I’m a fool for crime. Not that I like committing it mind you, but I enjoy reading about it and watching it. Movies, books and television shows about crimes and mysteries are one of my biggest interests. When I combine my enjoyment of crime and the timely topic of taxes, I researched tax cheats. The information I found was interesting to me, a crime junkie, so I hope you find some interest in it as well.
Below are six tax cheats. They are not necessarily the biggest ever, just the ones I found most interesting. They are in no particular order either. In case you were wondering what constitutes a tax cheat, be sure to read Are You Committing Tax Fraud, Tax Evasion or Tax Avoidance? You will find that you fit into one of these categories, hopefully the good one!
I said I wasn’t going to list the six biggest, but I have to mention THE biggest. Walter Anderson’s case is the largest tax evasion case in United States history. Anderson is a former telecommunications executive. He began his career at MCI and then founded many start-up telecom businesses and ended up selling these start-ups for large sums of money. The only problem was that he decided to not report all of proceeds from the sales. In 1998, Anderson earned over $126 million, but only reported income of $67,000 of which he paid a whopping $495 in taxes.
He plead guilty in 2006 of hiding $365 million by using off-shore bank accounts, shell companies and various aliases. When he plead guilty he was sentenced to nine years in prison and had to pay $200 million in restitution.
The best part (I guess for him at least) is that a typographical error on the plea agreement from the United States Government allowed Anderson to avoid paying up to $175 million of the restitution he agreed to pay.
Related: Do You Report All Your Income?
Helmsley was a hotel operator that would push personal expenses through to her businesses. She and her husband were doing a good job at getting away with it until one of their contractors refused to sign the paperwork because he knew what they were doing was illegal. The remodeling bill in question came to $8 million, which she and her husband didn’t want to pay. So, the contractors took her to court.
During the court proceedings, the contractors forwarded the illegal bills to the New York Post to show what the Helmsley’s were doing. In the end, Leona Helmsley spent 18 months in prison. Her husband, who had health issues during the time of the trial, was found unfit to stand trial and she had to stand trial alone.
After being released from prison and her husband passing away, Helmsley had a net worth in excess of $5 billion.
Any baseball fan knows of Pete Rose. He holds the record for most hits in a career with 4,256. In 1990 he plead guilty to filing false income tax returns. It turns out Pete didn’t report the money he earned selling autographs, memorabilia, and horse racing winnings. He ended up paying over $365,000 in back taxes and interest as well as a $50,000 fine.
Darryl is also a former baseball professional who became a star with the New York Mets in the 1980’s and it appears he learned from Mr. Rose above with regards to reporting income on his taxes. He too did not report income from selling his autograph. He ended up making a deal with the government and paid $350,000 in back taxes.
Wesley Snipes and his accountants were all charged with conspiracy to defraud the United States, among other charges. In 1996, he filed an amended return claiming a refund of $4 million and in 1997, filed another amended return claiming a refund of $7.3 million. He based these amended returns on an argument that income is not taxable. The government also claims Snipes never filed a tax return from 1999 through 2004.
In 2006, Snipes claimed he was a non-resident alien and therefore not required to pay income tax. In reality, Snipes was born in the United States and is therefore a United States citizen.
In 2008, Snipes was not found guilty of the conspiracy charge, but was found guilty of not filing income tax returns. In 2011, the Supreme Court refused to hear his case and was sentenced to three years in prison.
Most everyone knows that Capone was a famous mobster in Chicago back in the 1920’s. The gang that Capone was head of made their money using a furniture store as a front. There are estimates that he generated over $100 million per year through various illegal activities.
The interesting part of the story though is that Capone was never convicted of bootlegging or murder. He was found guilty of tax evasion and failing to file a tax return. This occurred because in 1916, the word “lawful” was removed from the 16th Amendment making income earned from illegal means taxable. Criminals like Capone had to decide whether to keep committing the crimes and report the income (basically admitting guilt) or not report the income (committing tax evasion). He chose to not report the income.
While on trial, it was found that Capone was bribing the jury, so a new jury was chosen. He was found guilty, fined and sent to prison for 11 years. Part of his prison time was served at Alcatraz.
Related: How to Report a Tax Cheater
Filing a false tax return or not filing a return is a big deal. In addition to having to pay back taxes, interest and penalties, if you are found guilty, you will have to pay hefty fines and could face serious jail time. Because of this, you are better off not trying to cheat the system. I, just like you, don’t like paying taxes. But deciding to not pay or cheat your way out of paying them is not the solution. Learn from the above examples that the IRS will find you sooner or later and it won’t be pretty.
Do you know of other tax cheats not mentioned above?