Three famous tax cheaters take issue with the authorities

AccountingWEB appears to be developing a rogues gallery of taxation ne'er-do-wells as the same celebrities continue to make headlines. Wesley Snipes, Conrad Black, Lil Wayne, and Suge Knight are, once again, in the news.

Wesley Snipes doesn’t give up easily. In July 2008, he was acquitted in court of tax evasion, but was convicted of failing to file tax returns from 1999 to 2004 and not paying the related taxes on income of $38 million.
 
Based on those charges, Judge William Terrell Hodges sentenced him to 36 months in prison and ordered him to pay a $5 million fine. Then Hodges let Snipes go free on bail while the actor appealed his conviction. Snipes was allowed to travel to London and Bangkok to finish the film work he’d started.
 
As the appeal process wound down, Snipes’s attorney thought he saw new hope with the arrest of Kenneth Starr, a financial advisor to celebrities, including Snipes. Starr was a key prosecution witness against Snipes. When Starr was arrested this summer on charges of securities fraud of roughly $59 million, Snipes and his attorneys asked the court to throw out the actor’s conviction. That didn’t happen.
 
Two years after the original conviction, time is up and Snipes's appeal has been denied. It’s unknown when he will report to jail.
 
Black is back
 
Back in court again is Conrad Black, the man convicted of bilking investors out of $6.1 million from Hollinger International as the assets of the company were sold off. Black, the former chairman of Hollinger, was sentenced to more than six years in federal prison for obstruction of justice, and a five-year concurrent sentence for fraud. He was placed in the low-security Coleman Federal Correctional Institution in Florida, where he remained since March of 2008.
 
His return to court, however, had a happier ending.
 
Black has always denied that he defrauded investors. In June of 2010, the U.S. Supreme Court ruled that a law used to convict Black was applied too broadly, and, therefore, improperly. Based on that finding, Black was back in court July 21 requesting to be freed on bail. Judge Amy St. Eve agreed to bail of $2 million, which was posted by Black’s long-time friend Roger Hertog. Black was then released from prison July 23rd.
 
Judge St. Eve ordered Black to surrender his passport and remain in the continental United States. But the defense attorney argued that his client, a native of Canada, should be allowed to return to Toronto in order to be with his wife, Barbara Amiel, whose health precludes her from living at the couple’s home in Palm Beach, Florida.
 
“[Black’s] home is in Canada,” defense attorney Miguel A. Estrada told St. Eve, seeking greater freedom for his client. The judge said she would consider the request at another court hearing in August if they provided her with details of Black’s financial status…which should be an interesting read.
 
Here are some of the highlights of his past and present dealings:
  • Black, now 65 years old, was once worth $200 million. He is the former owner of The Daily Telegraph and the Chicago Sun Times.
  • He relinquished his Canadian citizenship in order to become a member of the British House of Lords.
  • U.S. authorities assert that Black still owes the United States $71 million in back taxes. Black refutes that claim based on the fact that he did not live in this country.
  • Black denies reports that his Palm Beach, Florida, home was foreclosed and sold. Property records indicate the home was sold in February for $11.6 million. However, he will be able to reacquire the house if he pays off an outstanding lien by September. The house is for sale, Black told reporters.
 
More money, more problems
 
Rapper Lil Wayne – real name Dwayne Carter – has been imprisoned at Rikers Island for nearly a year on a gun possession charge. He should be released in the fall, but his troubles aren’t over. On June 3rd a federal lien in the amount of $1,138,760 was filed in Dade County Florida Circuit Court. The lien states that Carter owes back taxes from 2004, 2005, and 2007. The lien was addressed to an office occupied by Carter’s charity, One Family Foundation.
 
This is not the first tax lien against the rapper. He paid off a previous lien for $977,840 in August 2008. He also just settled a civil suit filed by a jeweler where Carter purchased – but did not fully pay for – an 18-carat necklace and a platinum ring. The judgment against Carter was for $146,000.
 
In the time he has spent in jail, Carter has made headlines for a variety of reasons, including an episode when he allegedly snuck a music player into his cell, and another incident that ended with a guard being fired after he was charged with spying on Carter.
 
More significant than Carter’s legal and tax woes is the contention by some in the entertainment industry that Carter and others have been specifically targeted. Multiple sources at AllHipHop.com claim there is a special unit within the Internal Revenue Service dedicated to nailing rappers, athletes, other entertainers, and foreigners who tour in this country and owe back taxes. Those sources say there is an “issue management team” that was formed in 2007 to collect taxes due from these individuals.
 
“A few years ago, they concluded that athlete and entertainer taxes might be escaping their radar. So they reinstated a division to only deal with this area,” Bill Zysblat told reporters at AllHipHop.com. Zysblat is with the global touring and accounting company RZO Productions.
 
Since that time, numerous rappers have been charged with tax evasion. Take a look.
 
Suge Knight, formerly the head of Death Row Records, was hit with a tax bill for $6.5 million relating to his 1996 tax return. The 2003 lien was filed again this year. Knight’s monthly income is now approximately $1,200 a month. Earlier this year, the items in his storage unit were auctioned of when he failed to pay the bill.
 
Rapper Swizz Beatz – real name Kasseem Dean – was hit with a federal lien on June 3, filed in Rockland County, New York. The lien, in the amount of $652,727, relates to income from 2008. In 2009, the state of New York filed a tax warrant against Dean and his ex-wife for $162,300. There’s more. Two other IRS liens were filed earlier:
  • A federal lien for $556,986 against Dean and his ex-wife, filed on August 18, 2008, also in Rockland County, for 2007 taxes due.
  • And on March 4, 2008, a federal lien for $842,645 was filed against Dean and his ex-wife for income tax owed for 2006.
 
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