The Maryland Court of Appeals, the state's highest, stayed the imposition of jail sentences today for former Old Court Savings & Loan president Jeffrey Levitt and his wife Karol until at least next week when it will decide whether to hear an appeal of their contempt of court convictions.
Jeffrey Levitt was scheduled to begin serving an 18-month sentence Wednesday morning. Karol Levitt, sentenced to serve 15 weekends in jail, was to begin her term this weekend.
In a related development, the Internal Revenue Service, claiming the Levitts owe $1.6 million in back taxes for 1983 and 1984, filed tax liens against them today in Baltimore and Worcester counties, where they own homes.
An IRS spokesman said the agency now has the authority to seize any of the couple's assets, including real estate, cash, cars and other property.
He said Jeffrey and Karol Levitt owe $438,224 in taxes and penalties for 1983 and $1,233,320 for 1984.
The Court of Appeals' action came in response to an emergency petition from the Levitts' attorneys, and the court asked opposing lawyers to respond to the petition by Monday. If the court then decides to hear the Levitts' appeal, the couple could remain free for months.
The Levitts, convicted of criminal contempt for violating court orders limiting their spending, contend that Baltimore City Circuit Court Judge Joseph H.H. Kaplan had no constitutional authority to impose such a spending freeze.
Kaplan issued the freeze orders last summer at the request of the Maryland Deposit Insurance Fund, which is overseeing the affairs of Old Court and has filed suit against the Levitts, alleging they fraudulently diverted millions of dollars from the now-defunct thrift. The spending freeze was imposed to ensure there would be funds left for MDIF to recover if it wins the suit.
In a contempt hearing two weeks ago, the Levitts acknowledged spending hundreds of thousands of dollars on luxury items in the fall, a period when they were under a $1,000-a-week spending limit.
But in appealing their convictions to the Court of Appeals, the Levitts maintain that Kaplan had no authority to freeze their assets prior to a verdict in MDIF's suit against them. Their lawyers contend that Kaplan's orders were void from their inception, and that the Levitts therefore cannot be held in contempt of court.
If the high court decides to hear the Levitts' appeal, it could continue the couple's stay of sentence, according to Court of Appeals chief deputy clerk Robert C. Franke. Normally, said Franke, lawyers are given 70 days to prepare written arguments before a hearing date is set. After hearing the case, he said, the seven-judge panel could deliberate for several months before reaching a decision.
In action in another savings and loan case today, attorneys for MDIF asked Kaplan to impose a spending freeze on former owners and directors of Bethesda-based Community Savings & Loan.
Those officials and three companies owned by them are being sued by MDIF for allegedly diverting $50 million to $100 million in Community funds to the thrift's parent company, EPIC Holdings Inc.
The hearing on the proposed spending freeze for Community defendants is expected to continue Thursday.