By JJ MacNab | September 11, 2008
FOR IMMEDIATE RELEASE
Wednesday, September 10, 2008
Five Promoters of Tax Defiance Scheme Indicted for Tax Fraud
WASHINGTON- Five promoters of Florida-based tax defier organization, American Rights Litigators/Guiding Light of God Ministries (ARL), were charged with selling worthless “bills of exchange” and promoting other schemes to orchestrate tax fraud, according to an indictment which was unsealed today, the Justice Department and Internal Revenue Service (IRS) announced. Defendants Eddie Ray Kahn, Stephen C. Hunter, Danny True, Jerry R. Williamson and Allan J. Tanguay, all of Florida, were indicted by a federal grand jury in Washington on Sept. 3, 2008.
The 12-count indictment charges all five defendants with conspiracy to defraud the United States and to commit mail fraud. In addition, each defendant is charged with one or more counts of mail fraud. The indictment further alleges that Kahn founded and led ARL from 1996 through 2004. During that time period, according to the indictment, ARL enrolled more than 4,000 customers from all 50 states, the District of Columbia and several foreign countries. Defendants Hunter, True, Williamson and Tanguay allegedly worked at ARL with Kahn to develop and sell tax defiance schemes based on deliberate misrepresentations of the legal foundation of the tax system.
According to the indictment, the purpose of the tax defiance schemes promoted by the defendants was to thwart the IRS in its attempts to assess and collect taxes by various means. These schemes included manufacturing and selling worthless “bills of exchange” supposedly drawn on the U.S. Treasury for customers to use in purported payment of their taxes, as well as producing false and harassing complaints against IRS employees that were sent to the Treasury Inspector General for Tax Administration in Washington, D.C.
Also, the Justice Department filed a lawsuit against ARL which resulted in a December 2003 preliminary injunction ordering ARL to cease selling its schemes. The indictment alleges that the defendants continued to prepare fraudulent and obstructive correspondence to the IRS on behalf of ARL customers, even after the entry of that order.
“Under the Tax Defier Initiative, the Tax Division is committed to vigorously enforcing the tax laws in an effort to stop promoters of tax defiance schemes,” said Nathan J. Hochman, Assistant Attorney General of the Justice Departmentâ€™s Tax Division.
“It is alleged in this scheme that the defendants manufactured and sold worthless â€˜bills of exchangeâ€™ for use to pay tax liabilities,” said Eileen Mayer, Chief, IRS Criminal Investigation. “We take this type of illegal activity very seriously and will continue to investigate and work with the Department of Justice on allegations such as these.”
Assistant Attorney General Hochman commended Victor W. Lessoff, Special Agent-in-Charge of the IRS Field Office in Tampa, Fla., and the IRS Special Agents in the case, as well as Tax Division attorneys Jeffrey McLellan, Kenneth Vert and Tino Lisella, who are prosecuting the case.
An indictment is only a charge and is not evidence of guilt. The defendants are entitled to a fair trial in which it will be the governmentâ€™s burden to prove guilt beyond a reasonable doubt.
Additional information about the Justice Departmentâ€™s Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.
By JJ MacNab | May 23, 2008
The judge has ruled thatÂ Snipes can remain out on bail pending appeal, and the appellate process can take years to complete.
What the judge said:
Obviously, having denied the Defendants’ motions asserting the issues he intends to raise on appeal, the Court is dubious as to the “substantiality” of those issues for purposes of appellate review.Â Nevertheless, the Court recognizes that the offenses of conviction are misdemeanor offenses, not felonies, and that the time required for the disposition of appeal may well equal — or nearly equal — the length of the term of commitment imposed.Â Additionally, the Court is not prepared to say that the issues on appeal are patently frivolous or asserted merely for purposes of delay.
Topics: Snipes | Comments Off
By JJ MacNab | May 22, 2008
My apologies for not posting more regularly,Â but I’ve been busy on my otherÂ blog (Bombs, Taxes, and Red Crayons) covering two tax denier related trials.
After sentencing onÂ April 24th, Snipes’ lawyersÂ (not the ones who handled his trial — Snipes fired them a few weeks ago) filed a motionÂ stating that they intended to appeal his conviction.Â Â
Since then, both sides have been engaging in a war of paper.Â Snipes’ lawyers want him to stay out of prison pending appeal, while the government both 1) considers him aÂ potential flight risk, and 2) states that there are no substantive grounds for an appeal to be successful.
InÂ one of the most recent filings, theÂ defense attorneys disclosed that SnipesÂ must turn himself in to the Bureau of Prisons by June 3, 2008.Â The BOP even has anÂ entry for himÂ all set up in their online database.Â
Why do the prosecutors think Snipes isÂ a potential flight risk?
From the government’s motion:
The United States did not object at sentencing to voluntary surrender for defendant Snipes, but is concerned about the possibility of him fleeing if he is allowed to remain on bond pending appeal. This concern is based on defendant Snipesâ€™ apparent lack of candor to this Court regarding his assets, combined with evidence of substantial offshore assets. At the sentencing hearing, defendant Snipes’ counsel gave a representative of the Internal Revenue Service (IRS) checks totaling $5 million as partial payment of his tax liability. The checks were drawn on the account of “Kymberlyte Production Services Int’l Inc.” (defendant Snipesâ€™ 100% owned loan-out company), and signed by Lori Davis (defendant Snipes’ personal assistant). Defendant Snipesâ€™ counsel represented that defendant Snipes also paid $1.7 million to the IRS with his 2007 tax return extension request. Despite the fact that defendant Snipes had at least $6.7 million to pay these liabilities, he represented to the Probation Office that he had less than $10,000 in liquid assets. Defendant Snipes has not explained this incongruity. His apparent lack of candor about his assets, combined with trial evidence that he has transferred millions of dollars offshore, show some risk of flight.
