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The Walter Anderson Case; you be the judge!

The Anderson case exemplifies how the government views their position of safeguard over taxes and disclosure to the IRS. At the end of this case study, you can read a letter written by Mr. Anderson in prison and you can be the judge. The strongest point and moral lesson from this case is that you absolutely have to disclose the appropriate documents to the IRS and pay your taxes.

The indictment charged that Anderson engaged in a tax evasion scheme, obstructed the Internal Revenue Service, and defrauded the District of Columbia government by failing to pay well in excess of $200 million in taxes owed to the federal and District of Columbia governments.

Mr. Anderson claims that his rights were violated and that he was treated cruelly. All though, he has the right to his opinion, his defense tactics landed him with a jail term (by plea agreement) of nine years and a restitution of 200 million dollars. On September 8, 2006, Anderson pleaded guilty to two felony counts of evading taxes and one felony count of defrauding the District of Columbia government.

For the layperson, be it known, that those who prosecuted Mr. Anderson have laid warning tracks. The next four paragraphs sum up how the Assistant Attorney General, the U.S Attorney General, the IRS Tax Commissioner and the Deputy Chief Financial Officer of the Office and Tax and Revenue feel about people “cheating and being dishonest” when it comes to their departments.

"Most people obey the tax laws: they report their income to the IRS and pay the taxes due," said Assistant Attorney General O'Connor. "Honest taxpayers deserve the assurance that those who willfully dodge their tax obligations will be investigated, prosecuted, and punished."

U.S. Attorney Wainstein stated, "Our system of government demands that citizens honestly meet their federal and state tax obligations. The indictment alleges that the defendant in this case circumvented the tax laws to evade federal and District of Columbia taxes. In a variety of schemes lasting over nine years, he allegedly concealed almost a half a billion dollars in personal income and went to great lengths to obstruct any scrutiny or investigation of his tax evasion. Thanks to the determined efforts of the IRS investigators and the prosecutors from our office and the Tax Division, we will now seek to have him held accountable for defrauding the United States and the District of Columbia."

IRS Commissioner Everson remarked, "Average Americans deserve to feel confident that when they pay their taxes, neighbors and competitors are doing the same. The IRS holds all Americans, including the wealthiest, to the same standards of honesty."

"The Office of Tax and Revenue (OTR) cannot and will not allow non-compliance of the tax laws in the District of Columbia," said Daniel L. Black, Jr. deputy chief financial officer of the Office of Tax and Revenue. "OTR will actively seek to halt any fraudulent behavior, and due to OTR's stepped up compliance efforts, we are aggressively pursuing all types of tax evasion, fraud or misrepresentation, no matter what the amount of tax owed."

The Case

Anderson began his telecommunications career as a salesman at MCI Communications in 1979. He entered into entrepreneurship in the 1980s and 1990s by investing heavily in several telecom companies that were later sold for enormous profits. Anderson bankrolled many early private space ventures and paved the way for the "astropreneurs" who followed. His most high-profile space investment was MirCorp, the 1990s start-up that briefly privatized Russia's ageing Mir space station. He reportedly pumped as much as $30 million into the venture.

Anderson was arrested on February 26, 2005 at Dulles International Airport as he was returning from London. He was accused of hiding his wealth in off-shore companies in Panama and the British Virgin Islands in an attempt to avoid taxation on his income. The companies reportedly earned nearly $500 million in revenue during a five-year period.

On September 8, 2006, Anderson pleaded guilty to the charges as explained earlier in this article. Anderson admitted hiding $365 million using shell companies, alias companies, offshore tax havens and secret accounts. In 1998, Anderson claimed $69,939 on his tax return. Later during his plea agreement, he admitted to earning more than $126 million.

After an appeal, on June 15, 2007, federal district Judge Paul L. Friedman ruled that Anderson would not have to pay $100 to $175 million of his restitution to the federal government due to a typographical error by the government in the plea agreement. Judge Friedman stated that he did not have the authority to "read something into a contract that is not there or to interpret uncertain language in the government's favor". Anderson will still have to pay $23 million in restitution to the District of Columbia government, and the government may sue for the difference in civil court.

Is the case over?

According to Mr. Anderson, the case is far from over; below is Mr. Anderson’s opinion. This is Mr. Anderson’s response to the Washington Post. You be the judge (and the jury).

by Walter Anderson

April 17, 2007

I first learned of the investigation against me on March of 2002. Since that time the United States Federal prosecutors and Internal Revenue Service Agents pursuing the investigation have used the overwhelming power and authority of the United States Government to promote false claims and damage my reputation. It would be difficult for anyone to defend against such an attack, but it became impossible once I was arrested and held. prior to my trial. The facilities where I was held were overcrowded and poorly run, and I have been subjected to tortuous, abusive and life threatening conditions on an almost daily basis for more than 2 years.

