Gov. David A. Paterson's top adviser paid $293,000 to settle a tax deadbeat problem -- far more than the $200,000 originally claimed -- and the matter wasn't closed with a final payment until Wednesday, five days after the administration said he no longer owed anything.
But lawyers for Charles J. O'Byrne contend that he had a perfectly legal excuse: "nonfiler syndrome" exacerbated by bouts of clinical depression.
Had the IRS and state Department of Taxation and Finance prosecuted O'Byrne with criminal charges -- as the state tax agency has done in dozens of cases involving state workers -- the syndrome could have been used as a defense, his lawyers suggested.
The Department of Taxation and Finance, which has said it cannot discuss the O'Byrne case due to privacy laws, took no criminal law enforcement steps to collect. Instead, it filed its first warrant in a civil court in Manhattan on May 30, 2007.
O'Byrne did not pay taxes or file his tax returns from 2001 through 2005 -- a period when his adjusted gross income totaled $672,000, according to documents released Wednesday.
The "nonfiler syndrome" has been used as a defense in criminal tax cases by individuals who lead otherwise productive lives except for filing their taxes, attorney Richard Kestenbaum said.
Asked if O'Bryne suffered from it, Kestenbaum said, "I do believe he did."
O'Byrne's lawyers confirmed what has been suspected from information on his financial disclosure forms: that high-powered Democratic supporters helped pay off his tax bills.
Jean Kennedy Smith, sister of President John F. Kennedy, loaned him between $60,000 and $100,000. A law school buddy of O'Byrne's, Brian Krisberg, also loaned him a similar amount, and Paterson's two sisters provided as much as $20,000. The lawyers would not provide specific amounts and said O'Byrne received no financial assistance from anyone with any business before the state government.
Two lawyers for O'Byrne briefed reporters Wednesday on his financial situation, and the hourlong session disclosed new information: O'Bryne's total delinquent tax bill, including back taxes, penalties and interest, was $293,000 -- more than the administration had claimed.
And the final payment to the state, $3,641.85, was not made until Wednesday.
Administration officials last weekend told reporters that all of O'Byrne's tax liabilities had been resolved. The lawyers said the recent payment was to cover a check O'Byrne previously sent to the Department of Taxation and Finance that never cleared. They could provide no documents to verify the earlier payment.
Paterson has defended his close adviser, and officials say O'Byrne's responsibilities will not change.
Henry Berger and Kestenbaum, the two Manhattan lawyers retained by O'Byrne, confirmed that he did not file his taxes because of three separate bouts of depression that required treatment and medication by a psychiatrist. One of the bouts with depression came at the end of December 2006 -- which was also the time O'Byrne filed four years' worth of tax returns.
A Paterson spokeswoman Wednesday night said O'Byrne had never been formally diagnosed with the syndrome.
The administration released a statement from O'Byrne's psychiatrist, Dr. Howard Kremen, who said he treated O'Byrne for "major depressive disorder" between early 2001 and 2006. "Charles has been free of depression since 2006," he said.
Later Wednesday evening, Paterson said in March 2008, when he took office, he asked the state police to conduct an assessment of O'Byrne. He did not say why. He said the investigation included information about the tax problems. "The state police determined that this information did not compromise Mr. O'Byrne's position in the Chamber," Paterson said.
The tax filing in 2006 came three days before O'Byrne was leaving his senior post with Senate Democrats to become Paterson's chief of staff in the lieutenant governor's office. O'Byrne's episode of depression extended into the early part of the Paterson administration.
"It did not interfere with his work. It did affect his personal life," said Berger, who is also a top Democratic Party election lawyer.
Kestenbaum, a former IRS lawyer, said O'Byrne acted in good faith to resolve the issue.
"He did the best he could, and they accepted that," he said of the two tax agencies.