Understanding tax evasion is a bit "evasive". This is because most people do not understand what qualifies as tax evasion. Millions of people fall behind on paying their taxes and end up in tax debt – but accruing tax debt is not necessarily "tax evasion".
By definition, tax evasion is the conscious effort to avoid paying taxes through illegal means. Thus, tax avoidance is legal, so long as the means used to reduce the tax are within the law. However, when taxpayers knowingly misrepresent or conceal the truth from tax authorities about their financial situation in order to reduce tax liability, then you have tax evasion. Common examples of tax evasion include declaring less income than actually earned and/or claiming deductions and credits for which you are not eligible.
To put tax evasion into perspective, we compiled the following list of the top 10 biggest tax evaders of all time. Here you can see what taxpayers did to evade taxes and their consequence.
10) Sunny Garcia
Famed surfer Sunny Garcia won numerous world surfing championships and starred in numerous television shows before he was found guilty of tax evasion. Garcia was only the second surfer in the world to win a prize of over $1 million, and also earned hundreds of thousands of dollars in other prizes and endorsements. Unfortunately Garcia neglected to pay income taxes to the U.S. government on any of the prize money he received from competitions outside the U.S.
In October of 2006, Garcia was sentenced to three months in prison and was ordered to pay taxes and fees on $417,000 of personal income that went unreported. Fortunately the judge in his case was lenient and allowed Garcia to postpone serving his sentence to compete in a Hawaiian surfing contest. In addition, the judge sentenced Garcia to seven months in home confinement and 80 hours of community service.
Why he made the list?
Garcia made millions of dollars but neglected to properly pay income taxes. However, he could at least admit that he had made a mistake. "I didn't surf because I thought I was going to make money at it," Garcia said. "But coming from a poor family, you want to buy everything you never had. I spent my money foolishly and didn’t handle my affairs."
9) Richard Hatch
Most people recognize Richard Hatch as the winner of the first season of Survivor, where he won a $1 million prize. Unfortunately he never paid federal income taxes on that million, or money he was paid for professional appearances totaling nearly $350,000. U.S. prosecutors reportedly offered Hatch an arrangement where he could received a lenient sentence in exchange for a guilty plea. However, he refused this offer claiming that CBS had offered to pay taxes on his prize money. Hatch later acknowledged he was entirely incorrect.
Although he was indicted on ten counts of tax evasion and fraud charges Hatch was only found guilty of tax evasion. The maximum sentence carried a possible fine of over $600,000 and up to 13 years in prison. In May 2006, he was sentenced for 51 months in prison, and three years of supervised release afterwards.
Why he made the list?
Hatch’s tax fraud case generated massive amounts of public interest because of his villain like portrayal in the Survivor television show. During the trial several of Survivor’s producers and crew members were forced to testify including famous producer Mark Burnett. Hatch claimed he thought CBS would pay taxes on his winnings but his excuse did not take into account the nearly $350,000 he was paid for appearances.
8) Edward and Elaine Brown
In January of 2007, a jury found Edward Brown guilty of three federal counts of tax evasion, and a few weeks later his wife Elaine was found guilty on seventeen tax fraud related charges. Combined, the two failed to report over $2 million in taxable income and were each sentenced to five years in prison. The Browns claim they were not shown any legitimate law that required them to pay taxes, therefore they felt they should not be forced to pay.
After their trial, the Browns gained national attention with their refusal to turn themselves in. The Browns lived in a compound like residence that was fully supplied with food and supplies. Edward publicly "vowed to resist arrest violently and die rather than go to prison." Eventually, on October 4th, they were arrested by undercover officers who gained entrance to their compound.
Why they made the list?
Although the Brown’s owed a relatively small tax liability of only $625,000, they gained national attention for their refusal to recognize the government’s authority to collect taxes. Their very public refusal to surrender garnered support from thousands across the nation who are against federal taxation. The Browns milked this publicity through numerous press conferences and they even hosted a We the People Radio Network concert.
7) Harry Eugene Claiborne
Claiborne, a United States District Court judge, was found guilty of tax evasion in 1984. He was born in Arkansas and unsuccessfully ran for a seat in the U.S. Senate before President Jimmy Carter appointed him to the District Court of Nevada. Claiborne was indicted for bribery, fraud, and tax evasion by a federal grand jury in 1983. He was tried for all three counts by the federal government in a case that was declared a mistrial. Later, he was tried on just the counts of tax evasion and was found guilty. He was sentenced to two years in prison.
In July of 1986, the U.S. House of Representatives impeached Claiborne on two charges of tax evasion and one charge of bringing disrepute to the federal judiciary. A few months later he was convicted and removed from office by the U.S. Senate.
