A federal judge has decided that it's time for actor Wesley Snipes to begin serving three years in jail, which he had been sentenced to two and a half years ago. The star of such films as Blade, White Men Can't Jump, and U.S. Marshals was convicted of three misdemeanor sentences for willful tax evasion on May 1, 2008. After pursuing appeals (which failed) Snipes has been free on bail, but that now has come to end.
The Judge ruled:
The Defendant Snipes had a fair trial; he has had a full, fair and thorough review of his conviction and sentence by the Court of Appeals; and he has had a full, fair, and thorough review of his presents claims, during all of which he has remained at liberty. The time has come for the judgment to be enforced.
You can read the Judge's full decision here.
At first blush, 36 months in prison may seem excessive. These are misdemeanors after all, and Snipes was exonerated of the felony charges. Many people have been convicted of failing to file tax returns, without receiving jail time. So why is Snipes about to serve such a long sentence?
The government pointed out that this was no simple tax evasion case. Snipes felt that the tax laws of the United States did not apply to him and he willfully chose not to pay taxes. Instead, Snipes used what many people call a "pure trust" (which some call a "constitutional trust"). Contrary to what the name implies, this is not a legitimate trust at all. It's actually a scam.
Snipes transferred his assets and business holdings into the pure trust, arguing that he no longer owned them, and it removed his earnings from the jurisdiction of the United States. Because of this (and other reasons) Snipes felt he didn't owe any taxes. Accordingly, between the years of 1999 and 2004, he didn't file income tax returns, despite earnings exceeding $37 million. The government determined he owed more than $15 million in taxes for these years.
Instead of paying Uncle Sam like the rest of us, Snipes mailed long treatises to the government, arguing the IRS was powerless to collect taxes from him. He declared himself to be a "nonresident alien" who didn't owe taxes. He accused the IRS of committing fraud, extortion and identity theft against him. He encouraged employees of his to likewise stop paying taxes and held a seminar at his home to convince others to use pure trusts and similar methods to dodge tax obligations.
The prosecuting attorneys argued that an example had to be made out of Snipes. While federal law limited the maximum sentence to one-year for each misdemeanor, tax sentencing guidelines suggested even longer sentences should be imposed based on the large amount of money he owed in taxes. If a celebrity like Snipes was permitted to avoid doing serious jail time with so much money involved, the government argued, then it would encourage others to evade tax payments because they would only fear a slap on the wrist if they were caught.
Snipes' attorneys claim he merely failed to file a couple returns and wants to pay what he owes. They say it's shocking that he should spend three years in jail for misdemeanors. It's not fair to treat him more harshly because he's a celebrity, they argue.
In fact, the attorneys asked the Judge presiding over the case to hold a new trial. They stated that two jurors had contacted them claiming that other jurors had decided Snipes was guilty before the trial ever started. These two jurors said they only agreed to the three misdemeanors as a compromise verdict, never expecting Snipes would actually serve jail time like this.
Despite this information, the judge held that the jury verdict was proper and agreed with the U.S. attorneys that the sentence was fair. He ruled that Snipes had been kept out of jail long enough.
So Snipes will soon report to a federal penitentiary to begin serving his punishment.
The really sad part about this case is that these "pure trusts" are far more dangerous than most people realize. While the IRS has done a good job of cracking down on them in recent years, there are still many companies selling them, saying they are a legitimate way to avoid paying taxes.
Often, they target seniors and use pure trusts to exploit money from them. Financial exploitation of the elderly is a growing epidemic in our country, with some estimating that there are more than five million cases of financial elder abuse occurring in our country each year.
Do not let your elderly loved ones fall prey to believing that a "pure trust" is a legitimate estate planning or tax-avoidance tool. It's a scam. And those who encourage others to place their money into them and not pay taxes should (and usually do) spend serious time in jail. In fact, many people who place their assets into pure trusts never get their money back.
Given how aggressively Snipes pushed pure trusts and other tax-avoidance mechanisms onto his employees and others, and with the staggering amount of taxes he intentionally failed to pay, three years doesn't sound so long at all.
Sentences like this help discourage unsavory people from preying on seniors and others with pure trusts and similar methods of exploitation.
Posted by: Andrew W. Mayoras and Danielle B. Mayoras, co-authors of Trial and Heirs: Famous Fortune Fights! and co-founders of The Center for Probate Litigation and The Center for Elder Law in metro-Detroit, Michigan, which concentrate in probate litigation, estate planning, and elder law. Andrew and Danielle are husband and wife attorneys, professional speakers and consultants across the country. Follow us on Facebook and Google+.