Another interesting tidbit I found on line, is that Snipes is planning on filming a new movie with director Antoine Fuqua entitled “Brooklyn’s Finest.”Â The preview posterÂ was released at this week’s Cannes Film Festival.
If Snipes is in prison, he can’t film such aÂ venture.
Topics: Snipes | Comments Off
By JJ MacNab | April 24, 2008
Wesley Snipes was sentenced late this afternoon, following an all-day hearing, to 36 months in federal prison.
Eddie Ray Kahn received 120 months, and Douglas Rosile was sentenced to 54 months.Â This will be Kahn’s second stay in federal prison on tax related charges.
By JJ MacNab | April 23, 2008
In their sentencing memos, the government has asked that the judge give the three defendantsÂ some fairly stiff sentences (click on their names to read the applicable filing by the prosecutors):
Wesley Snipes -Â 36 months in prison plus a fine of at least $5,000,000
Eddie Kahn – 120 months in prison
Douglas Rosile – 78 – 97 months in prisonÂ
On the other side, Snipes’ attorneys have asked that their client do no time in prison at all.Â The defense lawyers claim that jail would be a “travesty,” that Snipes’ small children will suffer, and that his various and famous friends all believe he is a good guy who shouldn’t go to prison.
From the defense memo:
Imprisoning Mr. Snipes, while his children are at such a critical developmental stage where a fatherâ€™s love, guidance and nurturance are essential to their development will cause the children irreparable harm. The youngest ones will cry themselves to sleep, not understanding why their father is no longer there to love them.
Only people without kids should ever pay for their crimes by going to prison?Â Snipes really should have taken his family into consideration before entrusting his futureÂ to the con artistry of a convicted tax evader and ex-CPA.
There’s also significant back and forth in the various filings about how much Snipes actually owes in back taxes.Â The government simply can’t know for sure because Snipes still hasn’t filed his tax returns for 1999 to 2004, whichÂ he is requiredÂ to sign under penalty of perjury.Â Â
Snipes, meanwhile,Â had several friends and family writeÂ character reference letters to theÂ judge, including notes from TV judges, his agent, his costume designer, his lawyer, andÂ fellow actors Woody Harrelson and Denzel Washington.Â None of these letters, however, can compare to a single sentence found in a recommendation made by martial arts school owner Bob Wall:
Chuck Norris admires and respects Wesley Snipes…Â
Hmmm.Â I’m not sure the prosecution team can top that one.
By JJ MacNab | April 14, 2008
TheÂ prosecutors submitted theirÂ sentencing memorandum today. They have asked the judge to sentence Snipes to 36 months in prison with a fine of at least $5 million, andÂ let’s just say they didn’t mince words.
For nearly a decade, Snipes has engaged in a campaign of criminal tax conduct combining brazen defiance with insidious concealment. By these means, Snipes has escaped paying more than $15 million in income tax to the Internal Revenue Service (IRS), and has pursued an intended fraudulent harm to the United States Treasury of more than $41 million. Â But for the limits of the statutory maximum sentence, the sentencing guidelines would call for term of imprisonment of more than 10 years. The intended loss in this case ($41,038,051) is so large that it is 100 times the amount ($400,000) that would place Snipes in a guidelines range calling for 36 monthsâ€™ imprisonment. However, even beyond the enormous tax harm caused by Snipes, the multifarious nature of his schemes and the deterrence value of a substantial prison sentence for this truly notorious offender call for a full 36 months in prison.
To read the entire government filing, go here.Â
Now compare those tax figures to what Snipes’ lawyers think he owes for the same time period.
At the April 11, 2008 meeting with the Probation Officer, counsel for the defendant proffered a one-page, high-level summary schedule showing a purported tax loss of merely $227,959 for the years 1999 – 2001. Counsel also proffered a one-page analysis captioned â€œDetail of RAR Analysis by Year,â€ covering only 1999, which putatively reduces taxable income by means of a â€œnet operating loss carryover,â€ before it makes the tax virtually vanish by means of a claimed â€œforeign tax credit.â€ No other schedules have been provided to date.
And you have to wonder if the California state taxing authorities aren’t considering taking their own action.
Snipes failed to file tax returns or pay taxes due to the State of California during the prosecution years, Ex. 33, and he sent a bogus $27,485 Bill of Exchange to the State of Florida taxing authorities. Ex. 87-41.
Topics: Snipes | Comments Off
By JJ MacNab | February 12, 2008
Or does he just have a problem paying taxes?Â
Last week, a New Jersey newspaper reported that Snipes’ outstanding tax liens on his Alpine, NJ home in the amount of $67,108Â had been sold at auction in December.Â Â If he doesn’t pay this amount off in the next two years, the new owner of the lien can foreclose on his New Jersey home.
His tax problems in California, as yet unreported in the press, are just as dire. In 2005, he defaulted on his property taxes on his Los Angeles home, and if he doesn’t pay off $171,581 in the next two years (growing at a rate of $1,841.12 per month), the County will sell his home out from under him.
He already lost one home in Windermere, FL to foreclosure in 2003 when he stopped making mortgage payments. He claimed that he’d been scammed by his financial advisors (which should sound familiar to anyone following the tax trial) and even tried to act as his own lawyer in court. In 2005, he almost lost a second home in Florida when the property was scheduled to be auctioned off to pay more than $23,000 in back taxes. This home currently has delinquent property taxes totaling $15,321.
Property taxes aren’t the only problems he has at the state level. According to public record, the following is a partial list of tax liens that have been filed against him and the companies he controls in various states:
Snipes and his company Kymberlyte grossed $17,353,983 in 2001.Â He couldn’t afford to pay a $362 tax bill or was he just asking questions?
By JJ MacNab | February 7, 2008
The court docket was updated this morning to reflect the new sentencing date for Kahn, Rosile, and Snipes.
