Wesley Snipes Faces Taxing Trial With IRS – Round One Begins

Screen actor Wesley Snipes is the target of the IRS and this time the Blade Runner might find that escaping the long arms of the IRS isn’t so easy. Been there, done that, and spent time in Federal prison for tax evasion – so I know first hand what Mr. Snipes is up against.  YouTube

Wesley Snipes has been indicted on federal criminal charges for his role in a bizarre tax avoidance scheme that allegedly included him seeking $12 million in fraudulent refunds and failing to file six years of tax returns. In an eight-count indictment unsealed today, Snipes and two others are charged with knowingly attempting to defraud the government by claiming that his substantial income was somehow immune to taxation. According to the indictment, Snipes, 44, conspired with Eddie Ray Kahn and former certified public accountant Douglas Rosile in the tax scam. Kahn is the founder of a Florida company (now known as Guiding Light of God Ministries) that, investigators allege, “promoted and sold fraudulent tax schemes” to clients like Snipes. Kahn has claimed that U.S. citizens could only be taxed on income earned from certain foreign-based activities (and not on money made in this country). This claim–known as the “861 argument” for the section of the tax code to which it refers–has been flatly rejected by the Internal Revenue Service. As part of the alleged Snipes scheme, the actor filed amended tax returns seeking $12 million in refunds on taxes he paid in 1996 and 1997. Details of the Snipes tax gambit first surfaced in 2002, when the Department of Justice sought a restraining order against Rosile. As an exhibit to that filing, investigators included a copy of Snipes’s amended 1997 tax return, which Rosile prepared. That document, which you can review here, sought a $7.3 million refund of previously paid taxes (Snipes earned $19.2 million in 1997). The amended return contended that the star’s income was “not from a taxable source” and contained a slightly tweaked affirmation next to the form’s signature line. The return was supposedly filed “Under no penalties of perjury.”

Substantive issues are at play in this case and we can assume it will be watched closely. The White Collar Crime Blog did a nice report on this very subject today. A summary of what they have listed as issues follows:

Some of the initial issues likely to arise:

• Jury – Snipes has questioned whether the City of Ocala can provide him with a fair trial. For the government, there can be the dislike for the IRS. Picking a neutral jury may be tough for both sides.

• Celebrity – How will the jury react to the celebrity? What would Martha Stewart say here? Being a celebrity can both hurt or help. Jurors can be elated to have met the star and been that close to the actor. On the other hand will they hold him to a higher standard?

• Finger-pointing – Will the three co-defendants be finger-pointing and will the government just need to sit back and wait for the trial to end.

• The Charges – The Indictment has an odd array of charges including two outside the typical tax realm – charges from title 18. Conspiracy charges are usually relatively easy ones for the government as the agreement does not have to be written and can be a mere nod of a head. Equally detrimental for Snipes is that there are 6 counts of 26 U.S.C. 7203, a failure to file tax returns. If the government can show that these tax returns were not filed, that’s a lot of years for the defense to overcome.

• Knowledge is Crucial in Tax Cases – The statute requires that Snipes have acted “willfully.” In Cheek v. United States, 498 U.S. 192 (1991) the Supreme Court held that the standard for willfulness is the “voluntary, intentional, violation of a known legal duty.” This can be a tough standard for the government, especially when there is no showing of a desire to obtain a monetary gain.

What will be the outcome? I predict – prison. I don’t like to be a pessimist, but there is a powerful saying: “Pigs get fat and hog get eaten!” Snipes is just “hogish” when it comes to taxes.

According to a New York Times report, From 1999 to 2004, the actor Wesley Snipes earned $38 million appearing in more than half a dozen movies. The taxes he paid in the same period? Zero.

J. J. MacNab, a Maryland insurance analyst who tracks people who deny they owe taxes and has testified before Congress about the movement, said that an acquittal of Mr. Snipes would be a severe setback for the I.R.S.

“He will get more press and attention than any other victory by the tax deniers, and the growth in new members will be exponential,” she said.

Mr. Snipes, 45, is charged with two felonies: conspiracy to defraud the government and filing a false claim for a $7 million refund (a claim for the year 1997, before he stopped paying taxes). He is also charged with failing to file tax returns for the six years starting in 1999. Prosecutors say they intend to show that Mr. Snipes moved tens of millions of untaxed dollars offshore and gave the government three worthless checks totaling $14 million to cover some taxes.

In court papers and interviews, Mr. Snipes says that he is not guilty and that he acted on the advice of two tax professionals. They are being tried alongside him and are promoters of the 861 position and other tax theories.

One is Douglas Rosile, who was stripped of his accounting license in 1997. The other is Eddie Kahn, who has served prison time for tax crimes. Both are under federal court order to stop promoting tax evasion, including the 861 position.

