Tax claims hit deceased Waterloo lawyer’s estate

June 04--WATERLOO -- Taxes are coming due for one of the Cedar Valley's most notorious attorneys, even though he is dead.

According to civil court documents, attorney David Alan Roth, 51, of Hudson, stole millions from clients by pocketing settlements he claimed were being deposited in annuities, collecting investments in nonexistent litigation and misappropriating law firm funds.

Roth took his life almost three years ago as his schemes began to unravel.

The fallout sunk the once-prominent Gallagher Langlas and Gallagher law firm of which he was the president, and his estate, which was besieged by claimants and became mired in 15 lawsuits, remains tied up in court.

In April, the Iowa Department of Revenue filed a probate claim for $178,721 in income taxes Roth hadn't paid. Thomas Houser, an attorney representing the estate, said he believes the IRS also intends to file a claim, and court records show attorneys are anticipating more than $900,000 in federal taxes, interest and penalties.

What the tax bill could mean for Roth's victims was one of the central topics during a Friday hearing in Black Hawk County District Court.

Some $3 million in life insurance had been paid to Roth's widow, and she surrendered all but $1 million of it under a settlement so it could be disbursed to the victims. Members and shareholders of Gallagher Langlas and Gallagher, who also filed probate claims, waived any claim to the life insurance money.

In March, the estate's attorney warned of the possibility the Iowa Department of Revenue and the IRS could claw back the life insurance proceeds from the victims to pay Roth's income tax liabilities. "Clawback" is the recovery of money already disbursed.

Attorney Craig Ament, who is representing some of Roth's victims, likened the possible clawback to a bank robbery where the IRS refuses to return the loot to the bank because it wants to first take a cut as income tax for the robber.

Ament also accused Houser of "poking" tax authorities to bring the Roth estate to their attention.

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Houser said the estate isn't seeking a clawback. But he said the estate did notify victims of the possibility.

Houser said he doubts taxing authorities will try to reclaim any life insurance proceeds that have already been paid to the victims.

But what the pending tax bill means for the estate's other assets -- currently estimated to be around $512,000, far short of outstanding claims -- has yet to be seen. Taxing bodies are usually given high priority among claimants.

The estate has yet to file Roth's income taxes for 2014, the last year of his life, a possible reason the IRS hasn't shown up in probate court. Houser said the holdup involved calculating how much Roth made through embezzlement that year. Reviewing bank statements, Houser said he estimated Roth made $1.5 million that year through crime, but he will likely end up reporting more than that because over-reporting income doesn't result in penalties, whereas under-reporting does.

Estate officials said in court records the estate wouldn't be subject to federal estate tax or Iowa inheritance tax.

The estate's $512,000 in assets includes $483,000 on hold in a probate case in Missouri courts, according to court records. Houser said Roth had a condominium and a "big boat" in Missouri, and the Missouri probate case has about 20 claimants.

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