NOTICE OF HEARING as to Eddie Ray Kahn, Douglas P. Rosile, Wesley Trent Snipes. Sentencing set for 4/24/2008 at 09:30AM in Courtroom 1 before Judge Wm. Terrell Hodges. Defendants Douglas P. Rosile and Wesley Trent Snipes, who are on bond, are required to be present. Defendant Eddie Ray Kahn, who is in custody, is required to be present. Copy provided to U.S. Marshal.(MAM) (Entered: 02/07/2008)
By JJ MacNab | February 5, 2008
KCUF Media wrote:
The IRS line about â€œvoluntary complianceâ€ is a blatant lie.
The â€œvoluntary complianceâ€ rhetoric from the IRS is weaselly at best, and deserves to be thrown out of court on that basis, at the very least.
Sigh.Â Considering the IRS, Congress, the Department of Justice, the Treasury, and who knows how many journalists over the last century have used the phrase repeatedly to describe our income tax system, you’d think that the tax denier crowd might be curious as to what it actually means.Â Nah.Â If you question your anti-tax arguments too carefully, you might have to admit that you have to pay taxes.Â Instead, they incorrectly believe that “Taxes are voluntary — I don’t have to pay.Â Yippee!”
I hate to disappoint you, but almost all of our laws in America are based on a system of voluntary compliance.
Perhaps an analogy will help with the confusion.Â You’re in your car approaching an intersection, and the traffic light is red.Â As you near the intersection, you look both ways and see that if you don’t stop, the approaching cars are far enough away that you’ll make it safely through the intersection.Â So why do you stop?Â Because you riskÂ gettingÂ an expensive ticket if you don’t and because if there were no traffic laws at all, travel by car would end up impossible in all but the most rural areas.Â This is an example of voluntary compliance.Â You’re volunteering to stop at the light,Â but if you don’t, you’ll be fined by the traffic court and may even lose your license if you try it too often.Â It’s an honor system that has consequences if you cheat.
Now compare that to a train crossing.Â You’re in your car approaching the train tracks, red lightsÂ are flashing, and a barrier prevents you from going forward.Â As you near the tracks, you see that you have plenty of time to cross the tracks safely before the train arrives, but you can’t move forward because of the barrier.Â This is an example of an enforced compliance system.Â You have no choice in the matter of whether you move forward.
Filling out your own Form 1040 and calculating the taxes yourself is voluntary, just as stopping at the red light is voluntary,Â but there are significant consequences if you don’t.
Since mixing the honor system with money matters is problematic, we’ve had to move farther away from the voluntary compliance system over the years.Â To slow cheating trends, payroll withholding and income reporting regimes were put in place, which I find unfortunate.Â If more people had to physically write a check to the US government each week, month, or quarter, I thinkÂ voters would take a far more active interest in whittling down government abuses and waste.Â But because paying the taxes has become automated, they just don’t think about it much.Â Â
Those who cheat on their taxes therefore hurt us all in more than one way:Â when they cheat, the rest of us pay more, and when enough people cheat, our system of voluntary compliance by necessity converts into one of enforced compliance.
By JJ MacNab | February 4, 2008
Good Guy wrote:
Iâ€™m glad those scum promoters got convicted on the felony counts. Itâ€™s now time for congress to set a dollar amount for elevation of failure to file as a felony. What this verdict says is â€œif you are going to owe millions in taxes, donâ€™t file- itâ€™s just a misdemeanor.â€ Thatâ€™s plain obscene. If the taxes due are over $10K, then it should be a felony. You want to erase the deficit? Letâ€™s get all the cheats!
It’s in the works already.Â The President’s Budget for 2009Â released this morning contains just such a provision.
Â MAKE REPEATED WILLFUL FAILURE TO FILE A TAX RETURN A FELONY
Current law provides that willful failure to file a tax return is a misdemeanor punishable by a term of imprisonment for not more than one year, a fine of not more than $25,000 ($100,000 in the case of a corporation), or both. A taxpayer who fails to file returns for multiple years commits a separate misdemeanor offense for each year.
Reasons for Change
Increased criminal penalties would help to deter multiple willful failures to file tax returns.
Any person who willfully fails to file tax returns in any three years within any five consecutive year period, if the aggregated tax liability for such period is at least $50,000, would be subject to a new aggravated failure to file criminal penalty. The proposal would classify such failure as a felony and, upon conviction, impose a fine of not more than $250,000 ($500,000 in the case of a corporation) or imprisonment for not more than five years, or both.
The proposal would be effective for returns required to be filed on or after January 1, 2009.
By JJ MacNab | February 4, 2008
Simple answer, it depends on the judge.Â
For Eddie Ray Kahn and Douglas Rosile,Â chances of a prison sentence are very good.Â They were convicted on two felony counts each, and the underlying amounts involved are so high that prison time is almost inevitable.Â
For Snipes, it appears that odds are pretty dang high too, unless the Judge isÂ much more of a softy than he appears in court.Â I suspect he doesn’t find tax protester semantic games and threats (especially that 29 page letter) particularly amusing.
In federal court, the sentencing process begins with a somewhat complex formula called the Federal Sentencing Guidelines.Â In the next few weeks, the probation officer assigned the case will prepareÂ the formula calculation and submit it to the court.Â Both the defense attorneys and prosecutors will have a chance to object to the recommendations madeÂ by the probation officer, andÂ the judge will takes those objections into consideration when he sentences the defendants roughly three or four months from now.Â When the prosecutors ask for the formula sentence to be increased, it’s called an “enhancement”, and a decrease request from prosecution or defense is called a “downward departure.”
The sentencing guidelines are not kind to Snipes.Â Bottom line, he could quite realistically be sentenced to the maximum sentence of 36 months in federal prison.Â
So how does the guideline formula work?Â
Depending on a number of factors, such as the amount of taxes Snipes didn’t pay and whether or not the judge thinks he obstructed justice by sending that nasty-gram to the IRS and prosecutor, different levels are assigned.Â Assuming the 2007 version of the Federal Sentencing Guidelines applies, and using a tax loss of $2,500,000 as the basis for the sentence, in the best case scenario for Snipes, the offense level would be 24.Â If he has no criminal record,Â he would be looking at a sentence of 51-63 months, according to theÂ Guidelines.Â Â Since the maximum amount by law he can be sentenced to isÂ 36 months, his GuidelineÂ sentence would be reduced to 36 months.
