Snipes' jail time: A tax-protest 'wake-up call'
A Hollywood actor's tax protest ends in jail time - a "loud and crystal-clear message" to resisters who believe they and their employees owe no income tax.
(FORTUNE Small Business) -- Actor Wesley Snipes was sentenced Thursday to three years in prison for failing to file tax returns. Despite surprising the court with a $5 million down payment on his outstanding tax balance, Snipes received the maximum jail time requested by federal prosecutors.
"The three-year sentence sends a loud and crystal-clear message to any would-be tax defier that if you engage in this illegal conduct, you can and will go to prison," said Nathan Hochman, assistant attorney general for the Justice Department's tax division.
The case's lead prosecutor, U.S. Attorney Robert O'Neill, echoed that assessment.
"The courts sent a really clear message that Americans must file and pay taxes," he said. "If you have a legitimate dispute with the IRS, contact the IRS and dispute what you believe you're due and owe. You can't just totally fail to satisfy your legal obligation like Mr. Snipes did."
Snipes went on trial in January for failing to file income taxes returns between 1999 and 2004, during which he made an estimated $38 million from movie projects such as the popular vampire trilogy Blade. Prosecutors said that Snipes also fraudulently filed for $11 million in refunds on income taxes paid in 1996 and 1997.
Snipes' attorneys argued that their client innocently fell victim to poor tax advice provided by his two co-defendants, Eddie Ray Kahn and Douglas Rosile.
Kahn and Rosile were both convicted in February on felony charges of tax fraud and conspiracy. They were sentenced yesterday to 10 years and 54 months in jail, respectively.
Snipes was convicted on three misdemeanor counts but was acquitted of serious felony charges, a verdict that was seen as a victory in the eyes of some tax protestors.
However, insurance analyst JJ MacNab, who is working on a book about the tax-protest movement, believes that the sentencing has sent a wake-up call to members of the defiant community, many of whom are small-business owners.
"There are people who are saying that they didn't argue his case correctly," she said. "But others realize that if Snipes can't do it with a team lawyers, how can they?"
In his statement to the court, Snipes apologized for his "mistakes" but steered clear of acknowledging intentional wrongdoing, according to observers.
"[Snipes] said he was sorry for his actions but he never used the word 'crimes' and he never used the word 'tax,'" said Hochman, who was present when U.S. District Judge William Terrell Hodges announced the sentence in Ocala, Fla. "I think it's an indication that Mr. Snipes, to this day, has not fully accepted responsibility for his actions."
In addition to the jail time, Snipes, 45, is being charged millions by the IRS for back taxes, penalties and interest. Defense attorney Linda Moreno declined to comment about her client's sentence, but said that a notice of appeal will be filed within the next few days.
Prosecutor O'Neill said he's confident the ruling will stand.
"In my opinion that was an error-free trial," he said. "In order to succeed in an appeal, you have to point to something that occurred in the trial that denied the individual due process of law. I don't see that happening."