Snipes: Guilty on Three Counts of Tax Evasion

Wesley Snipes was acquitted of conspiracy to defraud the IRS but found guilty on three of six counts of not filing a tax return (tax evasion) according to news reports. Snipes faces up to one year at ClubFed on each of the three misdemeanor counts, plus restitution to the IRS.

Snipes was acquitted of the more serious count of conspiracy to defraud the IRS. I think this is the best that Snipes could have hoped for as the evidence of him not filing and paying taxes was quite clear.

It will be interesting to hear what the jury’s reasoning was in acquitting Snipes.

Update: Snipes’ co-defendants, Eddie Ray Kahn, who founded a tax protest group, and Douglas P. Rosile, a former accountant, were convicted of tax fraud and conspiracy by the same jury.

Posted in Tax Evasion | Tagged | Comments Off on Snipes: Guilty on Three Counts of Tax Evasion

Verdict Reached in Snipes Case

The jury has reached a verdict in the Wesley Snipes case; it will be read shortly in the courtroom in Ocala, Florida. I’ll bring you news of the verdict when I get it.

Posted in Tax Evasion | Tagged | Comments Off on Verdict Reached in Snipes Case

Survivor: Prison to Continue

Richard Hatch, the Survivor winner who thought that 300 million witnesses were wrong to him winning $1 million, had his appeal denied today by the First Circuit Court of Appeals. Mr. Hatch will likely have to complete his sentence of 51 months at ClubFed.

Hatch appealed his conviction on various grounds:

“Hatch argues that the district court violated his Sixth Amendment rights by precluding Hatch’s testimony about his alleged discovery during the taping of “Survivor” that the production company, SEG, was “cheating” by giving food to other contestants and otherwise violating its own rules for how the contest would be run. Hatch’s discovery of these irregularities, he now says in his appellate briefs and argument, led the show’s producer, Mark Burnett, to promise Hatch, in exchange for his silence, that SEG would pay his taxes if he were to win the prize.”

There’s a problem with this line, though; the Court gave Hatch several opportunities to elicit such testimony. “The court thus opened the door for defense counsel to ask Hatch whether Burnett or someone else at SEG had promised to pay the taxes on the money he won. Hatch’s counsel, however, did not follow up with questions of this sort.”

Hatch also argued that the Court prevented him from introducing evidence, “…[of] a subjective belief he had no legal duty to pay his taxes, an argument which would negate the element of willfulness required to prove his guilt.” The Appellate Court found no evidence of that.

“But without evidence that the producers had agreed to pay Hatch’s taxes, the evidence that Hatch had caught those running the show cheating was of no contextual materiality to the revenue violations with which Hatch was charged. The court was well within its discretion to reject further testimony of Hatch’s complaints about ‘cheating’ during the show until the defense furnished evidence of a tax payment promise that made such contextual evidence relevant.”

Hatch also argued that the District Court limited his arguments on cross-examination. But that argument held no water; “Here, the district court’s limitations on cross-examination in this nine-day trial were thoughtful and far from being excessive.”

Hatch also argued that the expert witnesses called (generally, accountants that Hatch had used and IRS agents) should not have been admitted. Here to, though, the Appellate Court disagreed. “Taking each witness in turn, we find no error.”

And the final claim made by Hatch on appeal was also turned down: “Lastly, Hatch challenges in the briefest of language his sentence on the grounds that the court erred in the loss finding and in applying a perjury enhancement. Both claims are undeveloped and fail in any event.” You may remember that the District Court judge felt that Hatch had lied during his testimony (thus, the perjury enhancement). The Appellate Court has told Hatch that he did indeed lie,

“…the court catalogued many instances in which Hatch had committed perjury, noting that the list was ‘a pretty long one’ and included lying on the stand about his failure to disclose the income which formed the bases for the charges on which he was convicted and about his alleged failure to read the letter drafted by Wallis regarding the hypothetical Exhibit One which he then submitted for his tax return.”

So for the next 27 months or so Hatch will complete his sentence at ClubFed. Hopefully he’ll learn from this experience that usually 300 million witnesses are right.


Full Appellate Court Ruling Here

AP Story Here
Link to previous Taxable Talk posts on Richard Hatch

Hat Tip: How Appealing

Posted in Tax Evasion | Tagged | Comments Off on Survivor: Prison to Continue

No Verdict Yet

The second full day of jury deliberations in the trial of Wesley Snipes on tax evasion and conspiracy charges has come and gone. Jurors will return to work Friday morning at 9:00 a.m. in Ocala, Florida.

Today the jury presumably learned what “conspiracy” means. Here’s the definition from Law.com: “[W]hen people work together by agreement to commit an illegal act. A conspiracy may exist when the parties use legal means to accomplish an illegal result, or to use illegal means to achieve something that in itself is lawful. To prove a conspiracy those involved must have agreed to the plan before all the actions have been taken, or it is just a series of independent illegal acts….” Yesterday the jury had sent a note to the judge asking for the definition.