The lawyer representing Mr. Snipes at trial is Robert Bernhoft of Milwaukee, who has been barred by court order since 1999 from selling a program under which he said people could legally stop paying income taxes.

Now, I don’t know about you, but I just don’t see that as a winning hand. I think the cards are stacked against Mr. Snipes and his own choices – most importantly the tax advisers he has elected to associate with may well be his downfall.

I wish him the best!

Your comments are welcome!

We Pay A Price For Our Choices – Britney Spears Is Experiencing That Now!

Every choice has a consequence. That’s a statement I make in almost every presentation I give and every time, without fail, someone approaches me about a choice they made and the consequences that followed. www.chuckgallagher.com

Think about it, we make choices as normal humans and experience the pain or joy of the consequences that follow. But for a moment, can you imagine being Britney Spears.

What must it be like to be a mega star as a teenager? How do you learn to cope and grow, when as a star you’re under a white hot spotlight? What must the pressure be like when your every move is recorded and captured by the paparazzi’s lens?

Once again, Britney’s actions have left her without visitation rights for her two little boys. The Commissioner ruled that her suspension of visitation rights would continue until her next scheduled hearing on February 19th.

As easy as it is to point an accusatory finger at others, I wonder if we were faced with the kind of intense scrutiny she and Federline (former husband and father of her two children) face, if our actions would be sane or border on bizarre?

So here’s the question: If you could offer one piece of practical advice to Britney so she could bring sanity back to her life, what would it be?

O J Simpson’s Self Sabatoge – You Can’t Escape the Law – You Reap What You Sow!

Have you ever noticed that it’s impossible to avoid outcomes that – on the surface you would think – you want to avoid. Oh, for a time, you might think you could dodge the bullet, but then reality hits and, once again, you are hit squarely in the face with reality. For O. J. Simpson that rings true.

Reality is – O. J. Simpson is sabotaging himself.

No I’m no psychologist so I have no formal educational basis for my claim and even though I state that here, I am sure I’ll receive comments to that effect. But, I do have a Ph.D. from the school of practical experience. And, let me say, that is one of the most significant learning environments I’ve ever participated in. So let me state again my premise – O. J. Simpson is sabotaging himself!

The question is why? Why would anyone take actions – either consciously or unconsciously – that would bring about an outcome that, by most standards, people would not want?

Why, for example, would you violate the terms of your bail knowing that such a violation would, most certainly, put you in jail?

The Theory:

We are taught in school several laws which we hold to be truth. One is that, on a universal level, everything seeks to find equilibrium. For example, I am a private pilot and one of the first lessons was that a plane (airplane) seeks to fly, so if you are in an unnatural attitude – let go of the controls and the plane will generally right itself. Similarly, for every action there is an equal and opposite reaction. One might try to delay the outcome or reaction, but it is inevitable.

O.K. – so much for theory. How does that apply to O. J.? Well, O. J. got off from his earlier murder charge. Recall, if the glove don’t fit, you must acquit! Verdict: Not Guilty!

Now for most of us…that little (O.K. Big) brush with the law would be enough. But, O. J. couldn’t resist. He had to try to get his stuff. Slogan: The theft is fine, if the stuff is mine! (Sorry, couldn’t resist that one). Outcome: Busted for armed robbery. Hum…in trouble again. Now why would you even try to (get your stuff back) knowing that you could have an issue with the law?

But…that’s not enough. Simpson had been instructed by Las Vegas Justice of the Peace Joe M. Bonaventure in September not to have any contact with anyone involved in the case — not even by “carrier pigeon.” So what does Simpson – violate the terms of bail. Another dumb move.

Or is it?

Self Sabotage:

If one is guilty of a crime, then one will continue to do things so that guilt is brought to light. While Simpson got past the murder charge, there is something lurking that brings Simpson the need for punishment. So, having avoided what some would call his just reward, O. J. has chosen to act out in different ways so that equilibrium is restored. O. J. is guilty of something and the need for punishment is being manifest by his actions – whether conscious or unconscious.

A universal law is at work here – you will reap what you sow! And, until that law is satisfied, you will continually have the opportunity to reap till there is equilibrium.

The Positive Side of Consequences:

While reaping and sowing, at least in O. J.’s case, seems to focus on the negative, I know from experience that one can experience negative consequences from one’s actions, but likewise, you can enjoy positive results from the seeds you sow. From prison to Senior Sales Executive in a public company – I know that first hand from personal experience and speak about it regularly. If you’re interested in my presentations visit my web site at http://www.chuckgallagher.com

Perhaps, once O. J. is past this phase of his life and has satisfied his need for punishment, he’ll have the time to pay it forward and give back using his celebrity for the benefit of others. Till then – mark my words – a universal law is in play and once started it will find balance.