the State Insurance Department placed Empire in liquidation in 1964, Rosenfield continued selling insurance in the state thorough two other companies he controlled.

With Empire out of business, Rosenfield began operating Municipal Mutual Insurance Co., a smaller casualty company with offices at 106 South 16th St. in Philadelphia.

By early 1965, however, Insurance Department audits of Municipal's books had turned up a deficit of $54,329. In October, the company was forced to surrender its charter to the state and was placed in liquidation.

But Rosenfield was still not out of the insurance business in Pennsylvania. He continued selling insurance out of Sylvania Mutual Insurance Co., with offices at 1920 Chestnut st., until state insurance officials suspended the company in December, 1966, after uncovering a $69,622 deficit.

The three companies are still in liquidation with the Pennsylvania Insurance Department, but insurance officials say the companies will probably never pay the outstanding claims because there are no assets.

Interestingly, in December 1966 when the Insurance Department suspended Sylvania, the department was preoccupied with a much larger insurance company failure in Gettysburg, Pa. Eventually, state authorities found out that Rosenfield figured in that scandal as well.

The Insurance Department suspended Bankers Allied Mutual Insurance Co. after an audit disclosed a deficit of $6.9 million. Two months later, a companion company, Bankers and Telephone Employees, also was suspended with a deficit of $437,224.

What drove those two insurance companies into insolvency was a complex financial swindle that the State of Pennsylvania, to this day, has never completely pinned down.

13 Were Indicted

In less than three years, the two companies changed hands three times – the principals who figured in the sales came from cities ranging from Miami, to Norfolk, Va., to New York.

At the heart of the Bankers case was the mysterious disappearance of $1.2 million in securities owned by the Bankers' companies from their safe-deposit boxes at a Gettysburg bank.

The securities were converted to cash and the money was then used, according to a state investigator, to help one syndicate of buyers purchase the companies from another syndicate.

In January, 1968, a Gettysburg grand jury indicated 13 persons on charges including embezzlement, fraudulent conversion and conspiracy all growing out of the depletion of the two companies' assets. One of those named was identified only as J. Nelson, address unknown.

Two months later, the grand jury returned one more indictment. It named Seymour L. Rosenfield, alias J. Nelson, charging him with conspiracy, aiding and abetting a surety officer to embezzle, and fraudulent conversion.

The state charged that Rosenfield conspired with officers of the Bankers companies to embezzle the $1.2 million in securities.

State investigators claim they traced $250,000 of the money that changed hands during the Bankers' transactions to Rosenfield through a bank in the Bahamas, where he deposited a check made out to J. Nelson.

Of those indicated in 1968, three men were convicted. An appeal has since been denied, and they are awaiting sentence.

Never Came to Trial

As for Rosenfield and the remaining defendants, they never came to trial. All charges were dropped by the attorney general's office in January 1972 after a court ruled that there was insufficient evidence to bring them to trial.

Rosenfield had at least one other association with the historic Gettysburg community.

Four years before the Bankers collapse, Rosenfield was connected with another Philadelphia company called Drexel Associates, Inc., which sold $200,000 in bonds to Gettysburg area residents before the state apparently uncovered irregularities in Drexel's prospectus and stopped the sales.

State investigators never could trace what happened to the $200,000. About $35,000 was paid in commissions. Another $12,500 went for a management contract to one of Rosenfield's insurance companies.

Another $153,000 was paid to a Rosenfield company called Hanover Management, Inc. From Hanover, records showed that $125,000 was then paid to Rosenfield's Empire Mutual as an "escrow payment."  That was shortly before insurance auditors uncovered a $1.8 million deficit in Empire's accounts in 1962.

When a receiver made his final report on bankrupt Drexel in 1967, he reported outstanding claims of $199,000 – mostly from farm families in the Gettysburg area – and assets of "nil."

About the same time Gettysburg farmers found out their bonds were worthless, a plush Puerto Rican gambling casino was learning the same thing about a check Rosenfield had written.

In April 1967, the First Pennsylvania Banking and Trust Co. refused payment on a $1,000 check made out to the Dorado Beach Hotel on the account of S. L. and Geraldine Rosenfield because of insufficient funds.

The hotel later filed suit for the money. Rosenfield denied issuing the check. The court awarded the hotel a judgment of $1,310 in June 1972.

Charged With Evasion

From the early 1960s on, Rosenfield was the subject of numerous criminal investigations or civil lawsuits ranging from insurance company failures to stock swindles.

Then on Feb. 13, 1969, a Federal grand jury in Philadelphia indicted him for evading payment of $256,831 in income taxes in 1960 and 1961.

The charge came a decade after Rosenfield's financial manipulations first attracted public attention, and at least five years after the IRS first started probing his affairs.