The only other trial-related news to come out of Ocala is that the surety company that put up the bond to guarantee Mr. Snipes’ appearance while he was filming a movie in Namibia asked to be released from that bond. Given that Mr. Snipes is back in Florida, everyone expects that motion to eventually go through. Of course, the surety company will need to follow the rules: Have the motion signed by a member of the Florida Bar. They didn’t today, so the motion was denied. I’d expect that error to be rectified tomorrow.

Mr. Snipes will likely have to post a larger bond (the current bond is $1 million) if he’s found guilty to stay free until sentencing. If Mr. Snipes is found guilty sentencing would likely be in about three to four months.

Posted in Tax Evasion | Tagged | Comments Off on No Verdict Yet

If It Sounds Too Good To Be True…

…it usually is. Suppose someone came up to you and told you that you could put your assets in a U.S. trust, then funnel the money into a foreign (offshore) trust, and then have the money return to the U.S. and you would be able to have the taxes magically disappear. Would you believe that scheme?

Well, there’s a sucker born every minute and three individuals were there to take them. From Philadelphia comes the conviction of John Michael Crim, David Brownlee and Constance Taylor on charges of conspiring to defraud the IRS of $10 million. One other individual, Michael Crim (son of John Michael Crim) was acquitted. Six other unnamed defendants pleaded guilty earlier; one other individual awaits trial.

There was a lot of evidence in the case–70 boxes of evidence. There was also the testimony of three of the individuals who earlier pleaded guilty.

The one defendant who was acquitted should thank his lucky stars. Claire, a juror from Philadelphia, told the Philadelphia Daily News that Michael Crim was acquitted because he was, “too young to have mastered the business…and he was just a kid.” Hopefully the younger Mr. Crim (who is a resident of Orange County, California) will learn from his brush with the law and mend his ways.

As for the three who were found guilty their bail has already been revoked (the judge found them to be flight risks) while they await sentencing scheduled for May. They’re looking at lengthy terms at ClubFed.

Posted in Tax Fraud | Comments Off on If It Sounds Too Good To Be True…

In the Hands of the Jury

The fate of Wesley Snipes is now in the hands of a jury in Ocala, Florida. Closing arguments were heard yesterday and it was more of the same. The prosecution noted the facts that Mr. Snipes didn’t pay his taxes and that he allegedly worked hand-in-hand with his two co-defendants to not pay the IRS (and the government) the taxes that were owed and even filed a false claim for refund. As Ocala.com reported, “Nobody likes paying taxes. Nobody,” Prosecutor M. Scotland Morris said. “But paying taxes is the privilege we pay to live in a civilized society … That’s what this case is about — three men who believe they are above the law. They’re not above the law. Tell them that.”

On the other hand, defense attorney Robert Barnes characterized Mr. Snipes as a patriotic American. “It may have been protest. Protest is not criminal. It may have been disagreement. Disagreement is not criminal. It may have been frivolous. Frivolous is not fraud.”

But what about not filing tax returns for six years? To this observer that sure looks like tax evasion. However, that’s not what Mr. Barnes told the jury. He believed that Mr. Snipes must be acquitted to uphold American freedoms. “The liberty to ask questions … the liberty to challenge your government. The liberty to engage your government. These liberties are American liberties. The Liberty Bell may be cracked in Philadelphia, but it can still be heard in Ocala.”

I believe the most apt comments came from Robert O’Neill, U.S. Attorney for the Middle District of Florida. He told the jury, “We are taught from an early age that we have to pay our taxes. Everybody knows that — except these three men…Is it not deceitful to file one frivolous claim after another?… Any more obvious attempting of this would be very hard to imagine.”

Jury deliberations did not begin until 4:40pm yesterday, and ended at 5:00pm. They are continuing this morning in Ocala. If I were Mr. Snipes, I wouldn’t plan on accepting any acting roles for the next few years.

Other Coverage: Roth Tax Updates

Posted in Tax Evasion | Tagged | Comments Off on In the Hands of the Jury

A Bad Idea Goes Down to Defeat

Governor Schwarzenegger’s health care plan has been defeated in a State Senate Committee. The Governator’s plan would have forced most individuals into purchasing health insurance. It would also have introduced three new taxes.

The measure was rejected because even Democrats wondered where the money would come from given California’s budget crisis. The state faces a $14.5 billion budget deficit. Proposing large new spending and more taxes in a time of monetary shortfall in an election year doesn’t even fly with Democrats.

