I.R.S. Accuses Man of Hiding $450 Million

[R.A. Hettinga]

<http://www.nytimes.com/2005/03/01/business/01tax.html?th=&pagewanted=print&position=>

The New York Times
March 1, 2005

I.R.S. Accuses Man of Hiding $450 Million
 By DAVID CAY JOHNSTON


ASHINGTON, Feb. 28 - A prominent telecommunications entrepreneur who once
tried to mount a rescue of a Russian space station has been arrested and
charged with evading taxes by hiding at least $450 million of income
through offshore corporations.

According to a 12-count indictment released on Monday that federal
prosecutors called the largest criminal case of individual tax evasion, the
entrepreneur, Walter Anderson, 51, did not pay over $210 million in federal
and local income taxes he owed for the years 1995 through 1999 alone.

"Mr. Anderson ran the table when it came to violating the tax laws," Mark
W. Everson, the Internal Revenue Service commissioner, told a news
conference Monday. "Because of his dishonest dealings, Mr. Anderson's
lavish lifestyle was subsidized by honest, hard-working Americans."

In 1998 Mr. Anderson, who lives in Washington, reported a total income of
$67,939 and paid a tax of just $494. Mr. Everson said Mr. Anderson actually
made at least $126 million that year that he never reported. From 1987
through 1993, officials said, Mr. Anderson failed to file a tax return.

Mr. Anderson is the chief executive of Orbital Recovery, a company trying
to extend the life of telecommunications satellites. He was arrested
Saturday at Dulles Airport outside Washington as he stepped off a plane
from London, according to Kenneth L. Wainstein, the United States attorney
for the District of Columbia.

In court on Monday, Mr. Anderson pleaded not guilty to the charges. His
lawyer, John Moustakas, told Magistrate Judge Alan Kay that the
government's case was based on "innuendo and rumor."

 If convicted, Mr. Anderson faces as much as 24 years in prison.

Judge Kay ordered Mr. Anderson held without bail until a bond hearing on
Thursday. Susan Menzer, a prosecutor in the case, called Mr. Anderson "a
flight risk" who "can't be trusted."

"He hasn't been listening to judges for years," she added.

 Since a search warrant was executed in 2002, Mr. Anderson has moved
artwork and cash to Switzerland to defeat both tax collectors and creditors
who have civil court orders, the Justice Department said in court papers.

Mr. Moustakas did not return a phone call seeking comment.

Mr. Anderson has long attracted a certain level of public attention,
especially when he tried to arrange a rescue of the Mir space station five
years ago. He frequently flew in a private jet and made deals involving
millions of dollars. At conferences on space travel he often spoke of his
hatred of government.

But he came under scrutiny, law enforcement officials suggested, only
because of a tip from a disgruntled business associate.

 Mr. Anderson, according to the indictment, formed an offshore corporation,
Gold and Appeal Transfer, in the British Virgin Islands in 1992 to hide his
profits from deals involving a telecommunications company he started in the
1980's.

Over the next three years, the indictment charged, Mr. Anderson set up a
network of offshore corporations, including one in Panama under the alias
Mark Roth, that were used to hide his ownership of three telecommunications
companies and allow him to earn hundreds of millions of dollars without
paying taxes.

 While Mr. Anderson at times insisted publicly that he was worth no more
than $4 million, he serves as a senior business adviser to Constellation
Services International, a fledgling satellite rescue company that disclosed
his ownership of several companies, including Gold and Appeal. Its Web site
said Gold and Appeal was worth at least $100 million and described Mr.
Anderson as selling the Esprit Telecom Group in 1998 for $900 million.

 In extensive filings with the I.R.S. and the Securities and Exchange
Commission, the indictment charged, Mr. Anderson claimed that he was merely
an employee of Gold and Appeal, the offshore bank that the indictment says
was central to his tax-evasion effort.

 "The I.R.S. holds all Americans, even the very wealthy, to the same
standard," Mr. Everson said. "This indictment sends a strong signal that we
will not tolerate abuse of the tax laws."

But later, questioned by reporters, Mr. Everson noted that the I.R.S. law
enforcement staff has been cut by at least a quarter in recent years. Mr.
Wainstein, the United States attorney, said one of his prosecutors had
spent a year developing the case.

Prosecutors noted that it was difficult to catch determined tax cheats but
said that some countries known as tax havens had been cooperating with
American investigators more often since the 9/11 terrorist attacks. The
government has stepped up investigations but managed to recommend only
1,400 tax prosecutions out of the 130 million tax returns filed annually.

For budgetary reasons, the I.R.S. relies almost entirely on data reported
to it on computer files, not on traditional detective work, to help
identify tax evaders.

 Gary Hudson of Redwood City, Calif., said that Mr. Anderson invested $30
million in his Rotary Rocket, the primary backing for a private rocket
launching and recovery firm that ultimately failed.

"One condition of his investment was that we could not take any government
money," Mr. Hudson said in a telephone interview on Monday.

Besides avoiding federal taxes, the indictment charges, Mr. Anderson also
evaded at least $40 million in income taxes owed the District of Columbia
and $254,000 in local sales taxes he should have paid on jewelry, wine and
art, including a painting by Salvador Dalm and several by Reni Magritte.

Copyright 2
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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'