Stanley Tollman, who as a principal of Tollman-Hundley Hotels was once an owner of Days Inn of America, pleaded guilty to one count of tax fraud and agreed to pay more than $105 million to the government in back taxes and various fraud penalties. He has thus avoided as much as five years of prison time.
Under terms of the plea agreement with the U.S. attorney for the Southern District of New York, other charges of bank fraud against Tollman, 78, and tax fraud charges against his wife, Bernice Nina Tollman, 77, will be dropped.
The couple has spent the last few years living in London fighting extradition. The settlement with the Justice Department came about after the British courts this year refused to allow extradition of either Tollman, citing Mrs. Tollman's health.
Tollman-Hundley Hotels had owned a number of hotels, including a few Days Inns, before buying Days Inn of America, parent to the Days Inn chain, in 1989, which it later sold to Hospitality Franchise Systems, later Cendant.
Tollman and his wife also participated in the management of Travel Corp., the parent to Trafalgar Tours International, Trafalgar Tours USA and the Red Carnation Group of Hotels. Tollman is a former chairman of Trafalgar Tours, and his wife is a former CEO of the Red Carnation Group.
According to the U.S. attorney, the Tollmans established bank accounts on Guernsey, in the Channel Islands, where they hid at least $18 million in taxable income for tax years 1994 through 1999.
Tollman pleaded guilty, via a video link from London, to knowingly failing to pay taxes on that income. He agreed to pay $60.4 million to the IRS in back taxes, interest and fraud penalties.
He agreed to another payment of $44.7 million to settle a separate action brought by the U.S. in a 2002 indictment charging Tollman and six others with bank and other fraud. Tollman left the U.S. just before the indictment was handed down.
Four co-defendants in this case were convicted of fraud in February 2004. Among them, his partner, Monty Hundley, was sentenced in 2005 to eight years in prison for defrauding several major banks out of $100 million and the IRS out of $29 million. He also was ordered to pay $106 million in restitution.
Another defendant, Richard Masefield, formerly a Trafalgar Tours USA executive, had pleaded guilty before the trial to charges based on his use of Channel Island accounts to hide millions in income.
Also, Tollman's son Brett was added as a defendant and pleaded guilty in 2003 to tax fraud and in 2004 was sentenced to 33 months in prison and a $3.5 million restitution fee. He had been an executive with the hotel company and the Travel Corp.
Finally, Gavin Tollman, former president of Trafalgar Tours USA and Stanley Tollman's nephew, also facing tax fraud charges, was the object of extradition proceedings in 2005 in Canada. At the time, he was alleged to have failed to report $720,000 in income earned during his employment with Trafalgar.
It took him two years to fight off extradition efforts, after which he returned to London where he had been living. Robert Cleary, Gavin Tollman's attorney, said the government made a "huge mistake" in Gavin's case.
The U.S. attorney's office dropped its charges, a "complete repudiation" of its original position, Cleary said.
Cleary said the misreading of events stemmed from the fact that Gavin Tollman had authority from his father, now deceased, to withdraw money from his father's bank accounts in Guernsey.
It is as a result of that situation that Gavin Tollman this month pleaded guilty in U.S. District Court in New York to failing to supply information to the IRS on his tax returns; specifically, his role with respect to two foreign bank accounts, a misdemeanor. He agreed to file amended tax returns, the U.S. attorney reported.
Gavin and Brett Tollman are now directors of Travel Corp.'s Travel Group.
Meanwhile, the first $25 million of Stanley Tollman's obligation is due immediately, with remainder due, plus interest, over a period of five years.
If Tollman defaults, the plea agreement allows the government to seize real estate he owns on Park Avenue in New York, as well as property in Connecticut and Florida.
Tollman also must file "accurate and amended" returns for 2000 through 2007 and pay any additional taxes that may be due.
The U.S. attorney said the initial filings contained insufficient information to determine what the taxes should be.