Taxable Talk

If you've ever tried for a government contract, you know that there's plenty of paperwork involved. For example, you have to disclose any past fraud convictions. If you don't, you could find yourself facing even more problems.

That's allegedly what Richard Hudec, Jr. of Naples, Florida did. Back in 2001 he was released from prison after serving time for bank fraud, mail fraud and aiding and abetting. He was also facing civil judgments from New Jersey, the IRS, and various companies that he had allegedly defrauded.

Now, if you've been convicted of fraud, and you've even served time at ClubFed, you know that disclosing that on your paperwork might negatively impact your chances of getting a government contract. And what government contract was Mr. Hudec attempting to get? His wife purchased Holiday International Security, Inc., and changed the name to USProtect. USProtect apparently got some government contracts as the company provided security at 120 federal installations through a GSA (General Services Administration) contract.

How did USProtect get the contracts? Well, one method that they allegedly used was bribery. The former owner, Michael Holiday, pleaded guilty to bribery and tax evasion. Mr. Holiday used bribes to a former GSA official to secure contracts in California and Maryland.

Indeed, Dessie Nelson of Oakland, California has been charged with receiving over $100,000 in bribes and a cruise from Mr. Holiday. And tax evasion for not declaring the income from the bribes.

As for Mr. Hudec, he's been charged with concealing material information and tax evasion. He allegedly did not report over $500,000 of income from USProtect that he received on his 2002 tax return.

News Story: Naples Daily News

The Hollywood Reporter is saying that Wesley Snipes' tax evasion trial has been continued. Apparently Judge Terrell Hodges changes his mind after speaking with Mr. Snipes.

It appears that the new trial date has not been set.

More on the TaxProf Blog.

Wesley Snipes fired his attorneys for his upcoming tax evasion trial. The Ocala Star-Banner reports that Snipes new attorney, Robert G. Bernhoft, told Judge Terrell Hodges, "The scope and prejudicial effect of this pervasive ineffective assistance of counsel only recently came to Snipes’ attention, causing an irreparable breach in the attorney-client relationship with his former attorneys, and precipitating their discharge by Snipes, and the hiring of new trial counsel."

Hogwash, according to Judge Hodges. "This series of events would lead any reasonable person to suspect that the defendant's dismissal of able counsel is nothing more than a ploy designed to force a continuance of the trial," Hodges said, as reported by The Smoking Gun. The trial will start, as scheduled, on October 22nd.

Snipes' former attorney was William Martin. Martin has represented many famous individuals, including Senator Larry Craig, Michael Vick, and Allen Iverson. Interestingly enough, The Smoking Gun notes that Snipes' new attorney has represented several tax protesters in the past. And there's more.

A quick search found that Mr. Bernhoft has faced the IRS before as a defendant in a tax protester case. Back in 1996, Mr. Bernhoft and Robert Raymond operated "Morningstar Consultants" in Milwaukee. They ran advertisements saying "Just Say No": The IRS, according to Bernhoft and Raymond when they operated Morningstar Consultants, has no right to compel you to file a tax return, to require withholding, and a number of other tax protester arguments. The IRS filed suit against them for their "De-Taxing America" program and won at the District Court level; they were permanently enjoined from marketing this program. They appealed, and the District Court ruling was upheld.

The Appeals Court found plenty of problems with the "De-Taxing America" program. "The statements appellants made in the Just Say No advertisement are clearly false representations concerning the government's authority to tax its citizens...We attribute to both appellants a basic knowledge of the law such that they should reasonably be aware that their personal belief that paying taxes is a voluntary activity does not represent the current state of the law."

Anyway, Mr. Snipes appears to have found an attorney who believes—unless his views have changed in the past few years—that taxes are voluntary and that Mr. Snipes is right that only foreign income is taxable. These kinds of arguments have a batting average well below the Mendoza line in court. Of course, at this time Mr. Snipes is only alleged to have committed these acts. But tax protester arguments are extremely unlikely to be successful in this kind of case.

Based on this development, I think we're going to have a lot of humorous moments during Mr. Snipes' upcoming trial. But I have a feeling that Mr. Snipes won't be laughing much at the end.

News Reports:

Ocala Star-Banner
The Smoking Gun

Karen and Charles Petersen of Nowthen, Minnesota were indicted back in 2005 for tax evasion. The government alleged that they hid their income in a trust, and then used the trust to pay personal and business expenses. After they were convicted in March 2006, the couple decided to evade the sentence by becoming fugitives.

That worked for a while, but US Marshals caught the couple in December. Yesterday, Karen Petersen found out her sentence (her husband passed away before sentencing): 15 months, restitution of $181,500 in tax (plus penalties and interest), and a $7,500 fine.

When you become a fugitive, judges tend to be quite strict when sentencing. Ms. Petersen may have had a few months extra of freedom, but she paid with a tougher sentence.

A 166-page indictment was unsealed today in Dallas charging 16 individuals with bribery, receiving kickbacks, and tax evasion. The individuals, including State Representative Terri Hodge (D-Dallas), former Mayor Pro-Tem Donald Hill, and others face long terms at ClubFed if convicted on all counts.

The investigation, according to this report in the Dallas Morning-News, began 27 months ago when Mr. Hill's then City Hall office was raided by federal agents. US Attorney Richard Roper described the scheme as a "complex bribery and extortion scheme."

Mr. Hill told the Morning-News that he, and the others, are innocent. "We're not guilt of any of the things alleged here...We’re just going to prepare for the fight."

The tax charges are listed in counts . Mr. Hill is accused of not timely filing tax returns from 2001-2004, and failing to file in 2005 & 2006. His evasion allegedly totals over $200,000. Darren Reagan is accused of evading over $100,000 in taxes. (The more serious charges are the bribery, extortion, and fraud charges.)

All-in-all, the Dallas political scene received a jolt today. It will be interesting to see what comes of this.

Earlier this year I noted the sad tale of Robert "Tractor" Traylor, the former NBA player with Milwaukee, Cleveland, Charlotte, and New Orleans. On Friday, Traylor was sentenced to three years probation for aiding and assisting in the preparation of a false tax return.

Traylor could have received up to 14 months at ClubFed. Traylor does have to submit any untiled tax returns to the IRS within 90 days. Traylor now plays professionally in Puerto Rico.

News Story Here