The prosecutors in my case promulgated an exceptional number of inaccuracies and outright lies. Each time my legal counsel takes the time to carefully review the facts and evidence to reveal the prosecutors lies, they just fabricated additional claims. No matter many times this happened, the court still continued to give full credit and belief to the prosecution's claims.

One of the most serious allegations made against me in order to justify the unusual action of holding me prior to trial, was that 1 had "vast hidden resources" overseas, and that I intended to use these resources to support myself financially after I fled the United States to avoid prosecution. In a May, 2005 hearing, my legal counsel proved most of the prosecutors claims relating to my intention to flee were misleading or outright lies. No evidence was ever provided to show any "hidden" assets existed. The prosecution's basic argument was flawed, in any case, since many white collar defendants have substantial assets under their control. Having financial assets is not a legally justifiable reason to assume that someone will flee from trial under US law.

My sentencing hearing is now over. The judge decided that I will have to spend another 4+ years in the dungeons of the United States Government. Now that the prosecutors no longer need this "hidden assets' lie, they have since abandoned it. A recent article in the Washington Post, which came out a few days after the sentencing hearing, reported United States Government sources saying that I do not actually have "any sizable asset hidden abroad". They did not explain why they waited until that moment to change their story.

I wish the prosecutors had admitted they lied about my having "hidden assets" before I was held for 26 months in tortuous and draconian conditions. I wish they had told the judge that they really did not believe that I was a flight risk before I was held under conditions which made it impossible for me to work effectively with my attorneys to prepare for a trial. If they had acknowledged that claiming I was a flight risk was just a sleazy tactic to make it impossible for me to effectively defend my case, the judge would have been forced to do the right thing and release me prior to trial. If I had not been held under draconian conditions, I could have made a different decision. I might not have agreed to say I was "guilty" of "tax fraud" in relation to money and assets which I did not even receive or use, and I could have had an opportunity to have a fair trial. I did not have such an opportunity.

No evidence at all has come to light in the last 2 years which would support the claims that I had any hidden resources, or that the financial statement which I presented to the Court relating to my assets was not correct. The expert accounting witnesses, including the government experts, meticulously reviewed the records of the Smaller World trust and related organizations, and did not find any missing funds.

In my tax case, in a United States Criminal Court, the mere speculation of the prosecutors was considered by the judge as stronger proof than actual evidence. The prosecutor's guesses and unproven claims were actually taken as fact when contrary evidence existed to prove them wrong. It is not surprising that with this standard of justice, the United States had more of its citizens in prison than any other country in the world.

The prosecutors were not truthful on every aspect of my case. On every possible occasion the prosecutors made wild speculations and false claims in statements and written documents. The prosecutor's claims and allegations were seldom supported by any evidence at all. In the rare case where some evidence actually existed that could be remotely connected to their statements or filings, the evidence was highly ambiguous and often proved the opposite of what the prosecution claimed, once examined carefully. Claim after claim, statement after statement, the prosecutors were shown to be lying, but the judge continued to believe their statements. The documents provided by the prosecutors in relation to their case, showed that they actually had the real facts and information to know the truth.

In spite of the lack of evidence of any "hidden assets", at my September 8, 2006 plea bargain hearing, Prosecuting Attorney Susan Menzer stated:

"...we cannot say that he doesn't have funds available.” [Judge: "... and you can't tell me where it is.”] "That's true, Your Honor, we can't. But there's still enough evidence that there is money out there, Your Honor. And that someone - that there are people willing to help him." "And if he is intent on leaving this country, even if we can't point to the millions and millions of dollars, he will find those people to help him."

This claim that I have access to hidden funds was picked up by the Washington Post and reported prominently the next day. Since that time I have received some very unwelcome and excessive attention at the DC Jail from some of the inmates and Corrections Officers. This statement has effectively put a target on my back and placed me at risk now and in the future.

I have learned while I have been incarcerated that many individuals in the "drug business" lack the protection of the law in their commercial dealings. This lack of protection has created a situation where violent individuals extort or steal funds from other illegal operators by force. A significant portion of the drug related homicides in the Washington DC area are related to extortion and theft in an effort to obtain access to illegal inventory or illegally obtained funds by force.

The false claims made by the prosecutors about "hidden illegal assets" imply that I am in the same category as a drug dealer operating outside the law, and who is holding a large amount of unreported or illegal cash.

Due to these false and irresponsible claims I have become a potential target for extortion and other violent actions by the criminal community. I am forced to associate with members of this community at the DC Jail, so anyone there that is interested in taking action against me can easily recognize me in the future. I have to consider that if a violent criminal will kill someone for a few thousands in cash and some drugs, they would not hesitate to pursue me if they believed that millions of dollars were at stake.

