Stakes high for Wesley Snipes in tax fraud, conspiracy trial

OCALA, Fla. — Eight years ago, Wesley Snipes was hot. He made millions as a half-man, half-vampire in the first “Blade” movie, and had just gotten a star on the Hollywood Walk of Fame.

Snipes was also paying millions in federal income taxes, until prosecutors say he met two Florida men and accepted their argument that he didn’t have to. Based on a long-rejected interpretation of the tax code, Snipes allegedly tried to collect millions in illegal refunds, and has not filed a federal return since 1998.

The 45-year-old action star is set to go on trial Monday on tax fraud and conspiracy charges. He faces up to 16 years in federal penitentiary if convicted, while co-defendants Eddie Ray Kahn and Douglas P. Rosile face 10.

Snipes’ attorneys say he was the victim of unscrupulous advice, and didn’t know he was doing anything illegal. He is free on $1 million bond.

“He was completely innocent and he acted in good faith - not with any bad purpose or criminal intent to deceive or defraud the (Internal Revenue Service) at all,” defense attorney Robert Barnes said.

Prosecutors say the evidence proves otherwise.

Kahn founded a group in the 1990s, American Rights Litigators, and a successor group, Guiding Light of God Ministries, that purported to help members legally avoid paying taxes. Rosile, a former certified public accountant who had lost his licenses in Ohio and Florida, prepared the paperwork. Snipes joined their group in 2000.

Kahn’s and Rosile’s system relied on what’s known as the “861 argument” - a fringe interpretation of the federal tax code that holds that U.S. citizens don’t have to pay taxes on wages they earn within this country. It has been continually rejected as frivolous by judges and the IRS, but is still used by some tax protesters.

“In reality,” the indictment said, “(Kahn’s entities) were for-profit, commercial enterprises that promoted and sold fraudulent tax schemes that interfered with the administration of the internal revenue laws of the United States.”

ARL charged annual dues for members like Snipes and took 20 percent of any return generated, the indictment said.

Snipes invited Kahn to his California home for a presentation in 2000, and continued to work with Kahn even after his previous tax advisers told him Kahn’s position was inaccurate, the indictment said.

Snipes also ordered his film companies to stop deducting taxes from employees’ paychecks, prosecutors said.

Not only did Snipes stop filing, he also started filing false forms on taxes rightly paid in the previous two years, the indictment said. In April 2000, Snipes sent a fraudulent claim for $4 million he paid in 1996, prosecutors said.

In October 2000, Snipes signed an “Affidavit of Incompetence” stating that he didn’t understand the tax laws or know if they applied to him.

The next April he allegedly filed for more refunds - $7.4 million from 1997 wages- while failing to file for the previous year.

The government never returned any of the money, but Snipes kept working with Kahn. He paid membership dues at least until March 2003, the indictment said.

Part of Kahn’s scheme, prosecutors allege, was to keep the IRS backed up with bizarre demands and heavy paperwork. It relied on a “determination letter,” which ARL allegedly advised Snipes to send to check his tax status. If the IRS did not respond, Kahn allegedly told Snipes, he did not have to pay any taxes.

Snipes twice sent letters to IRS special agents investigating the case, in 2003 and early 2004, saying the agent had no authority to probe his tax situation.

The actor has moved on to a second legal team, having fired two lawyers who also represented Michael Vick in Vick’s highly publicized dogfighting case. Both they and current counsel offered a flurry of motions, most of them denied.

The most noteworthy was a change-of-venue request, arguing that this central Florida town is racist and he couldn’t get a fair trial. Snipes wanted the trial moved to New York, where he has a home, but the judge said there was no compelling reason or proof of racism.

Further complicating Snipes’ case is his co-defendants. The three, tied by the conspiracy charge, are being tried together despite Snipes’ protests.

Kahn, who remains jailed, has no legal training, but insists on representing himself and has made several missteps and peculiar motions. For example, he sought to be immediately freed because the indictment lists his name in all capital letters, and said Florida was never ceded to the federal government, so U.S. attorneys have no jurisdiction.

Those motions were denied, as was Snipes’ request to separate the two in trial.

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