Taxable Talk

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.

...it usually is. Suppose someone came up to you and told you that you could put your assets in a U.S. trust, then funnel the money into a foreign (offshore) trust, and then have the money return to the U.S. and you would be able to have the taxes magically disappear. Would you believe that scheme?

Well, there's a sucker born every minute and three individuals were there to take them. From Philadelphia comes the conviction of John Michael Crim, David Brownlee and Constance Taylor on charges of conspiring to defraud the IRS of $10 million. One other individual, Michael Crim (son of John Michael Crim) was acquitted. Six other unnamed defendants pleaded guilty earlier; one other individual awaits trial.

There was a lot of evidence in the case--70 boxes of evidence. There was also the testimony of three of the individuals who earlier pleaded guilty.

The one defendant who was acquitted should thank his lucky stars. Claire, a juror from Philadelphia, told the Philadelphia Daily News that Michael Crim was acquitted because he was, "too young to have mastered the business...and he was just a kid." Hopefully the younger Mr. Crim (who is a resident of Orange County, California) will learn from his brush with the law and mend his ways.

As for the three who were found guilty their bail has already been revoked (the judge found them to be flight risks) while they await sentencing scheduled for May. They're looking at lengthy terms at ClubFed.

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.

The trial of Wesley Snipes and his tax advisors continued in Ocala, Florida last week. The prosecution rested its case on Friday; the defenese will begin presenting its evidence on Monday. The last government witness, IRS agent Steward Stich, testified that Mr. Snipes earned over $37,897,053 from 1999 through 2004 but didn't pay a penny in taxes.

Earlier, testimony showed that Mr. Snipes sent a 600 page letter to the IRS. Why? Joe Kristan takes up this part of the story:

If you were indicted on federal tax charges that could put you in prison for years, would you:

a). Pour yourself a stiff drink.
b). Flee the country
c). Call a good lawyer and devote your time to preparing your defense
d). Write a 600-page letter to the IRS telling them not to mess with you.

Wesley Snipes chose option "d," according to testimony in his tax evasion trial as reported at Ocala.com:

After being indicted in 2006, actor Wesley Snipes sent a document to the Internal Revenue Service declaring he was a "nonresident alien" of the United States, refuting his Social Security number and warning that continued prosecution could lead to professional consequences for federal employees.

Among other things, the letter claimed the IRS deceives people to "terrorize, enslave, rape or pillage" taxpayers.

Don't be silly. Terrorize and pillage, sure. Enslave and rape? I haven't seen that out of the IRS.

The IRS does many things, but a picture of a bunch of accountants laying siege on a Dark Ages town is just hard to believe.

The defense did get one ruling to go there way on Friday. Accountant Kenneth Starr was ordered by Judge William Terrell Hodges to provide the information requested of him by the defense or be held in contempt of court. Mr. Starr has ten days to comply.

As to what to expect from the defense, I have no idea. Defense attorney Robert Barnes said there's a chance that Mr. Snipes might testify. There's speculation that testimony will focus on Snipes' advisors providing bad advice (i.e. telling people they didn't have to pay taxes). The problem with that is that if you get bad advice you don't have to take it. Snipes was told by others to pay his taxes; I doubt that line will work. Additionally, we may see celebrity testimony (though Judge Hodges hasn't yet ruled whether that testimony will be allowed).

Meanwhile, Robert Bernhoft, one of Snipes' attorneys said, "It's the weakest conspiracy case I've ever seen in my life, that's all I can say. Were looking forward to defense, were looking forward to closings and we're looking forward to vindication." And the trial likely will conclude next week as the defense now only expects to put on evidence for two to three days.

It should be an interesting week in Ocala.

An online betting site has posted odds on whether Wesley Snipes will find his way to ClubFed or not. According to Gambling911.com, BetCris.com has posted these odds on Mr. Snipes:

Will Wesley Snipes be convicted of tax fraud?
Yes 1/10
No 3/1

Wesley Snipes' tax fraud sentence will be...
Convicted 1 - 5 years: 1/3
Convicted 5 - 10 years: 7/4
Convicted 10 - 16 years: 10/1
Not Convicted: 5/1

The best comment is from BetCris' spokesman, Esteban Siles, who told Gambling911, "I don’t understand why people refuse to pay their taxes. If it didn’t work for Al Capone or Tony Montana, then why would tax evasion work for anyone else?"

There's been plenty of tax fraud activity besides Wesley Snipes over the past few days. Here are some of the more interesting cases.

From Las Vegas comes the case of a truly Bozo plan. Keith Carthon created some phony W-2s, and then sent them to some friends who filed them. Of course, those returns all had refunds....The IRS figured out the scheme, and Mr. Carthon will spend 27 months at ClubFed. His co-defendant, Ramona Brock, will be tried in March for the same crimes.

From Dearborn, Michigan comes the story of someone who accurately reported part of his income. The trouble was that you're supposed to report all of your income. Yousef Safiedine owned a gas station, and leased it to a relative. He reported about 40% of the rental income he received, $134,000 per year from 1999 - 2001. However, he didn't report an additional $160,000 each year. Mr. Safiedine was found guilty of filing a false tax return signed under penalties of perjury. He'll be sentenced in May, and is likely looking at a short stay at ClubFed.

From the political corruption files, we head to Gary, Indiana. Three politicians arranged for the Gary Historical and Cultural Society to take over a closed supermarket. So far, so good. They then arranged for the Historical and Cultural Society to sell the closed supermarket to the Gary Urban and Enterprise Association for $200,000. That doesn't sound good, but the transaction was likely legal. And it sounds worse when the politicians kept $150,000 as a "finder's fee." And it got much worse for them when they didn't report the $150,000 on their tax returns and got caught, tried, and convicted. Will Smith, Jr. received 15 months at ClubFed, Roosevelt Powell got 37 months, and Willie Harris got 55 months.

Hopefully, you won't follow in these individuals' crooked footsteps. For ClubFed isn't much fun.

Last week Ronald Lupica was sentenced to 15 months at ClubFed plus restitution for defrauding ARC, a Connecticut trash company, and not reporting the $1.4 million he and a confederate stole on their tax returns. Besides the $1.4 million owed to ARC, another $249,111 (plus interest) must be paid to the IRS. Just a simple case of fraud and tax evasion, right?

Not exactly. The article in the Connecticut Post notes that ARC's owner, James Galante, is under indictment on federal racketeering charges. Mr. Galante allegedly got his funding from the Genovese crime family (aka the Mob).

And this all comes from the most benign of ideas: recycling paper. Sometimes good ideas lead to bad results.