Eisners Sue N.Y. Tax Consultants

These are definitely taxing times for Michael Eisner.

Not only is Walt Disney Co. chief executive battling a lagging performance by its ABC network and a lethargic stock price, but he and his wife, Jane, have another headache: The couple is suing a New York money management firm for more than $3 million for allegedly botching the couple’s California state income tax returns.

According to a lawsuit filed Monday in U.S. District Court in Los Angeles, the Eisners allege New York-based Executive Monetary Management and its co-founder, Michael Stein, failed to properly advise them on their state tax returns from 1996 through 1999, resulting in an audit that led to more than $3 million in back taxes and interest.

The Eisners allege the company made mistakes in handling the couple’s state tax returns, admitting it was unaware of the differences between federal and state laws on how to treat the contribution of appreciated stock to private foundations.

Wealthy executives frequently establish and donate appreciated stock to private foundations both as a way to accomplish charitable goals and as a strategy to minimize taxes.

In early 1987, for example, the Eisners donated 1 million shares of Disney stock worth $89 million to their family foundation. Recent contributions by the foundation include $7 million to Cal State Northridge, which is renaming its education school after Eisner.

In the lawsuit, the Eisners said they first learned they were being audited by the state Franchise Tax Board in April 2001.

The couple allege that Executive Monetary Management responded to a notice by admitting to the tax board that it made an error, saying it was because they are tax professionals based in New York and were not aware of the California law.

Although filed, the lawsuit has yet to be served, a legal maneuver often used when trying to force the settlement of a dispute.

Executive Monetary Management manages assets and provides accounting services for wealthy executives, including a number of entertainment industry clients. The company is a subsidiary of the prominent money management firm Neuberger Berman.

Executives from the company did not return calls seeking comment.

Eisner declined to comment through a company spokeswoman.

Even with the $3-million hit, the Eisners aren’t exactly hurting.

According to last fall’s Forbes 400 list of wealthiest Americans, Eisner is worth an estimated $720 million.