Walter Anderson was a successful telecommunication entrepreneur. However, he ran afoul of the law. In 2006 he agreed to plead guilty to two counts of tax evasion and one count of fraud after admitting to $200 million of tax evasion. He was sentence to nine years at ClubFed but didn’t have to make restitution.
Mr. Anderson appealed the sentence as too long; the IRS appealed that Mr. Anderson should have to make restitution. The IRS won on both counts. The IRS then sent Mr. Anderson a notice of statutory deficiency alleging that Mr. Anderson slightly underpaid his taxes:
Tax Year Deficiency Sec. 6663 Penalty 1995 $ 386,344 $ 289,758.00 1996 $2,012,045 $1,509,033.75 1997 $36,490,421 $27,367,815.75 1998 $50,022,418 $37,516,813.50 1999 $94,868,390 $70,993,002.00
There’s no typographical error here. That’s a $144 million deficiency for just 1998 and 1999 before the fraud penalty. Mr. Anderson filed a Tax Court petition and argued that the IRS was collaterally estopped from pursuing the case against him and asked for summary judgment; the IRS countered that they should obtain summary judgment against him as Mr. Anderson has already admitted fraud by pleading guilty.
The decision runs 82 pages and I’m not going to bore you by going through it all. If you are interested in how criminal proceedings and Tax Court cases interact it is worthwhile reading.
Suffice to say, Mr. Anderson didn’t have a good day. He lost his argument that the IRS couldn’t pursue a case against him. The IRS didn’t win on everything, though. The IRS did win that there will be summary judgment for the 1998 and 1999 tax years. Mr. Anderson’s criminal pleas were for those two years, and it’s very hard when you tell a criminal court that you committed tax fraud to take that plea back in the Tax Court.
Mr. Anderson might have lost the other three years, too, except that he has yet to receive a copy of a 270-page grand jury testimony document. The criminal court ordered that it be sent to Mr. Anderson by electronic means; however, Mr. Anderson, who currently resides at the Fairton, New Jersey branch of ClubFed, has no computer access at that facility. Because Mr. Anderson hasn’t received the 270-page document, the IRS has also been unable to get it.
In any case, Mr. Anderson now owes the IRS nearly $250 million (subject to appeals). I’m not counting on the IRS getting any of that money soon.