A dress designer’s tax woes
Albert Nipon, then a manufacturer of staid maternity clothes, became the talk of the fashion world in the early 1970s when he introduced a line of ultra-feminine dresses. When the fashions appeared, everyone else was selling sportswear and jeans, but the carefully tailored garments were quickly snapped up by Saks Fifth Avenue, Neiman-Marcus and other tony department stores. The onetime Du Pont accountant was on his way. Sales of Nipon’s dresses (price: $100 to $2,000) this year are expected to reach $60 million, and he has collected a clutch of celebrity customers, including Mary Tyler Moore, Barbara Walters, Rosalynn Carter and Nancy Reagan.
Last week Nipon, 57, was again the talk of the fashion world, but for a very different reason. He was indicted by a federal grand jury in Philadelphia for evading nearly $500,000 in personal income taxes and more than $300,000 in business taxes. In addition, Nipon was charged with paying bribes of $200,000 to two Internal Revenue Service agents to cover up his tax discrepancies. U.S. Attorney Edward Dennis Jr. called the case “one of the largest bribery schemes ever uncovered.”
The charges against Nipon are part of a 3½-year investigation of the IRS’s Philadelphia office, which has already led to the indictment of six present and former Government workers. According to the indictment, Tax Agent Meyer Weiss examined Nipon’s 1978 and 1979 returns and discovered that they were fraudulent. But instead of filing a report with his office, Weiss conducted a phony audit in exchange for the payoff. In November 1980, Nipon made the first of what would be four $50,000 cash payments to another IRS agent, Edmond Costantini, who served as intermediary. In 1982 Costantini paid $15,000 to a third IRS agent so that Nipon’s 1980 corporate return would be approved.
The Government claims that in 1978 Nipon had a taxable personal income of $884,309 and owed the Government $508,063 in taxes. But he reported income of only $32,282 for that year and a tax liability of just $19,834. In a statement last week, Nipon blamed the discrepancy largely on “the disallowance of expenditures for improvements, furnishings and renovations to my home, which were paid for by the company.” Nipon and his wife Pearl, who heads the dress company’s design team, live in Gladwyne, outside Philadelphia, in a Norman-style manor on a sumptuous 6.8-acre estate that he bought for $412,500.
Nipon had no comment on the question of whether he had bribed the IRS agents. After pleading not guilty to the fraud charges, he deposited $1 million with the IRS to cover any additional tax payments that may be necessary. If convicted he faces up to 15 years in prison and a $30,000 fine.
Department-store officials do not expect Nipon’s tax problems to hurt sales of his popular dresses. Observed Sonia Adler, editor of Washington Dossier, a monthly society magazine: “Most people who buy his clothes are not going to read about his tax problems in the papers.” Nancy Reagan, however, is no longer among his customers. According to Sheila Tate, the First Lady’s press secretary, “She had some Nipon outfits in her wardrobe back in the first year of the Administration, and she wore some of his clothes during the ’80 campaign because they are easy to pack.” But even before last week’s indictment, Nancy Reagan had already switched to Adolfo, Galanos and Bill Blass.
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