Joseph N. Barnes, whose failure to file federal income taxes is threatening the future of one of the nation's largest minority bond counsel firms, was sentenced to eight months in prison yesterday.
Barnes, 44, a name partner at Barnes, McGhee, Segue & Harper, pleaded guilty last June to the charge that he failed to file returns in 1987, 1988, and 1991. Barnes was ordered to make restitution for $210,000 in unpaid taxes for those years.
The order to pay for three years was part of a plea bargain after the government originally charged Barnes with evading as much $1 million in taxes over a 15-year period, according to Federal District Court Judge Harold Baer Jr.
In handing down the sentence, Baer said: "It appears that the defendant engaged in a calculated and fully understood effort to avoid his obligations.
On balance, this is a record that will not be tolerated," Baer added.
Ted Wells, Barnes' lead defense lawyer, said in a statement asking for a lenient sentence that Barnes had already been punished in part by the toll his conviction has taken on the law firm he helped found.
"Since his conviction, Mr. Barnes has flown around the country tirelessly, trying to hold the firm, his dream, together. This law firm, which once was so special and so important, is hanging on for dear life," Wells told the court.
But Michael B. McKenzie, a partner at the firm, which was renamed McKenzie, McGhee and Harper on Nov. 1, said he believes the firm would recover.
"We have suffered a loss of business because of this, but we have developed some other practice areas that are less political - like securitizations and tax liens," McKenzie said.
"Our bank accounts are low, but our other business lines are strong, and I think the worst is over," he said.
Barnes McGhee ranks ninth year-to-date among bond counsel firms so far this year, having worked on 22 issues worth a total of $2.9 billion, according to Securities Data Co.
But since Barnes' June 1 conviction, the firm has fallen to 26th place for the five-month period, working on only nine issues with a total value of $903.7 million. The firm's market share has eroded from 2.1% through the first half of the year to 1.1% since June 1, according to Securities Data Co.
In addition to seeing its market share erode, in September the firm lost its position as co-bond counsel to the nation's largest issuer, New York City.
Michael Burke, who heads the city Law Department's municipal finance division, said the legal problems that engulfed Barnes McGhee's name partner were considered when the city decided to drop the firm as co-bond counsel. Brown & Wood is now the city's sole bond counsel.
Barnes, a former member of the board of the New York Urban League, and a leading fund-raiser for former New York City Mayor David N. Dinkins, was ordered to surrender on or before Jan. 2, 1996.
Barnes still faces disbarment.o