Posted in California | Comments Off on A Bad Idea Goes Down to Defeat

The Defense Rests

I was wrong about the trial running another two to three days. The defense rested this morning in Wesley Snipes’ tax evasion trial in Ocala, Florida. Daniel Meachum, one of Mr. Snipes’ attorneys, made this statement: “We chose not to call witnesses because there was no need to. The government prosecutors have put on a case that simply does not come close to meeting the standard of its burden of proof. It was obvious after we went over the evidence the government presented that we could move on to closing arguments immediately and get a just acquittal for Wesley on all counts listed in the indictment”

Well, let’s evaluate where we’re at in the trial. Now of course I don’t have the benefit of actually listening to the evidence, but it seems clear to me that (a) the prosecution has proved that Mr. Snipes earned around $38 million; (b) that Mr. Snipes never filed a federal tax return for the years in question; (c) that he threatened IRS agents; (d) that he was told by his former accountant and by one of his employees that he had to pay taxes. Maybe I’m missing something, but that to me looks like an open and shut case of tax evasion. Mr. Snipes was supposed to file a return and didn’t.

Now, as to proving conspiracy my understanding is that the government must prove (a) that a crime occurred, and (b) that Mr. Snipes was an active part of causing that crime to occur. On this count of the indictment I don’t know without a review of the evidence whether or not the charge has been proven. In any case it will be up to the jurors in Ocala to decide.

Closing statements were scheduled for Tuesday morning. I would expect verdicts within a couple of days.

Posted in Tax Evasion | Tagged | Comments Off on The Defense Rests

Is the IRS Reading Taxable Talk?

It’s not a dumb question. The TaxProf Blog quotes a piece in Tax Analysts that states that the IRS is aware of tax blogs.

“The tax press has played an increasingly important role in the IRS’s communications strategy as the number and form of media outlets have proliferated over the last 25 to 35 years, IRS Chief Counsel Donald Korb said at a January 18 session of the American Bar Association Section of Taxation midyear meeting in Lake Las Vegas, Nev….

“Tax bloggers have gone a step beyond what traditional media can do and have ‘democratized’ the way tax news and other information reach people who may not have had access to such information before the Internet age, Korb said. People no longer have to have subscriptions to tax law publications or be in Washington to get that information, he said. Tax blogs such as TaxProf Blog, which is run by Paul Caron, a University of Cincinnati College of Law professor, ‘are a great tool to get information out to a particular group,’ he said.”

The TaxProf Blog is, as Joe Kristan noted, “[the] king of our little tax blogging world.” I do know that I have readers at California’s Board of Equalization because they’ve emailed me about some stories I’ve written in the past. I believe (based on visitor logs) that some individuals at the Franchise Tax Board and the IRS have stopped in and perused Taxable Talk.

The media has definitely changed from even ten years ago. Today there are tax blogs, and tax issues are followed more by the general public. I think that’s for the better as problems are discovered far quicker and the public is much better educated about the consequence of tax law.

Hat Tips: TaxProf Blog, Roth Tax Updates

Posted in IRS, Taxable Talk | Comments Off on Is the IRS Reading Taxable Talk?

There’s One in Every Crowd

I recently wrote an article for Poker Player Newspaper on taxes for poker players (I’ll post a link to the article in about a week when it’s up on their website). This morning I received an email that states,

“You said that people must sign their tax returns under perjury (which subjects them to potential criminal liability), but failed to mention the US Constitution’s 5th Amendment: “. . . nor shall be compelled in any criminal case to be a witness against himself . . ” Since tax return information can be used against a filer in a criminal prosecution, this makes the filing/signing of the tax return voluntary.

…If you can show me in the Infernal Revenue Tax Code where it makes the filing of a tax return mandatory, then I will be glad to recant my objections….”

I’m always happy to help, and for any other tax protesters out there, please read this carefully.

You must file a tax return if your income is above the statutorily determined amount of gross income during the tax year. See either the Tax Protester FAQ or the IRS’ page on frivolous tax arguments. As for the Fifth Amendment claim that’s implied in the email I received, “It is well settled that the Fifth Amendment general objection [to filing a proper tax return] is not a valid claim of the constitutional privilege.” Betz v. United States, 753 F.2d 834, 835 (10th Cir. 1985) The Tax Protester FAQ has plenty more to say about this specious argument.

Every year I get emails like this one. I choose one to respond to on the hopes (probably forlorn hopes) that the one lucky individual will see the light. I know I’m likely wasting my time. Eventually, though, that individual will have an IRS Special Agent or law enforcement officers from his state knocking on his door and telling him, “You have the right to remain silent….” If you want to send me an email like the one I received feel free to do so. I only respond to one a year because, as the Tax Court routinely says, “Their arguments that this income was not taxable are frivolous tax-protester arguments that we need not “refute * * * with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.” Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984).” [Quoted in Callahan, et. al., v. Commissioner, T.C. Memo 2007-301] So go ahead and waste those electrons!

Posted in Tax Evasion | Comments Off on There’s One in Every Crowd