On Friday, the Eleventh Circuit Court of Appeals issued an opinion in the highly-publicized tax evasion case against actor Wesley Snipes, U.S. v. Snipes, No. 08-12402, which may be read here. The odd facts in the case are as follows: around 2000, Snipes became involved with a tax resistance organization, American Rights Litigators (“ARL”), operated by Snipes’ co-defendant Eddie Ray Kahn, which made various arguments on behalf of its clients against the IRS’ collection of taxes, including that domestic earnings of individuals allegedly do not qualify as “income” under 26 U.S.C. § 861 because the earnings do not come from a listed “source.”
From 1999 to 2004, Snipes earned more than $37 million, however he did not file income tax returns for any of these years. During this period Snipes did, however, send the IRS correspondence, altered tax forms and demands for income which he had paid in earlier years. Snipes made wildly outlandish arguments to the IRS, including that he was a non-resident alien; that earned income must come from sources wholly outside the U.S.,; that taxpayers are legally defined as persons operating “a distilled spirit Plant;” that the Tax Code is limited to the District of Columbia and insular possessions of the United States, and excludes the other 50 states; and that Snipes was “a fiduciary of God” and a “foreign diplomat” who was not required to pay taxes. In addition, Snipes’ companies ceased deduction of income and payroll taxes for employees. Snipes invited his employees to attend an “861” seminar at his home and threatened one employee who questioned the theory, Carmen Baker, that if Baker was “not going to play along with the game plan,” she should find another job.
Snipes, Kahn and Douglas Rosile were indicted in 2006 in the Middle District of Florida for conspiracy to defraud the United States by impeding the IRS in its collection of income taxes, in violation of 18 U.S.C. § 371, filing a false claim for a refund, in violation of 18 U.S.C. § 287; and willfully failing to file tax returns, in violation of 26 U.S.C. § 7203. Snipes filed several motions to transfer venue to the Southern District of New York pursuant to 18 U.S.C. § 3237(b) and Federal Rule of Criminal Procedure 21(b), which were denied by the district court.
Snipes’ trial commenced in January 2008. Carmen Baker testified at trial that Snipes had allegedly ordered her not to talk to anyone or disclose any information when she received a grand jury subpoena, telling Baker that he had a confidentiality agreement with her signature, and that if she contacted the government, she would have to “pay the consequences.”
Snipes requested several specific jury instructions, including that the Sixth Amendment to the U.S. Constitution protects a defendant’s right to trial in the district where a crime is committed, and on good faith and good faith reliance on advice of counsel.
Defense attorney and former Deputy Independent Counsel Craig Gillen also notes regarding the case that Snipes was charged with six counts of willfully failing to file his individual tax returns for tax years 1999 through 2004, in violation of Section 7203. In May of 2002, Snipes and his lawyer had a telephone conference with an IRS agent wherein Snipes was informed that he was under investigation for tax crimes. The agent read Snipes his non-custodial rights which included the right to remain silent. Snipes replied "very interesting." At trial, Snipes requested a jury instruction based on good faith reliance on his Fifth Amendment privilege against self-incrimination. Snipes claimed that because the IRS agent advised him of his right to remain silent, he believed he had a 5th Amendment privilege not to file his tax returns. Snipes claimed that because he had a good faith belief in his right not to incriminate himself, he could not be guilty of willfully failing to file the returns. The trial court refused to give the requested instruction.
On February 1, 2008, the jury convicted Snipes on three--misdemeanor--counts of willful failure to file individual federal income tax returns for calendar years 1999, 2000, and 2001. The presentence investigation report calculated Snipes’s intended tax loss at $41,038,051 under U.S.S.G. §§ 2T1.1(a) and 2T4.1. It also recommended an enhancement for obstruction of justice pursuant to U.S.S.G. § 3C1.1, for Snipes’ direction to Baker to conceal evidence from the grand jury’s investigation, and recommended an overall sentence of 36 months’ imprisonment. The district court overruled Snipes’ objection to the obstruction enhancement and, discussing the sentencing considerations in 18 U.S.C. § 3553(a), imposed a sentence of 36 months. Snipes appealed.
In its opinion, the Eleventh Circuit panel affirmed Snipes’ conviction and sentence. On appeal, the government conceded that Snipes' proposed instruction on good faith reliance on the privilege against self-incrimination was substantially correct. The Court of Appeals, however, held that there was no error because the conduct which formed the basis for Snipes' counts of conviction occurred before the May 2002 conversation with the IRS agent, and also held that the trial court's instruction on good faith was sufficient. Although the trial court had refused to give the Snipes instruction, in closing arguments, Snipes' counsel did argue to the jury that Snipes' reliance on the IRS agent's pre-interview advice of rights constituted a good faith basis for his failure to file the tax returns. Apparently this argument resonated with the jury--on all counts for tax years subsequent to the May 2002 interview, Snipes was acquitted.
In regard to Snipes' other arguments, the Court rejected Snipes’ argument that the district court erred in denying his motion for elective transfer under Section 3237(b) as untimely, finding that Snipes failed to properly move to extend the elective transfer deadline. The Court also held that the trial court did not abuse its discretion in not holding a pretrial evidentiary hearing on venue, concluding Snipes was not entitled such a hearing, but rather had a Sixth Amendment right to have the issue of venue decided by the jury. The Court also held that the district court did not err in sentencing Snipes pursuant to Section 2T1.1, or in enhancing his sentence by two levels for obstruction of justice under Section 3C1.1. It concluded that Snipes’ comments to Baker amounted to encouraging Baker to avoid complying with a grand jury subpoena, which may be considered obstruction of justice. Lastly, the Court held that Snipes’ 36 month sentence was reasonable.