If the tax loss were at least $7,000,000, his Guideline calculation would be at least 63-78 months, which is again capped at that 36-month maximum.Â Â If he owesÂ more, or the judge findsÂ that an obstruction enhancement is warranted, the Guideline recommendation would be even higher but the maximum sentence can never be higher than 36 months.
The bad news for Snipes is that the formula puts him in prison for three years.Â The potential good news for him is that the judge doesn’t legally have to follow the formula.Â That 36-month sentence is an advisory number and if the judge feels there is suitable justification for sentencing Snipes to less time in prison, he can.Â If the judge departs significantly from the formula, the prosecutors can appeal the sentence, though, and this judge was very careful in how he handled and documented the trial, indicating that he doesn’t like his rulings to be overturned at the appellate level.
IfÂ Snipes files all of his past return (1999 through 2006) and pays off his tax obligations prior to sentencing, the judge may be inclined to be more lenient.Â 36 months in prison can be a pretty good incentive to do just that.
By JJ MacNab | February 1, 2008
Bad day for Rosile and Kahn.Â Â Relatively good day for Snipes, considering what it could have been.
Rosile and Kahn were both convicted on two felony counts (conspiracy to defraud the government, and aiding in the filing of Snipes’ false refund return.)Â Snipes was convicted on three misdemeanor counts (willful failure to file tax returns) and acquitted on the remaining charges (the same two felony counts as above and threeÂ additional misdemeanor failure to file counts.)Â Kahn is being held in prison pending sentencing and both Rosile andÂ Snipes are free on bail.Â
The jury deliberatedÂ for just shy of three full business days and came up with what I thought was an odd mix for a verdict.Â Kahn’s and Rosile’s guilty verdictsÂ were no surprise of course, they’ve been long-term tax protest promoters, and Snipes’ defense counsel were pretty quick to blame them.Â And even before the jury expressed confusion over the definition of “conspiracy,” I thought Snipes might be acquitted on that count.Â
The split on the failure to file counts, however,Â came in the opposite of what I’d guessed.Â While the prosecutor told the press after the verdict that he thought the threeÂ not guilty counts were theÂ result of Snipes’ change in residence, I think it’s more likely thatÂ the jury thought thatÂ havingÂ your rights read to you by a Special Agent (“you have the right to remain silent”) somehow exonerates you from having to send your financial information to the IRS onÂ a Form 1040.
Outside the courthouse was a crowded mess.Â There were several TV crews, reporters, construction workers from across the street, and many, many Snipes fans and supporters.Â Â From the victory dance going on byÂ some ofÂ the defense team, oneÂ would have thought that the jury had ruled not guilty on all counts.
ButÂ it’s important to remember thatÂ this was a mixed verdict.Â Snipes bought into a serious scam to the point of pushing it on his employees, andÂ is now facingÂ three years in prison for believing that tax protestÂ legal fairy tale was real.Â Because of the enormous amount of income tax, it’s quite possible the judge will send him to prison for the full three years under federal sentencing guidelines.
The tax denier community is already expressing a mix of glee and resentment. Many are finding solace in his partial victory, as if his verdict somehow changes their personal odds of financial ruin and prison. Others are angry that Snipes’ legal team put the blame on Rosile and Kahn, long-term leaders in the tax protest world.
So all that remains besides sentencing is finding out whatÂ SnipesÂ will do now.Â Will he continue his angry tirades to the government?Â Will he pay taxes (and penalties and interest) on that $38 million of personal income plus $20 million of corporate income and express remorse prior to sentencing?Â Will he do the responsible thing and warn other potential victims of promoters like Kahn and Rosile not to buy into their schemes?
Time will tell.
By JJ MacNab | January 31, 2008
The surety company backing Snipes’ bail bond has requested that the judge either put Snipes in custody or require a new bond if and when the jury finds him guilty.Â
“In the Surety’s view, defendant Snipes’ waiver of defenses indicates more than a lack of resolve. It can easily be inferred that the defendant has no faith in the judicial system and is an unwilling participant. It is apparent that he may not vigorously pursue an appeal, if he is not interested in presenting a defense at trial. Therefore, any appeal is likely for purpose of delay in order to allow the defendant to flee. It is also likely that Snipes simply does not consider himself to be subject to the jurisdiction of the court, or any United States governmental body.”
The motionÂ describes Snipes’Â contention that he is a nonresident alien and then turns that frivolous tax denier argument against him.
If Snipes believesÂ he is a nonresident alien, it follows that he is likely to believe he is non-extraditableÂ if he flees to another country.Â
While not offering a defense can sometimes convince a jury that the case is weak, it certainly doesn’t impress a seasoned surety company.
For now, the judge has denied the motion based on a signature technicality which I would imagine the surety company will fix asap, but this is an interesting example of how Snipes’ kooky detax arguments have had unintended consequences.
In summary, the surety company wants more money posted by Snipes, which the defense lawyers have declined, and Snipes’ choices now are to either find a new surety companyÂ or risk being incarcerated immediately if the jury doesn’t acquit.
Considering that this judge has been fairly lenient about allowing Snipes to travel after he was indicted (Canada, Namibia, South Korea)Â he may not see a need for Snipes to be jailed pending sentencingÂ or appeal, butÂ the motionÂ exposes an interestingÂ look into how a bail bondsman takes Snipes’Â nutty theories seriously.Â
By JJ MacNab | January 31, 2008
Months after he was criminally indicted, Snipes sent a lengthy, and at times nasty, letter to the IRS and the federal prosecutor assigned to his case.Â
The entire letter – minus the 600 pages of attachments, of course – can be read here.
