Actor Wesley Snipes Was Sentenced To 3 Years In Prison For Tax Evasion In 2008 And Has Been Allowed To Remain Free While His Appeal Is Being Considered.

Actor Wesley Snipes Tax Evasion Problems

[source: wikipedia]

On October 12, 2006, Wesley Snipes, Eddie Ray Kahn, and Douglas P. Rosile were charged with one count of conspiring to defraud the United States under 18 U.S.C. § 371 and one count of knowingly making or aiding and abetting the making of a false and fraudulent claim for payment against the United States, under 18 U.S.C. § 287 and 18 U.S.C. § 2. Snipes was also charged with six counts of willfully failing to file Federal income tax returns by their filing dates under 26 U.S.C. § 7203. The conspiracy charge against Snipes included allegations that he filed a false amended return including a false tax refund claim of over US$4 million for the year 1996 and a false amended return including a false tax refund claim of over US$7.3 million for the year 1997.

The government alleged that Snipes attempted to obtain fraudulent tax refunds using a tax protester theory called the "861 argument" (essentially, an argument that the domestic income of U.S. citizens and residents is not taxable). The indictment said Snipes used accountants who already had a history of filing false returns to obtain refund payments for their clients. The government also charged that Snipes sent three worthless, fictitious "bills of exchange" to the Internal Revenue Service (IRS) in the amounts of $1,000,000 (on November 30, 2000), $12,000,000 (January 18, 2001), and $1,000,000 (September 10, 2002), with each accompanied by an IRS tax payment voucher coupon.

Under the alleged deal, the firm American Rights Litigators was to receive, from the clients, an amount equal to 20 percent of the tax refunds obtained for those clients. The government also charged that Snipes failed to file tax returns for the years 1999 through 2004.

In a December 4, 2006 letter from Snipes in response to his indictment, he declared himself "a non-resident alien" of the United States (in reality Snipes is a US born citizen). Snipes said he was being made an example of and unfairly targeted by prosecutors because of his fame in connection with the federal tax fraud investigation. He attempted unsuccessfully to get the trial moved from Ocala, Florida on the ground that racist attitudes in that town would prejudice his chance for a fair trial. Snipes faced the possibility of up to sixteen years in prison and substantial fines if convicted on all the charges. The trial began on January 14, 2008, in Ocala, Florida, with opening statements beginning on January 16, 2008.

On February 1, 2008, Snipes was acquitted on the felony count of conspiracy to defraud the government and on the felony count of filing a false claim with the government. He was, however, found guilty on three misdemeanor counts of failing to file Federal income tax returns (and acquitted on three other "failure to file" charges). His co-defendants, Douglas P. Rosile and Eddie Ray Kahn, were convicted on the conspiracy and false claim charges in connection with the income tax refund claims filed for Snipes.

On April 24, 2008, Snipes was sentenced to three years in prison for willful failure to file federal income tax returns under 26 U.S.C. § 7203. While defense lawyers urged leniency, prosecutors argued that Snipes should be made an example of because of his fame. Kahn was sentenced to ten years in prison, and Rosile was sentenced to four and half years in prison. As of 2010, Snipes remains free on bail to work, even traveling internationally, while he appeals his conviction.

In April 2009, the Los Angeles Wave reported that Snipes has refused to answer certain questions in connection with a talent agency lawsuit in which the agency claims that Snipes owes over $1.4 million in commissions. Snipes is reported to have taken the position that his answers could incriminate him in a federal tax investigation. Lawyers for the talent agency stated that Snipes' lawyer advised the lawyers for the talent agency that "Snipes and his [ . . . ] companies are under an additional investigation by the Internal Revenue Service and Snipes would be asserting his Fifth Amendment right against self-incrimination and would not answer any questions at his deposition." On May 22, 2008, the trial court ruled that Snipes may remain free while his appeal is being considered.