A longtime tax adviser warned Wesley Snipes he could get in trouble by hiring new accountants who said he didn't have to pay taxes, a federal prosecutor said Wednesday.
In the opening statements of an expected monthlong trial, assistant U.S. Attorney Robert O'Neill said the 45-year-old actor was called by Kenneth Starr, a New York money manager with several famous clients. Starr told Snipes there was no merit to the argument that he didn't have to pay taxes, and the next day sent a letter terminating his tax services, O'Neill said.
"In the '90s, Mr. Snipes was a taxpayer," O'Neill told the jury. "Something happens in the year 2000, and that stops the payment of taxes."
Snipes and two other men, Eddie Ray Kahn and Douglas P. Rosile, are charged with tax fraud and conspiracy in an eight-count grand jury indictment. Snipes is further charged with willfully failing to file tax returns from 1999 to 2004, on the advice of Kahn's tax protest groups American Rights Litigators and Guiding Light of God Ministries.
Prosecutors say Kahn and Rosile convinced Snipes that he didn't have to pay taxes based on a fringe misinterpretation of Internal Revenue Service code known as the "861 argument." Long rejected by judges and the IRS, it holds that only wages earned by U.S. citizens outside America are subject to taxation.
Snipes faces up to 16 years in prison if convicted on all eight counts.
The "Blade" action star was the victim of several unscrupulous advisers, his attorneys said Wednesday. Key to the case is whether Snipes intentionally broke the law, because ordinary failure to file tax returns is a civil crime.
Attorney Robert Bernhoft said Snipes didn't trust Starr, which made him "extremely intrigued" to hear Kahn's argument.
Further, Bernhoft said, Snipes relied on the advice of Sylvester Stallone, a fellow Starr client and personal friend. Stallone sued Starr in 2002, alleging his bad advice cost him some $7 million.
"This is not a new story — artists, athletes being taken advantage of," Bernhoft said.
Snipes is also accused of directing his movie companies to stop withholding taxes from employees and fraudulently demanding taxes from years previously paid. Snipes filed amended returns for $11 million in 1996 and 1997 taxes, which the government never gave back.