From: U.S. Department of Justice
Posted: Tuesday, March 1, 2005
WASHINGTON, D.C. - Assistant Attorney General Eileen J. O'Connor, of the Justice Department's Tax Division, Attorney Kenneth L. Wainstein of the District of Columbia, Mark W. Everson, Internal Revenue Service Commissioner; and Daniel J. Black, Deputy Chief Financial Officer for the District of Columbia's Office of Tax and Revenue, jointly announced the indictment and arrest of Walter Anderson, 51, a local telecommunications entrepreneur, on tax evasion and related charges. A federal grand jury sitting in Washington, D.C. returned the 12-count indictment last Wednesday under seal. Anderson was arrested Saturday, February 26 and will be presented this afternoon before a U.S. Magistrate Judge.
The indictment charges 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.
"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 most wealthy, 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 indictment alleges that over a five-year period, Walter Anderson personally earned nearly a half billion dollars through investments in business ventures he conducted through offshore corporations he set up to make it appear that he was not personally earning these amounts.
Walter Anderson was involved in starting up long distance telecommunications businesses at a time when the industry was just being deregulated. The grand jury charged that, beginning in 1992, as Anderson realized that the merger of his first successful company -Mid-Atlantic Telecom- with another company would result in substantial taxable earnings, Anderson allegedly formed an offshore corporation to receive and disguise his anticipated income. At the time, Anderson allegedly owed the IRS hundreds of thousands of dollars in back taxes, interest and penalties for failing to pay federal income tax in prior years.
As alleged in the indictment, Anderson created an elaborate evasion scheme to avoid paying the tax that the law requires. In October 1992, Anderson allegedly formed an offshore corporation named Gold & Appel Transfer in the British Virgin Islands (BVI) and hired a trust company to serve as Gold & Appel's registered agent and sole director. Gold & Appel was allegedly owned by another BVI company, Icomnet, previously formed by Anderson. Anderson allegedly granted himself an exclusive option to purchase Gold & Appel shares for a nominal sum, insuring that no one else could own these remaining shares. By forming the corporations in that manner, neither the option nor Anderson's name was recorded in the BVI's public records. As a result, the indictment alleges Anderson hid his ownership of the corporations that held these assets, but was still able to maintain complete control.
The indictment also alleges that after other merger activity with telecommunications companies he owned, Anderson further obscured his ownership of Gold & Appel, by using an alias and forming another offshore corporation-Iceberg Transport, S.A.-in Panama, another country with strict secrecy laws. To allegedly disguise his ownership of this company, Iceberg was created as a "bearer share" company. This meant that, unlike U.S. corporations, there was no central registry the company; whoever had physical control over the actual share certificates was considered the owner. Anderson allegedly received the shares, using his alias, in a mailbox drop in Amsterdam. Once he set up Iceberg, Anderson then allegedly directed the transfer of shares of Gold & Appel to Iceberg, and represented that Iceberg owned Gold & Appel. Anderson allegedly hired a trust company and its employees to serve as registered agent for the company and offices and directors of Iceberg ensured that he had complete control over it.
The indictment further alleges between October 1992 and July 1996, Anderson transferred his ownership interests in three telecommunications companies-Mid-Atlantic Telecom, Esprit Telecom and Telco Communications Group-to Gold & Appel and Iceberg. In this way, when appreciated stock was sold, or other taxable events occurred, Gold & Appel and Iceberg not Anderson would appear to be the taxpayer.
The indictment alleges that after these transfers were made, each of these telecommunication corporations became dramatically more valuable. Between 1995 and 1999, Anderson allegedly used the assets of Gold & Appel and Iceberg, which included the profits realized from these three telecommunication corporations, to invest in other business ventures. Anderson allegedly generated more than $450,000,000 in earnings for Gold & Appel and Iceberg during this period.
The indictment alleges that as a U.S. citizen and a resident of the District of Columbia, Anderson was required to report the net earnings of Gold & Appel as income on his federal and District of Columbia individual income tax returns. Anderson allegedly failed to report this income on either his federal or District of Columbia tax returns and failed to pay approximately $170 million in federal income taxes and $40 million in D.C. income taxes.
During the time in question, Anderson allegedly claimed he was living in Florida, which has no state income tax, although he allegedly resided at various times in two different residences within the District. District of Columbia law requires residents to pay a "use tax" for items purchased outside of the District but used there.
If convicted of the charges, the defendant faces up to 80 years in prison.
In announcing the indictment, U.S. Attorney Wainstein, Assistant Attorney General O'Connor, IRS Commissioner Everson, and Deputy Chief Financial Officer Black commended the efforts of the team of investigators and prosecutors. DOJ Tax Division Trial Attorney Karen E. Kelly and Assistant United States Attorney Susan B. Menzer will prosecute the case jointly.
An indictment is merely a formal charge that a defendant has committed a violation of criminal laws. Every defendant is presumed innocent until and unless found guilty.
// end //