South Omaha City Councilman Vinny Palermo says he won’t resign from office, and he intends to run for reelection in 2021.

Palermo expressed relief Wednesday after U.S. District Judge Brian Buescher sentenced him to four years of federal probation, not prison, for failing to file federal income tax returns in 2012, 2013 and 2014.

“My wife and kids, we needed this black cloud to go away,” he told The World-Herald. “(Federal investigators) knocked on my door almost three years ago.”

Palermo pleaded guilty in September to the three misdemeanor counts.

Palermo will have to pay a $35,000 fine, on top of the $21,209 he has already paid in restitution for taxes owed from his local tree-trimming business. He also will be required to perform 120 hours of community service.

Prosecutors said Palermo knew or should have known to file tax returns related to his business on gross income of $145,434 in 2012, $220,400 in 2013 and $129,612 in 2014. He and his lawyer, James Martin Davis, agreed.

“It’s easy for me to play the victim, and instead of doing that, I actually accepted responsibility,” Palermo told reporters after the sentencing.

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The City Charter allows for the removal of a council member if the council decides a member has committed a crime in violation of their oath of office.

But Palermo’s council colleagues have made no move to remove him.

Council members Brinker Harding and Aimee Melton issued separate statements Wednesday afternoon asking Palermo to step down as the council’s vice president. Both said another member should take on that role for the council.

“It is imperative that we lead with the highest ethical standards at all times,” Harding said, adding that he does not plan to pursue Palermo’s removal. “I believe in this instance that Mr. Palermo’s actions have violated the public’s trust.”

Said Melton: “Whether through recall or the next election, it will ultimately be up to the voters of District 4 to determine if they condone their representative on the council violating federal law.”

Palermo said Wednesday that he will not step down from the vice president’s role.

Council President Chris Jerram offered no immediate comment when reached after the sentencing.

Mayor Jean Stothert, who has sometimes clashed with Palermo, said the council will have to decide whether it wants him to continue serving. She said South Omaha deserves “the best and most focused representation possible.”

The judge on Wednesday said he took into account Palermo’s lack of a criminal record in sentencing him to probation. 

Buescher said he departed from federal sentencing guidelines, which called for up to 12 months in prison and a fine of up to $15,000. He said he found no public purpose for sending Palermo to prison, but he wanted a larger fine to reflect the seriousness of the offense.

“This situation is a financial crime,” Buescher said. “Mr. Palermo, you were running a cash business. Problem is, you didn’t file taxes for several years.”

Palermo said Wednesday that he should have asked questions sooner when his accountant told him he owed no taxes. Palermo said he was working a full-time job in the early 2010s, with taxes being withheld, while he was trying to get his tree-trimming business going. He said he figured he’d invested too much money into running the business to make money or owe taxes.

Instead, he later learned, he owed more than $200,000 in taxes. He has since filed his returns for those years and paid his taxes.

Palermo’s accountant at the time was indicted in 2013 for, among other things, conspiracy to defraud the government by filing false tax returns. Federal prison records show he was released in 2017. The accountant could not be reached for comment.

Palermo said he has since hired a new accountant and is far more aware as a business owner of what needs to be paid and when. He said he now pays business-related taxes quarterly.

Palermo was elected to the council in 2017, having served previously as a member of the Omaha Public Schools board.

World-Herald staff writer Kevin Cole and chief librarian Sheritha Jones contributed to this report.

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