Sad, and ugly stuff.Â
The jury has now ended two full days of deliberation, and willÂ return Friday morning at 9:00 am to continue their process.Â
By JJ MacNab | January 30, 2008
What a day we had on Tuesday.
Court convened at 9:30Â AM to give locals a little extra time to hit the polls, and the judge addressed a last minute kooky filing submitted by Eddie Kahn. The nonsense motion was , of course, denied and closing arguments began.
The prosecution team went first, and they nailed their closing argument. Prosecutor Scotland Morris asked the jury to appeal toÂ its reason and common sense in considering this case. One by one, he addressed the charges against the defendants, showing a chart that outlined the governmentâ€™s burden of proof for each type of count, and then pulling up relevant documents that fulfill each of those obligations. He explained that the defense has been trying to deflect the possibility that a conspiracy took place by focusing on the lack of secrecy. Snipes asked for an audit, and Kahn and Rosile were sending their theories to the IRS as attachments to the frivolous filings. Morris pointed out, however, that secrecy is not a necessary element for a conspiracy.
The presentation was quick and efficient, and acted as both a reminder to the jury of certain key documents theyâ€™d seen, and as a timeline for the jury to follow the conspiracy that had allegedly taken place between Kahn, Rosile, and Snipes.
That pesky venue issue (that relates only to the willful failure to file counts) was brought up yet again, and Morris showed the jury Snipes Florida driverâ€™s license which was issued in 1997 and renewed in 2004, his Florida Homestead Exemption application, and a document where he testified under oath that his legal residence was Windermere Florida.
He also pointed out some of the flaws in Snipesâ€™ reasoning over the years. For example, if you have a good faith belief that you donâ€™t owe taxes, why send in $14,000,000 of phony Bills of Exchange to pay those taxes or doctor the IRS form to change the jurat (the small print on the form where you say you are signing under penalties of perjury)?
â€œThatâ€™s what this case is about: three men who think theyâ€™re above the law.â€ â€“ Scotland Morris
Morris also point out a tendency of the defense team to try to put the IRS on trial, instead of the defendats, to deflect attention from tax cheats to that clumsy incompetent bureaucracy.
Defense Attorney Robert Barnes then gave the first half of the defense closing statement. In summary, Barnes painted his client as a wacky goofball with odd beliefs who was always acting in good faith when he filed the amended return, stopped filing and paying taxes entirely, and sent dozens of wing-nutty letters and packages to the IRS instead of providing them with his financial data.
Then the whole OJ Simpson thing started in the courtroomÂ and I had to wonder if the jury found theÂ â€œcatchy phraseâ€ game as annoying and insulting as I did.
â€œIf the glove doesnâ€™t fit, you must acquitâ€ became â€œdisagreement is not deception, disagreement is not fraud.â€ We heard this over and over and over in the hour that Barnes spoke. Disagreement may not be deception, but filing doctored IRS forms sure is. Disagreement is not fraud, but trying to claim almost $12,000,000 in refunds is. So is passing $14,000,000 in phony checks, and filing thousands of pages of nonsense documents in an attempt to stall IRS collections.
While I had hopes that legal counsel would compare Snipes to Galileo and Rosa Parks (tactics used in other tax protester trials), they instead compared him to the Pilgrims that landed on Plymouth Rock. Dang.
Trying to justify someone cheating on their taxes by painting them as just like the founding fathers (since when is cheating is so All-American?) really gets my goat. Barnes carried the All-American theme even farther.
â€œThe Liberty Bell may be cracked in Philadelphia, but it can still be heard in Ocala.â€ Robert Barnes
Bernhoft then took over the closing argument to address that pesky â€œWhere did Snipes live?â€ topic. He presented a chart of all of the place Snipes had used his corporate credit card to prove that he spent more time elsewhere than he didÂ in Florida, but didnâ€™t produce any documents where Wesley asserts that his home is anywhere other than Florida; no New York or New Jersey or California driverâ€™s licenses or property records for other homes. In perhaps the most absurd exhibit seen in this trial, the defense had counted the number of times â€œMarina del Reyâ€ had appeared on any document in the case vs. how many times Florida appeared, and the jury was supposed to think that such a raw count would overwhelm hard evidence such as the Florida Homestead Application, documents sworn under oath, or his recently renewed FL driverâ€™s license.
Bernhoftâ€™s explanations for the Florida address evidence were fascinating. He claimed that Snipes had gotten his driverâ€™s license in Florida when he was 17 and that it had been automatically renewing by mail. The current photo on the license suggests otherwiseâ€¦ And as for Snipes claiming under oath on a civil lawsuit filing against a movie studio that his legal address was in Florida, heck, heâ€™s a celebrity, and they lead different lives from the rest of us, so hell yeah he lied under oath on that filing to protect his wife and children from stalkers. Itâ€™s therefore unfair to accuse him of perjury.
And finally, Bernhoft played the celebrity card even more. â€œYou need to walk a mile in Snipesâ€™ shoes. His world is a fictional reality.â€ He went on to say that Snipes has to become part of his world and therefore has a unique point of view.
â€œYou just donâ€™t do what he did unless youâ€™re a true believer. You just donâ€™t put protesters in prison. Itâ€™s not a crime to ask questions.â€ Bernhoft
Doug Rosileâ€™s lawyer, David Wilson,Â put on a similar defense.
â€œYou donâ€™t tug on Supermanâ€™s cape â€¦ and you donâ€™t ever question the IRS.â€
Wilson too tried to blame the IRS rather than his client, accusing the government of playing â€œhide the ballâ€. He compared Doug Rosile, who prepared hundreds of amended 861 returns in this case, to presidential candidate Mike Huckabee who says he wants to abolish the IRS.