My concerns in this area are not speculative. Some inmates with whom I have become acquainted at the DC Jail have specifically warned me after the Washington Post repeated the false claims. Copies of the Washington Post article were passed between inmates for weeks after it came out. Those inmates sympathetic to me have in some cases identified specific individual inmates and specific Correctional Officers with whom I should avoid contact. I suppose the prosecutor believes she is justified to put my life at risk. Perhaps this is part of my "punishment" for "Tax Fraud".

I have been told me that there has been a lot of discussion and speculation about the amount of funds I have hidden, how much is held in cash, and how it could be obtained from me. The Washington Post Article and other news media have reported some very large numbers in relation to my tax case.

This false claim places me at risk, now and in the future. I have a genuine concern that someone, who has believed the false claims of the prosecution about my having a vast amount of illegal or hidden funds, and who could easily recognize me from my stay at the DC Jail, may initiate actions which will put my life at risk.

Prosecutor Menzer has made the false claim about "vast financial resources" many times in the past. She has made it clear in many public statements, on the record, as a representative of the Federal government that she believes that these funds are "hidden" outside the law and that these funds are illegally held. No evidence has ever been provided to prove this allegation. No source of these funds has been identified. The prosecutors in the 2+ years since my indictment and incarceration prior to trial have not been able to find any evidence to support their theory and belief that I have hidden assets or "unknown accounts".

What has been "hidden" in this case is not assets, but the truth. No one who has come to the hearings or read the transcript and detailed paperwork in this case can understand how the judge has reached certain conclusions.

The detailed analysis by the IRS investigators and the forensic accounting experts hired by the Federal Public Defenders Office have shown on the record at public hearings that I followed all the corporate forms and procedures in my management of the Smaller World Trust Assets. An International tax expert testified at the sentencing hearing that the Smaller World Trust, as formed in British Virgin Islands 1993, was legally constituted and had no tax consequences in the United States. He stated that in 1997, the United States enacted some very technical and complicated new laws related to trusts. The Trust was formed and existing prior to these new laws. The prosecutors did not challenge his testimony. This is not "Tax Fraud". Fraud requires intent, and that there be some benefit from the fraud.

The United States Government has been exceptionally zealous in their pursuit of this case. The pretrial incarceration and the high level of publicity seemed to be designed to destroy my career and professional reputation.

Due to my pretrial incarceration, I have had to resign from my job as CEO of Orbital Recovery, which was my source of income. I also resigned from most of the other Board of Directors positions I held. I have not been able to perform my obligations to my family. I also was not able to complete a financing transaction for one company in the United Kingdom and the company failed, with all jobs and assets lost.

The prosecutors were not satisfied to be holding me prior to a trial in one of the worst facilities in the United States, under draconian, torturous conditions. They also arranged for and encouraged additional specific obstacles, interference, intervention, torture, and discriminatory conditions to be imposed on me by the authorities operating these facilities. These illegal, irresponsible and inhumane acts have done incalculable and permanent damage to me physically and mentally.

Since I learned about the investigation targeted against me in March of 2002, I acted in good faith and attempted to honor my obligations to the United States legal system and Courts as well as my fiduciary duty to the commercial and Not-for-profit organizations that I was associated with. For 6 years, IRS investigators and the Prosecutors systematically attempted to destroy my business and professional reputation, but I did not flee the United States. I hired legal counsel and prepared to defend myself. The Prosecutor had an agreement with my legal counsel to inform them if they intended to charge me so I could "self surrender". This agreement was violated after they analyzed the strength of the case against me and decided it would be to their strategic advantage to limit my ability to defend myself.

After 2+ years of abuse, torture and intolerable conditions , I pleaded guilty to a portion of the charges against me because I did not believe I would be able to physically survive a 5 month trial while being held in the dungeons of the United States Government. I have been subjected on a daily basis to torturous circumstances including sleep deprivation, psychological torture, denial of medical care, harassments/threats, and other abuses. I was also had concerns about the ongoing threats, intimidation and coercion of witnesses in the case.

The United States Federal Government did not play fair and follow their own rules. I will pursue appeals, but I believe I will not be exonerated by the United States "justice" system. United States Government employees acted through force and lies to deny me the right to a fair trial. The methods they used to threaten, coerce and intimidate witnesses was not any different from that of a typical criminal gang.

My exoneration will have to come from another source. The record is clear and the truth does not need to be "hidden". There is extensive information relating to the proceedings of this case. The reports, records, transcripts of expert witness testimony, other court transcripts, and the extensive documents filed with the court tell the story. I believe the evidence available is overwhelming and clear. When I emerge from the dungeons of the United States Government, I hope that the actual facts and record will restore my reputation whole.