For years, the Wethersfield-based law firm of Peck & O’Brien has built a reputation as a small but accomplished legal boutique. What it has also built is a growing stack of federal tax liens and a series of unpaid debts.
Peck & O’Brien’s problems, though, are more than just financial. Experts say they illustrate the dangers inherent when people spend too much time practicing their profession, and not enough time managing their professional practice.
Last month, the IRS slapped the firm with a $43,000 unemployment tax lien, the most recent in a string of four liens totaling more than $88,000 that date back to November of 2005. The IRS declined to comment on the liens, citing privacy restrictions.
But Managing Partner John J. O’Brien, one of the firm’s two lawyers, claims the string of debts burdening his firm stem from financial mismanagement by a former office manager employed from 2004 until last October. O’Brien declined to name the former employee.
When that person left, O’Brien said he discovered there were a sizable number of Form 941 unemployment tax returns that had not been filed.
“We found out because the IRS was hot on our trail,” he said.
O’Brien advises clients on business and commercial law. But he said he was unaware that his own firm was falling so deeply into debt.
He also said the firm – formerly Moller, Peck & O’Brien – disputes the lien total claimed by the IRS. He said the true amount should be about half.
The firm claims it has paid in full its current period unemployment taxes and has made some payments toward the arrearage, although O’Brien – reached by telephone during a vacation last week – could not recall the amount paid back
Other Bills Unpaid
It is not the only unpaid debt racked up by the firm in recent years. The Connecticut Business and Industry Association has yet to collect a $4,853 judgment it won last year against Peck & O’Brien for failing to pay its premiums on group health insurance the firm purchased through the CBIA, court documents show.
CBIA won the judgment last March, but has yet to collect.
Even the Wethersfield tax collector has placed a lien on the business for $430.37; the amount of taxes Peck & O’Brien has yet to pay the town on furniture and fixtures for the last two years at its former office space at 433 Silas Deane Highway. The firm moved last month to another office at 78 Beaver Rd.
O’Brien said he first heard of the town’s liens from the Hartford Business Journal. He attributed it to the lack of good bookkeeping during the tenure of the now-departed manager and vowed to have his current office manager look into it immediately.
Michael R. Peck, the firm’s other patner, said he was unaware of any liens that had been placed on the business. “It’s the first I’ve heard of it,” Peck said, deferring further comment to O’Brien.
Reprimand Coincided With Debts
Peck & O’Brien’s string of debts coincided with O’Brien’s June 2005 reprimand by a superior court judge for “serious ethical misconduct” in failing to pay a consultant whom he hired to work on a case. He was ordered to pay that consultant $18,335 – which he did, O’Brien said.
The judgment came during a difficult financial period for O’Brien. Since 2000, the IRS has placed several liens on him personally and jointly with his wife.
“We’re working to get those paid off soon,” he said.
The debt problems at his firm also coincided with the departure of former name partner William Moller, who retired in 2004.
In the three years since Moller left the firm, Peck & O’Brien has shrunk from four attorneys – including Moller and another associate lawyer – and three office staff, to two attorneys and one office secretary.
“We’re very comfortable with the size we are right now,” O’Brien said.
Small Firms’ Challenges
Peck & O’Brien is a highly regarded firm in the Hartford legal community, and Michael R. Peck in particular is respected by his peers, said Anthony Natale, current president of the Hartford County Bar Association and a lawyer with Pepe & Hazard.
“He [Peck] is a very positive force within our organization,” said Natale. Peck, too, is a former president of the Hartford County Bar Association. He is the husband of Superior Court Judge A. Susan Peck. He and O’Brien have been partners for about a decade.
But the nearly $100,000 in debt the firm owes shows how even well established, well-liked lawyers are vulnerable to the difficult business of being out on their own.
“Lawyers are never taught the business of law,” said Susan Cartier Liebel, a lawyer and professor of law at Quinnipiac University School of Law in Hamden. “And when you have nearly half of all lawyers beings solos and having to wear multiple hats it’s almost not fair. When you are lawyer who is also an entrepreneur, you still have the responsibility to function as a lawyer, but you have to be a business owner managing taxes, employees, insurance and those other things as well.”
Herbert Kritzer, a sociologist and law professor at the University of Wisconsin who has studied small firms, said that cash flow problems at small firms are typical. Small firms, he said, are just as likely to encounter the problems any small business has. And the issue of liens, in any business, is rarely discussed.
“Can you imagine anybody sitting around with his buddies saying ‘I have a tax lien?’ That’s like sitting around saying ‘I have syphilis,’” Kritzer said.
The debts, said O’Brien, have “forced us to continue working really hard because we have these obligations. It’s certainly on the forefront of our mind. It’s not a small amount of money, but we’ve made good inroads.”
