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Actor Snipes sought in IRS fraud case

Officials say Wesley Snipes and two others tried to defraud the IRS of $11-million.

By JUSTIN GEORGE
Published October 18, 2006

TAMPA - Wesley Snipes plays an FBI agent in the soon-to-be-released film Chasing the Dragon.

But it was the actor's role as a wanted man in the 1998 film U.S. Marshals that better reflects where he now finds himself.

Federal authorities are looking for Snipes, 44, the Orlando-born star of movies such as Blade and White Men Can't Jump, after charging him with trying to defraud the Internal Revenue Service of more than $11-million in taxes. At a news conference Tuesday, federal authorities in Tampa unsealed an indictment against Snipes and two other men: Eddie Ray Kahn, 63, a tax protest group leader from Sorrento, and Douglas P. Rosile, 58, an unlicensed accountant from Venice. All three are accused of conspiracy to defraud the IRS and presenting a false claim for payment to the agency.

Officials said the men helped Snipes, who was earning $5-million to $8-million per film in the mid 1990s, file amended tax returns for 1996 and 1997. They said he didn't actually owe taxes and was due refunds of $4-million and $7.3-million.

Snipes, who formerly lived in Windermere, also is charged with six counts of failing to file income tax returns for the years 1999-2004.

Rosile faced an Ocala magistrate Tuesday after turning himself in. Kahn is believed to be in Panama. Authorities weren't able to locate Snipes, though they didn't say he was evading them. An arrest warrant has been issued.

"We're not sure where he is," said Paul Perez, U.S. attorney for Florida's Middle District, who said if Snipes wasn't aware of the charges, "after this press conference, he'll definitely know."

The case is being prosecuted in Tampa because all three defendants lived in Central Florida.

Celebrity tax troubles aren't uncommon, as Pete Rose, Leona Helmsley and Willie Nelson can attest. But IRS Special Agent Michael Yasofsky said it was the manner and means used in this case that makes it significant.

American Rights Litigators is the group accused of orchestrating the schemes. Kahn founded it in 1996, and labeled it a "professional organization that utilizes aggressive CPAs and attorneys dedicated to legally representing and protecting the rights of American citizens."

The group started in an office in Mount Plymouth in Lake County before it moved to Mount Dora, changing its name to Guiding Light of God Ministries. Now it bills itself as a nonprofit "Christian ministry and organization established to assist men and women in their pursuit of truth and freedom as Americans."

Investigators say no matter its name, the group was promoting and selling fraudulent tax schemes that harassed the IRS.

The group charged members a membership fee of $150 per person, represented them and allegedly made false demands to the IRS on their behalf.

Rosile, who continued to work as a CPA after his license was revoked in Florida and Ohio, allegedly prepared fraudulent tax returns for members based on the "861 argument," which falsely contends that the government can't tax money earned domestically.

Justice Department officials said Rosile prepared returns for customers in 34 states and caused the government an estimated loss of at least $29-million. In June, a federal judge barred him from ever preparing federal tax returns.

It's unclear how Snipes became involved with the group. Maybe it was because Snipes lived in Central Florida, where the group was based, Perez said. But investigators say Snipes knew what he was doing. Kahn even traveled to California, where he gave Snipes a private seminar on his tax views, which resulted in Snipes telling an employee of a company he ran to stop withholding payroll taxes.

Records show Snipes paid the group a consulting fee in January 2000 and joined the American Rights Litigators in March of the same year. In April 2000, Snipes signed the first of two amended income tax returns, using the "861 argument" and claiming he was owed refunds totalling more than $11-million.

The claims were rejected.

Snipes didn't file tax returns from 1999 to 2004, and instead sent three "bills of exchange" to the government totaling $14-million as payment for owed taxes.

The bills look like checks, with watermarks and security features, and are made on ornate paper. They claim to have been issued under the authority of the United States. But they were worthless, Perez said, fabricated by Kahn's group.

The conspiracy and presenting a fraudulent claim charges each carry a maximum sentence of five years in prison. Failure to file a return is punishable by one year in prison per count.

In 2004, a federal court ordered Kahn and three others to stop preparing, selling or marketing fraudulent tax schemes. A California man who pleaded guilty to filing false federal income taxes once said Kahn's group taught him he owed no tax because he earned his money in the "Republic of California," not the United States.

For Snipes, the indictment is the latest in a series of setbacks. Last year, he tried to enter South Africa with a forged passport. In 2003, his $1.7-million mansion near Orlando was foreclosed on.

Rini Cobbey, a professor who studies pop culture, film and celebrities at Massachusetts' Gordon College, said it's difficult to say whether the indictment will affect Snipes' acting career. He is considered a second-tier actor when compared with Tom Cruise, Tom Hanks or Denzel Washington, but he has a large cult following from the Blade series.

A tax scandal isn't as notorious as other celebrity crimes, Cobbey said, but the millions of dollars involved in Snipes' case "are big numbers."

Times staff writer Helen Huntley and researcher John Martin contributed to this report. Justin George can be reached at jgeorge@sptimes.com or (813) 226-3368.

FAST FACTS

Wesley Snipes

Personal: Actor, age 44, born in Orlando. Divorced, 2 children.

Professional: Films include Jungle Fever 1991, White Men Can't Jump (1992), Passenger 57 (1992), Rising Sun (1993), The Money Train (1995), Murder at 1600 (1997), U.S. Marshals (1998), Blade (1998), Blade: II (2002), Blade: Trinity (2004)

Charged with: Conspiracy to defraud the IRS, presenting a fraudulent claim for payment to the IRS, six counts of failure to file income tax returns, 1999-2004.

Sources: The Complete Marquis Who's Who Biographies, U.S. Attorney's Office. Source: IRS

861 contention

"Argument 861" comes from section 861 of the Internal Revenue Code, and argues that U.S. residents don't have to pay taxes unless their income comes from foreign countries. If they earn money domestically, they don't have to pay taxes.

The government calls it a misapplication of the IRS code, and courts have consistently rejected this argument. There are at least 39 frivolous antitax arguments that the IRS and courts have reviewed, including views that income tax is unconstitutional and that taxes can be withheld as a government protest.

[Last modified October 18, 2006, 05:49:31]