Will contests brought by disgruntled heirs are so commonplace that no one bats an eye at the news, but it’s not every day that an heir comes up with an elaborate plan to retaliate against their family. One prominent heir is doing just that, filing a scathing revenge lawsuit accusing his family members of tax fraud.
Bob Pressman, a third-generation heir to the Barneys luxury retail dynasty, alleges that his siblings and late mother, Phyllis Pressman, orchestrated a fraudulent scheme to evade millions in New York state taxes by falsely claiming Phyllis resided in Florida.
The Allegations
Bob, the grandson of Barneys’ founder Barney Pressman and son of retail visionary Fred Pressman, alleges that his family conspired to misrepresent Phyllis’ residency. According to the lawsuit, Phyllis spent the last six years of her life in her $38 million oceanfront mansion in Southampton, N.Y., rather than in West Palm Beach, Fla., as claimed. This alleged deception allowed the family to avoid paying over $20 million in state income and estate taxes in New York.
The lawsuit further claims that Phyllis openly expressed her dislike for Florida and had no intention of making it her permanent home. Bob’s siblings—Gene, Elizabeth and Nancy—are accused of aiding their mother in this scheme to increase their inheritance, leaving Bob disinherited and excluded from the estate.
A Family Feud Reignited
The lawsuit is just the latest chapter in a drawn-out family feud dating back to the 1990s. The family relationship has always been tumultuous to say the least, with Gene accusing his brother of running Barneys into the ground and his sisters suing Bob, who once managed Barneys’ finances, several years after the retailer filed for bankruptcy, accusing him of cheating them out of $30 million from the business.
According to the NY Post, the drama culminated with Bob being cut out of his mother’s will, rumored to be worth upwards of $100 million, after years of family squabbling and Bob’s refusal to participate in the alleged tax scheme.
The Legacy of Barneys
Barneys New York, founded in 1923 by Barney Pressman, began as a modest men’s discount clothing store in Manhattan. Under Fred’s leadership in the 1960s, the store transformed into a luxury retail empire, attracting celebrities, fashion editors and affluent shoppers. Despite its cultural significance, Barneys faced financial struggles, ultimately filing for bankruptcy in 1996 and again in 2019 before closing its doors.
The Pressman family’s internal conflicts have cast a shadow over the Barneys’ legacy, with the latest lawsuit highlighting the complexities of wealth, inheritance and familial relationships, especially when family businesses are involved.
What’s at Stake
According to the claims, the family could be liable for upwards of $50 million in back taxes and penalties. As a whistleblower under the New York False Claims Act, Bob could be entitled to up to 30% of any recovery.
If proven, the case would be among the top five such cases brought in New York.
Although the Internal Revenue Service offers its own whistleblower program, it’s unlikely that Bob would also receive a whistleblower reward from the IRS because the IRS is going to say they learned about the potential tax fraud through the litigation, said David Klasing, founder of Tax Law Offices of David W. Klasing, P.C.
“It’s important to note that any deal Bob makes with the state of New York, either to receive amnesty or receive a reward, doesn’t necessarily have to be honored by the federal government, explained Klasing. “What’s concerning, as a criminal tax defense attorney, is that the government is much more likely to bite the hand that feeds them tax fraud referrals if they find that that person’s hands aren’t clean themselves, rather than pay a whistleblower reward claim,” he added.
A Cautionary Tale
It’s unclear whether potential financial gain, resentment, sheer disapproval of his family’s actions or a combination of the above motivated this lawsuit, but what’s clear is that if true, the allegations would be a significant reputational blow for the Pressman family.
The NY Post has also previously reported that Bob was writing a tell-all manuscript blaming his family for the retailer’s demise, which could be another money grab at the expense of the family.
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