His primary focus on the case was to express several times the catch phrase: â€œmeritless is not fraudulentâ€. This painful word game trying to force a distinction between the 861 scam being meritless vs. frivolous vs. fraudulent was a tap dance to nowhere.
And then, US Attorney Robert Oâ€™Neill presented the rebuttal argument. Finally, after two days of jury selection, seven days of testimony, and hours and hours of courtroom motions and the defense team grandstanding before the tv cameras, someone told the story of this case. He cut through the nonsense and got straight to the point.
â€œItâ€™s laughable that anyone has mentioned good faith in this case.â€ Robert Oâ€™Neill
According to Oâ€™Neill, Snipes, Rosile, and Kahn have done nothing but stall the IRSâ€™ efforts to collect taxes. Snipes’ teamÂ claimed that he was simply asserting his right to remain silent when he didnâ€™t file tax returns after he was warned that he was being investigated; he was afraid those later returns would be used as evidence against him. Oâ€™Neill skewered this argument by pointing out that Snipes certainly wasn’t afraid to file with the IRS 263 pages of nonsense which he tried to label a tax return, and multiple other documents with the IRS after his rights had been read.
As for Snipes demanding answers to his multi-hundred-page documents, Oâ€™Neill was quick to point out that that isnâ€™t the IRS job to provide special treatment to tax protesters whose goal it is to stall the IRS and waste its limited resources.
It was refreshing to hear someone finally refer to the goal of a tax protester scheme: to frustrate the IRS, and to throw enough wrenches in the cogs of the machine in an attempt to get out paying taxes.
The judge then read the jury a lengthy set of instructions and the jury went to a back room to deliberate just after 4:30 in the afternoon.
Good luck, jury, and thanks for taking your duties so seriously throughout this trial.Â
By JJ MacNab | January 28, 2008
No witnesses, no celebrities, no testimony, no evidence.Â Just a big, high-risk poker bluff.
By resting their case immediately,Â theÂ defendants’ unspoken statementÂ to the jury is that the government didÂ such a weak job presentingÂ its case that there’s no point in rebutting it -Â since the burden of proof is on theÂ government.Â
“We could have called a bunch of Hollywood stars.Â We couldÂ have put on a big show, but we don’t do that. We’re not going to waste the jury’s time.” — Bernhoft
I’m pretty confident the jury is disappointed that they won’t be hearing from Barbara Walters, Sly Stallone, Mohammed Ali, and Tom Brokaw.Â Instead, what they’ll hear now is closing arguments from two prosecutors and four defense attorneys.Â One of those defense attorneys (Mr. Meachum) plans on talking about his friendship with Snipes, which I would think would have been more appropriate if he had done such commentary as a character witness, subject to cross examination.
I predict that the defense team will focus on the persecution theme with comparisons to Rosa Parks and Galileo.Â To paraphrase what they’ll say: “Snipes was just asking questions, and instead of simply answering his questions, they’re trying to punish him by putting him in prison.Â By finding the defendant ‘not guilty’ you, ladies and gentlemen of the jury, can send a message to this abusive government and finally put them in their place.Â Snipes still has to pay all those back taxes anyway, so what’s the point of also putting him in prison except to persecute him.Â If you find himÂ ’guilty’, you’ll be telling the government that it’s ok to punish those who dare to question what their government does.”
It’s pretty dramatic stuff, and every blueÂ moon it works onÂ a jury.Â
In comparison, the case that the government will have to refresh for jurors is kind ofÂ dull but it’s hardly a weak case.Â SnipesÂ became a member of Eddie Kahn’s ARL despite dire warnings from his prior advisors.Â He stopped paying taxes and even tried toÂ recruit and force his employees into his new belief system, threatening one with loss of her job if she didn’t get with the team.Â Over the next several years, despite dozens and dozens of warnings from the IRS, Snipes engaged in a paper war, filing long diatribes with massive attachments containing tax protest gibberish to just about every government agency around.Â He filed altered tax returns in an attempt to get back refunds from prior tax years, and sent phony checks in to the IRS totalling $14,000,000.Â Even after he was notified that he was under criminal investigation, Snipes continued to play his games, sending in 263-page demands when a more reasonableÂ person might have sought a second opinion from a qualified advisor about whether just maybe he’d made a mistake. And finally, months after his indictment, that 29-page letter where he threatens government employees while making further demands was theÂ final piece of evidence that Snipes’ “questions” were not asked in good faith.Â Life so many tax protesters, the questions were rhetorical, and were intended as weapons to fight the IRS.
It’s never a dull day in the theater of the absurd.
By JJ MacNab | January 27, 2008
“Some people believe with great fervor preposterous things that just happen to coincide with their self-interest.” Coleman v. Commissioner, 791 F.2d 68, 69 (7th Cir. 1986).
A whirlwind of goofy sounding theories has plagued the Wesley Snipes criminal trial for the past couple of weeks, appearing in bothÂ the evidence being admitted, and among the tax denier supporters in the courtroom audience.
The following is a brief debunking of some of the more outrageous myths being promoted.
NoÂ law makes me liable:Â Sure itÂ does.Â Read sections 1, 63, and 61 of the Internal RevenueÂ Code.Â Â ”A tax is hereby imposed” isn’t exactly hiding out on page 1 of the Code.
There are 63 million people in the “tax truth” movement:Â Snicker.Â This is one of the more amusing cases of the tax protest movement trying to misuse statistics to their benefit.Â According to an older IRS report, there are an estimated 60 million people in the US who don’t file any income tax returns.Â Protesters assume that all of these people have opened their eyes to the super secret Truth(tm) of the “no law makes me liable” argument.Â Unfortunately for the movement, that big number includes little children, students, people in hospitals, people who live below the poverty line, people who are unemployed or under-employed, and people who should have filed just to get a refund they were owed when their bosses withheld too many taxes.Â Â The real number of tax protesters is unknown but is probably closer a half million individuals.Â That’s still a lot, but hardly 63 million.
