New York ruling helps ComputerLand founder fend off tax collector
By Karen Freifeld
NEW YORK (Reuters) – Tech mogul William Millard may have escaped the tax man once again.
Millard, who built ComputerLand Corp into a retail giant in the 1970s and 1980s, is wanted by the Northern Mariana Islands for $36 million in taxes.
New York’s Court of Appeals on Tuesday issued a ruling that makes it harder for the islands, a U.S. commonwealth in the Pacific, to collect.
The Northern Mariana Islands had sought an order for Canadian Imperial Bank of Commerce (CIBC) to turn over assets allegedly deposited by the Millards at a Cayman Islands subsidiary.
The commonwealth tried to get the New York branch of Toronto-based CIBC to garnish the assets. But the bank opposed the request, arguing that, under New York law, it could not be ordered to turn over assets of a foreign bank subsidiary.
On Tuesday, the Court of Appeals ruled CIBC could not be ordered to turn over assets held at its Cayman Islands subsidiary to enforce the judgments.
The court said that CIBC needed to have custody or possession of the assets, not just control over the subsidiary.
“Use of the phrase ‘possession or custody’ contemplates actual possession,” Judge Jenny Rivera wrote in the Court of Appeals decision interpreting the law.
Representatives of Millard could not be reached for comment on Tuesday.
The ruling has implications for foreign banks and corporations with operations in New York, according to a lawyer familiar with the case, clarifying when a creditor can get an order to garnish assets held by a foreign subsidiary.
The state court decision was issued after a federal judge in the Southern District of New York denied the order, and the commonwealth appealed to the 2nd U.S. Circuit Court of Appeals.
That court asked New York’s Court of Appeals for guidance in interpreting state law on the issue.
The Northern Mariana Islands has been seeking to garnish accounts belonging to Millard and his wife Patricia since at least 2011. It claims the couple has used offshore tax havens, bank secrecy jurisdictions and other tactics to keep the assets out of reach.
Michael Kim, an attorney for the Northern Mariana Islands, was not immediately available to comment.
Scott Musoff, an attorney for CIBC, declined to comment.
The case is Commonwealth of the Northern Mariana Islands v. Canadian Imperial Bank of Commerce, New York Court of Appeals, No. 58.
For the Commonwealth: Michael Kim of Kobre & Kim.
For CIBC: Scott Musoff of Skadden, Arps, Slate, Meagher & Flom.
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