Wesley Snipes Acquitted of Tax Fraud, Convicted on Misdemeanor Counts

Travis Reed

The Associated Press

February 04, 2008

Action star Wesley Snipes was found not guilty of federal tax fraud and conspiracy charges in the Golden-Collum Memorial Federal Building in Ocala, Fla., on Friday, but was convicted on three misdemeanor counts of failing to file a tax return.

Snipes and two co-defendants, a delicensed accountant and a tax protest leader, were indicted in 2006. Snipes was also indicted on six counts of willful failure to file a tax return from 1999 to 2004, a period in which he signed two contracts for more than $10 million on sequels in the "Blade" trilogy. He was acquitted on three of those and convicted on the others. He could be sentenced to three years in prison after originally facing a possible 16 years.

Co-defendants Eddie Ray Kahn, the founder of a tax protest group, and Douglas P. Rosile, a delicensed accountant, were convicted by the same jury of tax fraud and conspiracy.

Snipes sat expressionless until all of his verdicts were read. Then, defense attorney Robert Bernhoft put his hand on the actor's leg and Snipes nodded in relief.

Rosile grimaced when his verdict was read. Kahn was not in attendance. He remains behind bars and argues the court has no jurisdiction to try him.

The verdict from the five-man, seven-woman jury came on the third full day of deliberations.

Snipes, who starred in the "Blade" films and "White Men Can't Jump," is among the most famous targets of an IRS criminal investigation, and his prosecution was key for the government. The actor used tax protest arguments long rejected by courts but still continuing to find adherents.

For example, Snipes said the IRS' own code meant no citizen had to pay taxes on income earned in this country, and the agency had no legal authority to collect wages anyway, because it is not a proper government entity.

Snipes' attorneys claimed he was victimized by crooked advisers, and tried for years to get the IRS to explain whether he owed taxes. Later, the actor threatened the government and individual agents in his pursuit, declaring himself a "nonresident alien" not subject to tax laws.

Prosecutors say Snipes paid taxes in the 1990s, but changed his mind after meeting Kahn in 2000. He allegedly stopped filing returns, illegally sought $11 million in 1996 and 1997 taxes paid and drew fake checks to pay the U.S. Treasury.

Kahn founded the central Florida tax protest group American Rights Litigators and its successor, Guiding Light of God Ministries. He has been using tax scams since at least the early 1980s, according to government documents, and refused to defend himself in court against these charges.

Rosile, a CPA who lost his licenses in Florida and Ohio, allegedly prepared the fraudulent documents for Snipes, along with numerous other Kahn clients. He and Kahn would split a percentage of any fraudulent tax return that slipped through, their alleged agreement showed.

In a years-long battle with the IRS, Snipes drew on the dubious "861 argument." So named because it references section 861 of the tax code, the law holds that foreign-source wages of U.S. citizens are taxable. But tax protesters take that to mean only such income is subject to tax, and no wages made in this country are.

Judge and jury have long rejected those ideas, but there are exceptions. A few have won acquittal because the jury thought they sincerely believed they did not have to pay taxes.

The IRS bears a unique burden of proof in criminal tax cases. The agency must show not only that someone broke the law, but he or she did so with willful, bad purpose to defraud the government.