The IRS isn’t an agency of the US Government:Â Whoop-de-doo!Â No one ever said it was.Â It’s part of the US Treasury.Â Congress created something called the Commissioner of the Internal Revenue back during the Civil War and then gave thatÂ Office enough annual budget to hire lots and lots of tax collecting employees.Â The current budget pays the salaries of about 100,000 employees, and the resulting bureaucracy is the IRS, a fancy name for the Commissioner’s staff.
The IRS is secretly located in Puerto Rico:Â Puerto Rico has something called the Bureau of Internal Revenue, andÂ Congress never created anything by that name.Â Et voila, the Puerto Rico BIR is actually and secretly the IRS, right? Wrong.Â See answer just above.Â Congress created the Commissioner of Internal Revenue and gave him lots of money to hire people.Â That’s all the IRS is.
The IRS is a private company located in Delaware that enriches private bankers:Â Â In 1933, someone registered a company in Delaware with the name “INTERNAL REVENUE TAX AND AUDIT SERVICE.”Â Obviously, that company is the IRS…Â Except the IRS wasn’t actually called the Internal Revenue Service in 1933, it was called the Bureau of Internal Revenue.Â Just because someone registers a name that is similar doesn’t make it the same entity.Â And a message to tax deniers, using “private bankers” as your new euphemism for “Jewish bankers” isn’t going to help your cause improve its racist reputation.
If your name is spelled out in ALL CAPITAL LETTERS, it isn’t you:Â Sure it is.Â Old computers didn’t have lower case letters and so using all upper case letters to print birth certificates and such is all they were capable of.Â Over the years, using all capital letters for court documents and legal documents became a convention; there is no secret meaningÂ in it.
You can write unlimited checks on a Treasury account that was secretly set up in your name when you were born:Â This “Treasury Direct Account” is supposed to be accessible by writing Bills of Exchange against the funds held there.Â Problem is, there is no such account in anyone’s name, so any checks you try to write on it are fraudulent.
I’m sure as the trial progresses, we’ll be hearing more such goofiness, and I’ll post updates as appropriate.Â It’s amazing that so many people believe this nonsense so fervently, to the point whereÂ they’re willing to go to prison rather than consider that they’ve been swindled by charlatans.
By JJ MacNab | January 27, 2008
Snipes, Kahn, and Rosile were all indicted on one count of conspiring to defraud the US Government.
From in or about 1999 through the date of this indictment, in Lake and Orange Counties, in the Middle District of Florida, and elsewhere,
WESLEY TRENT SNIPES,
EDDIE RAY KAHN,
DOUGLAS P. ROSILE,
The defendants herein, did knowingly, willfully, and unlawfully combine, conspire, confederate, and agree with each other and others, both known and unknown to the Grand Jury, to defraud the United States by impeding, impairing, obstructing, and defeating the lawful government functions of the IRS in the ascertainment, computation, assessment, and collection of the revenue: to wit, income taxes.
As proof of the conspiracy, the government claims that 1) the three tried to make it appear that Snipes didnâ€™t owe taxes, when in fact he did, 2) the three attempted to get a refund for Snipes by filing an amended return, 3) Snipes failed to file tax returns from 1999 to 2004, 4) Snipes and Kahn tried to pass phony â€œBills of Exchangeâ€ to pay off Snipesâ€™ tax obligations, 5) Snipes stopped withholding taxes from his employeesâ€™ paychecks, and 6) the three tried to hide the purpose of the conspiracy and the acts committed.
When you think of a conspiracy, you conjure up images of shady people hiding in back rooms, rubbing their hands in glee at the prospect of setting their evil plan in motion. One of them might even have a really wicked looking white cat on his lap. Secrecy is important because if anyone catches wind of any aspect of their plot, the jig is up, and the bad guys are hauled off to prison by the good lookinâ€™, square-jawed guys from the FBI.
Throughout the trial so far, the defense attorneys have made it clear that the principal theory of their case is that Snipes acted in good faith and that he was just a duped client of Kahn and Rosile. To paraphrase their case, it couldnâ€™t possibly have been a conspiracy because Snipes wasnâ€™t hiding; all he was doing was asking questions. By attaching a special form to his amended tax return, he was giving the IRS notice of what he and his advisors were doing. As proof of just how much he was not hiding, his attorneys point out that he asked the IRS to audit him and to provide him with an opinion letter. Obviously, according to his attorneys, he never intended to defraud the government because he was only asking questions to make sure he complied with the law.
Even if the jury thinks that the questions posed by Snipes, Kahn, and Rosile were genuine (a big if, considering how few non-rhetorical questions were asked, and how much those questions were obscured by insults, angry diatribe, and hundreds and hundreds of pages of nonsensical legal research), itâ€™s not true that he and his advisors werenâ€™t hiding. Considering how much evidence in this case was only found during a surprise raid on Eddie Kahnâ€™s office, to claim that everything Snipes, Kahn, and Rosile were doing was disclosed to the government is simply far-fetched.
For example, the IRS contacted Kahn, Rosile, and Snipes numerous times and requested 1040 Forms, books, records, and other financial information. Their requests were ignored. Instead, the anti-tax trio used stalling tactics such as requesting a Determination Letter from an IRS office that doesnâ€™t even provide such documents, or sending a 263-page rambling manifesto to the IRS with a demand that the IRS provide a detailed response within 30 days, or sending phony checks in the amount of $14,000,000 to the IRS in lieu of tax payments. Will the jury really see these tactics as the efforts of man acting in good faith? It will be their job to decide whether Snipesâ€™ request for an audit was genuine considering he hadnâ€™t filed any tax returns for the Service to actually audit.
And unlike the evil white cat conspiracy scenario above, itâ€™s not required that all aspects of a conspiracy to defraud and impede the IRS be hidden. Disclosing oneâ€™s reliance on the 861 argument and submitting it with an altered IRS form may be goofy, but Iâ€™m fairly certain that Kahn and Snipes didnâ€™t disclose to the IRS that they were forcing their 861 scheme on Snipesâ€™ employees, or that Kahn and Rosile were splitting 20% of any and all refunds they successfully obtained for their clients.