IRS agents first began looking into Rosenfield's tax returns in the yearly 1960s. An Illinois Insurance Department report, dated May 21, 1964, contains this comment about Rosenfield's General Union company:

"Agent Freise of the IRS has made numerous inquired at the Department and reviewed Department files, plus his line of questioning would indicate that IRS was looking for prior concealed income and cash looting of General Union."

By then – 1964 – Rosenfield already had left Illinois and was doing business in Philadelphia, his unpaid taxes amounted to more than $2 million.

By the time he was indicted in Philadelphia in 1969, Rosenfield had liquidated his assets, including the family's $71,000 Lower Merion house, and had moved his family to Los Angeles.

In 1969, after leaving Philadelphia, Rosenfield worked out of Las Vegas much of the time, describing himself as "business broker" who transacted business in New York, Los Angeles and Las Vegas. His family lived in Los Angeles.

The Rosenfields eventually settled in the new Calabasas community at the western edge of the San Fernando Valley.

Paid Off House

According to a confidential IRS memorandum of Sept. 23, 1971, the Rosenfields paid for their new $76,000 house in three installments:  One check for $2,000, another for $200 and a final cashier's check for $73,800.

The owners of record from May 1970, when the family took possession, were Harry and Anna Rosenfield – Seymour Rosenfield's parents. In February, 1971, they conveyed the house in a trust deed to Geraldine Rosenfield and Harry and Anna Rosenfield.

The Merion house near Philadelphia had also been held in trust under Geraldine Rosenfield's name.

Yet there is little doubt that Seymour Rosenfield was instrumental in purchasing the California house.

The real estate company near Los Angeles that sold the Calabasas house ran a credit check on Rosenfield at the time the couple expressed an interest in purchasing the home.

The credit report, which was part of the IRS memorandum, included the following entries: Personal property - $100,000; life insurance - $500,000; real estate (clear) - $175,000; government bonds - $150,000.

Rosenfield's net worth totaled $600,000 plus, according to the report. He later denied under oath that he had such assets.

At the same time Rosenfield's $2 million tax debt remained unpaid, IRS also investigated the couple in 1971 for apparently failing the file four quarterly returns listing wages paid to household employees who worked at their Calabasas house.

Rosenfield Interviewed

The same confidential IRS memorandum from Special Agent Russell K. Ward of the IRS intelligence division, said this of the Rosenfields:

"During a returns compliance check, June 1971, by the Collection Division, Mrs. Rosenfield was requested to furnish both her and her husband's social security numbers along with delinquent House Employees Returns, Form 942, for the third and fourth quarters of 1970 and the first and second quarters of 1971.

"At the time of the request, Mrs. Rosenfield stated that she and her husband had filed their 1970 Income Tax Return but had not filed the required Forms 942.

"In August 1971, the requested Forms 942 were received as well as Mrs. Rosenfield's social security number, 360-18-7680. Mrs. Rosenfield, however, failed to furnish Mr. Rosenfield's number. Numerous requests were subsequently made upon Mrs. Rosenfield for the husband's number but to this date the information has not been received.

"Base(d) on the suspicious attitude and procrastination which Mrs. Rosenfield exhibited it was felt at the time that no direct contact should be made with Mr. Rosenfield by the Collection Division."

However, on Oct. 15, 1971, Agent Ward and another agent interviewed Rosenfield at the Calabasas home, but Rosenfield was not overly cooperative.

"Mr. Rosenfield claimed that he had filed his Income Tax Return for 1970 and all other returns but refused to state where or when he had filed them," Agent Ward's report said.

As for the charges of income tax evasion filed against him in 1969, Rosenfield was acquitted by a jury in March 1971. A month later he was indicted for failing to file income tax returns for the years 1964 through 1966. He was subsequently convicted.

'Didn't Have Money'

During the sentencing hearing in that case, Rosenfield testified that while he was then earning $40,000 a year, he was still unable to pay his back taxes, then totaling more than $2 million.

When the judge asked why no payments were made, Rosenfield replied:

"I didn't have the money to pay it, your honor."

"Well are you suggesting that it took that much money to survive?" the judge asked.

"It certainly did," said Rosenfield.

Rosenfield was sentenced to six months in jail and fined $10,000, but he never showed up to begin serving the prison sentence and the $2 million in unpaid income taxes remain unpaid – as, of course, does the fine.

When the jury was hearing evidence in that case, an indignant Rosenfield expressed outrage at the charges against him – failing to file income tax returns for three straight years.

"I never knew and still can't believe that it is a crime not to file your income tax returns on time," declared the insurance executive. "I mean, that is absolutely shocking."