Taxable Talk

Wesley Snipes will be sentenced tomorrow in Ocala, Florida, for his conviction on three misdameaner charges of failure to file a tax return. The prosecution has asked that Snipes get the maximum sentence: three years at ClubFed. Snipes’ attorneys are asking for probation.

Linda Moreno, one of Snipes’ attorneys, told the Orlando Sentinel, “Mr. Snipes has led an otherwise exemplary life and is deeply sorry for his wrongful conduct. He has retained reputable tax professionals to assist him in resolving his tax liability and will make amends.”

Actors Denzel Washington and Woody Harrelson both wrote letters to Judge William Terrel Hodges asking for leniency. Judge Hodges will make his decision tomorrow, and I’ll let you know what the sentence is when it’s released.

A few weeks ago I received an email from Robert Bernhoft, the lead defense attorney for Wesley Snipes during his recent trial for tax evasion. For those who don’t remember, Mr. Snipes was found not guilty of the most serious offenses (tax fraud) but was found guilty on three of six charges of not filing a tax return.

I’ve received permission to post Mr. Bernhoft’s remarks:

After the Snipes’ trial I came across several articles and posts you authored while sifting through some of the voluminous media and web material that my staff had collected. In those articles you stated that Mr. Snipes had been convicted of three counts of tax evasion. This is untrue. Mr. Snipes was convicted on three of six counts of failure to file a return.

The difference is significant, because tax evasion is a tax fraud felony, see 26 U.S.C. § 7201, whereas failure to file a return is a “non-fraud” misdemeanor, see 26 U.S.C. § 7203. The felony/misdemeanor distinction is very important for several reasons. First, a misdemeanor conviction does not ordinarily disenfranchise Mr. Snipes from voting or possessing firearms, does not ordinarily bar him from running for (or holding) national office, and carries a statutory maximum sentence of 1 year. (Felony tax evasion carries a 5-year statutory maximum sentence per conviction count). Moreover, the U.S. Sentencing Guidelines treats misdemeanor convictions much less severely than felony convictions in a number of ways other than the difference in statutory sentencing maximums, including giving the sentencing judge broad discretion to sentence to probation or other non-incarceration alternatives to actual imprisonment.

Lastly, I note you made some disparaging comments about Mr. Snipes’ decision to discharge Attorney Billy Martin and hire my firm for his defense, opining, on at least one occasion, that Mr. Martin’s “O.J” and “blame the advisors” defense would surely be better than some “lame tax protester arguments.” Mr. Snipes faced a very real 16 years imprisonment if he was convicted on both felony tax fraud counts (conspiracy to defraud the IRS and filing a false claim), but now faces a statutory maximum of three years imprisonment on misdemeanors only, and without the opprobrium and loss of rights attached to felony tax fraud convictions. In retrospect, I think the trial worked out rather nicely for Mr. Snipes, don’t you?

First, I absolutely agree with Mr. Bernhoft: The trial worked out very well for Mr. Snipes. Mr. Snipes likely would have been sentenced to a significant term at ClubFed had he been found guilty of both felony counts. If I should at some future point be accused of felony tax evasion I’d definitely consider Mr. Bernhoft for my defense.

I also assumed that when Mr. Bernhoft took over the defense that the defense strategy would be a typical “tax protester strategy.” I told Mr. Bernhoft in an email that I was wrong, and I’ll state it here. Mr. Snipes’ defense was handled quite well. (Indeed, contrast Mr. Snipes’ defense with that of his co-defendents, Eddie Ray Kahn and Douglas P. Rosile, who were found guilty of felony tax fraud.)

I think Mr. Bernhoft is splitting hairs about Mr. Snipes’ conviction of failing to file a tax return. He accurately notes that I called it “tax evasion.” Indeed, the headline on my post of February 1st said just that. However, the story noted that he was convicted of three misdemeanor counts. Mr. Bernhoft is correct, of course, that felony convictions are much more significant than misdemeanors.

In my post “Final Thoughts on the Snipes Trial” I noted that both the prosecution and the defense praised the Ocala, Florida jury. I noted that,

“Yes, Snipes was guilty of stupidity (if you believe you don’t have to pay taxes…) and tax evasion failure to file a tax return (the government clearly proved that he didn’t file tax returns while he was earning income) but was he the purveyor of a tax fraud scheme?

“I hadn’t looked at the case in that manner but thinking about it I can see how a jury could decide that Snipes just bought the words of Kahn and Rosile. The verdict is not a repeat of the OJ Simpson case; Snipes was found guilty of three counts of tax evasion failure to file a tax return and could spend some time at ClubFed. He also faces the possibility of a civil suit by the IRS to recover the taxes. That might not happen, though, because his defense attorney says that Snipes intends to file and pay his taxes.”

Here are two other conclusions that can be drawn from this case that I believe Mr. Bernhoft would agree with. First, it’s a lot cheaper to file your tax returns and pay your taxes then to have to go to trial and defend yourself against tax fraud charges. And second, I don’t think Mr. Bernhoft will be complaining about juries in Ocala, Florida and clamoring to move trials from that bucolic town again.

Courtesy of the TaxProf Blog and Roth Tax Updates, I discover that NewsGroper.com has created a tongue-in-cheek Wesley Snipes Tax Blog. From that blog:

“n fact, we have a philosophy that separates us from all those other tax advisement companies who will just jerk you around… know full well, I don’t owe anybody any money. Ever.”

We’ll be starting our own series of Bozo tax tips on April 1st, but until then this parody blog should suffice. One note, though: The Wesley Snipes Tax Blog is definitely R-rated.

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.

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.

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.

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

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.