Under a â€œKlein Conspiracyâ€, the fancy schmancy lawyer name for this count in the indictment, the government must show:
- an agreement between two or more individuals or entities to impair, obstruct, or impede any lawful function of government, such as collecting taxes,
- an overt act to further that agreement, and
- intent to accomplish the objectives of the agreement.
From the evidence shown, will the jury find that the three worked together to keep the IRS from collecting taxes from Snipesâ€™ sizable income? Overt acts could include sending in that amended return or trying to pay taxes with phony Bills of Exchange. As for intent, the jury will need to weigh Snipesâ€™ defense (just asking questions) with the correspondence theyâ€™ve seen where he rails against the government and threatens federal employees.
For those who want to learn more about this type of conspiracy charge, hereâ€™s a more thorough article.
By JJ MacNab | January 26, 2008
Itâ€™s an interesting group of people sitting in the audience during the trial. Reporters, people who didnâ€™t make it on the jury but are curious about the case, one jurorâ€™s spouse, supporters and family members for the defendants, tax protesters, government employees, and so on. For the most part, itâ€™s a very polite and sociable group.
One question Iâ€™ve heard asked several times is this: â€œWhy did the government go after Snipes while leaving all of the other participants in the scheme alone? Why did they single him out?â€
I decided to do a littleÂ digging to see if the assumption behind the question was true and the results of my research turned out to be quite interesting.
Where are they now?
Ray Pope: The ARL attorney whose â€œgreat resumÃ©â€ the defense has been trying to introduce into evidence is currently serving a 97 month prison sentence for 19 felony counts of conspiracy, money laundering, wire fraud, and aiding and abetting.
Milton Baxley II: The Gainesville attorney who represented Rosile and Snipes before the IRS has been enjoined from running a scam, disbarred by the State of Florida, and is currently serving an 18 month sentence in prison for violating that injunction.
Barton Buhtz: The man who invented the idea of the fictitious Bills of Exchange that Snipes tried to use to pay $14,000,000 in taxes plus a state tax warrant was recently found guilty on six felony counts involving his phony documents are is scheduled to be sentenced in two weeks.
Wayne Rebuck: This Snipes advisor was one of the directors of the Commonwealth Trust Company, the organization that sold Snipes his â€œpure trustâ€ in Switzerland. Rebuck pled guilty to conspiracy and his Commonwealth Trust partners are currently awaiting a verdict from the jury in their criminal trial in Pennsylvania.
Clifford Kidd: This American Rights Litigators client was indicted in Texas in December of 2007Â on one count of corrupt interference with Internal Revenue laws and five counts of passing fictitious Bills of Exchange.
John Weisberg: This ARL client was indicted in New York on four counts of willful failure to file tax returns. His criminal trial is scheduled to begin on January 30, 2008.
Richard and Tracy Corona: After following ARL advice, Mr. Corona, a San Diego attorney, was found guilty on one conspiracy count, one count of tax evasion, and three counts of failure to pay taxes. On January 11, 2008, Mr. Corona was sentenced to 33 months in prison and his wife was sentenced to 30 months after she was convicted on all four felony counts. The Coronas filed false amended returns and sent numerous frivolous documents and correspondence to the IRS.
Brent Gross: In July, 2007, this ARL client was convicted on three counts of tax evasion, three counts of filing false returns, and one count of passing a fictitious Bill of Exchange.
Snipes isnâ€™t being singled out by the Justice Department; it just seems that way because heâ€™s the only case generating significant attention.Â On the contrary, he’s just one case in what will likely be a long line of people associated with Eddie Kahn getting into legal trouble.
By JJ MacNab | January 26, 2008
Today was all about money. A whole lot of money. Buckets of it. Take all-of-the-money-made-by-all-16-jurors-and-multiply-by-10 kind of money.
Government Witness: Steward Stich has been an IRS Revenue Agent for 36 Â½ years and his role in the trial was to present the summary of his research into how much Snipes earned in gross income from 1999 to 2004. The ultimate goal was to prove that Snipes earned more than the â€œminimum filing thresholdâ€ in each of the six years in question. Bottom line, if Snipes earned more than roughly $7,300 in each of the four years he was single, and more than approximately $15,750 in each of the two years he was married, then he was legally required to file tax returns with the IRS.
Revenue Agent Stich showed that Snipesâ€™ actual earnings exceeded these amounts by a comfortable margin. A really comfortable margin.
Between 1999 and 2004, Snipes grossed a minimum of $37,897,000 in personal income plus his Kymberlyte company had corporate earnings of at least $20,855,000. Since Snipes didnâ€™t file any returns during the years Kymberlyte was in business, he never elected to receive a more tax-beneficial business structure so his combined taxes are even higher than they should have been had he filed. Ouch.
Add interest and penalties to that higher tax amount, and Snipes could be looking at back taxes of $35,000,000. Double ouch.
The government rested their case, and the trial broke for the weekend just before lunch.
Next week, the defense will present their witnesses to the jury, which theyâ€™ve estimated will take about two days.Â Then the government will have an opportunity to rebut that testimony. After closing arguments by both sides, the jury will escape to a back room and deliberate on the fate of all three defendants.
Thereâ€™s a man in the courtroom who looks a bit like Snipes, and most of us had assumed that he was a brother or cousin or other family member. Turns out heâ€™s a look-alike named Wayne Woodyard. Go here to watch him on video, and here to read a longer story about Wayne and Snipes’ fans outside the courthouse.
Warning: Iâ€™ve had to delete many, many comments from this blog in the last few days from tax protesters desperately trying to use this space to peddle their scams and myths to the readers here.Â Go away.Â Your comments will be deleted. Lifeâ€™s not fair.