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Snipes Portrayed As Victim In Tax Fraud, Conspiracy Case

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By TRAVIS REED, The Associated Press

Published: January 17, 2008

OCALA - A longtime tax adviser warned actor 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 Snipes was phoned by Kenneth Starr, a New York money manager with several famous clients. Starr told Snipes there was no merit to the argument that he did not 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.

Prosecutors say Kahn and Rosile convinced Snipes he did not have to pay taxes based on a misinterpretation of Internal Revenue Service code, the "861 argument." Rejected by judges and the IRS, it holds that only wages earned outside the United States are subject to taxation.

Snipes faces up to 16 years in prison if convicted on all eight counts. Kahn and Rosile face up to 10 years in prison.

Snipes' attorneys said Wednesday he was the victim of several unscrupulous advisers employed by Starr and Kahn. Key to the case is whether the actor intentionally broke the law because ordinary failure to file tax returns is a civil crime.

Robert Bernhoft said Snipes didn't trust Starr, partly because his New York firm cost the actor $757,000 in bad foreign investments in 1998 and later obligated Snipes to a $2 million loan without his consent, according to Snipes.

Those incidents made Snipes "extremely intrigued" to hear Kahn's argument, Bernhoft said.

Further, Bernhoft said, Snipes relied on the advice of actor Sylvester Stallone, a fellow Starr client, personal friend and potential witness. Stallone sued Starr in 2002, alleging his bad advice cost him about $7 million. Other potential witnesses include Starr clients Tom Brokaw and Goldie Hawn.

"This is not a new story -- artists, athletes being taken advantage of," Bernhoft said.

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