On an unrelated note, Claiborne committed suicide by shooting himself on January 19, 2004. This was years after he was allowed to return to practice in the state of Nevada.
Why he made the list?
Claiborne was the first person in nearly 50 years to be removed from office through impeachment. He was the first federal judge ever to be convicted of crimes while on the bench, and was only the fifth government official in U.S. history to be impeached
6) Tom Coughlin
Coughlin served as the vice-chairman of Wal-Mart Stores, Inc. and was a close friend of founder Sam Walton until he was convicted of tax evasion, embezzlement, and theft. According to Coughlin, the money he stole from Wal-Mart was to pay bribes to union officials to not organize at Wal-Mart locations. However, U.S. attorneys could not find any evidence to support Coughlin’s claims.
Coughlin pled guilty in 2006 to five counts of wire fraud and one count of tax evasion. He was sentenced to 33 months of in-home detention and forced to pay over $450,000 in restitution to Wal-Mart Stores Inc. and the Internal Revenue Service.
Why he made the list?
Coughlin was a close friend of the founder of Wal-Mart but it didn’t stop him from embezzling company money and lying about it. Although he did face serious repercussions for his actions, his punishment could have been much worse. During Coughlin’s trial a physician testified that he was suffering from health problems including diabetes, cardiac disease, sleep apnea, and arterial blockage. If it weren’t for his severe health issues he could have been sentenced to up to 28 years in prison and $1.35 million in fines.
5) Al Capone
Capone, known frequently as "Scarface", was an Italian-American gangster who profited off the illegal bottling and distribution of alcohol during the prohibition. Although he was placed on the Chicago Crime Commission's "public enemies" list he was never successfully convicted of any racketeering charges. However, his criminal career came to an end in 1931 when he was convicted and found guilty of income tax evasion.
Capone was tried in federal court and pled guilty to the charges he was faced with. He was hoping for a plea bargain but his attempt was blocked when the judge replaced the jury on the day of the trial to block any attempts to bribe or intimidate the original jury. Capone was sentenced to eleven years in a federal prison, one year in a county jail, and an $80,000 fine. Fortunately his legal representatives paid all of Capone’s past due taxes.
Why he made the list?
Al Capone will forever be known as one of the biggest gangster in American history, but the only way the government could arrest him was with tax fraud charges. Capone always did business using front men and had no account records in his own name. Even his house was in his wife’s name. The lack of any reported income was the only act the government could use to gather enough proof to convict Capone.
4) Pete Rose
On April 22, 1990, baseball superstar Pete Rose pled guilty to two charges of tax evasion. Rose was a player and manager in Major League Baseball, and was best known for playing for the Cincinnati Reds. As part of his plea, Rose admitted to filling false income tax returns that did not show income from selling autographs, memorabilia, and gambling winnings.
Rose was sentenced to five months in prison at the medium security prison camp in the United State Penitentiary in Marion, IL. He was also fined $50,000 and forced to pay the Internal Revenue Service over $350,000 in back taxes and interest. Rose paid his fines and was released from prison in January 1991.
Why he made the list?
As if Rose’s tax woes in the early 90’s weren’t bad enough, he found himself in trouble with the IRS yet again a decade later. In August of 2004 the IRS hit rose with a $973,693 tax lien for unpaid taxes from 1997-2002. However, Rose’s lawyers claim that Rose acknowledged the problem and is negotiating repayment terms.
3) Reuben Sturman
Sturman ran one of the most successful pornography operations in U.S. history before finding himself in trouble with the IRS. Based in Ohio, he ran numerous businesses that generated an estimated $300 million in just the year 1991. Sturman faced numerous legal charges dating back to 1964, but always avoided prosecution by counter-suits, shady business dealings, and using multiple aliases.
Because of how Sturman hid his assets he, along with five associates, were indicted of tax evasion by the federal government. In 1989, he was convicted and sentenced to ten years in jail. He was also ordered to pay the IRS over $2.5 million in unpaid taxes and fees.
A few months later, Sturman was charged for transporting obscene material. The case was expected to end in a plea bargain, but during the case Sturman was caught trying to bribe a juror. As a result he was charged with extortion and sentenced to nineteen additional years in prison.
Later in life, he briefly escaped the California prison he was serving in, but was quickly re-apprehended. Sturman died in 1997 while serving his sentence in Lexington, Kentucky.
Why he made the list?
As with many evaders on the list, Sturman’s case generated a lot of public attention. Similarly to Al Capone, Sturman was charged with a tax evasion case after authorities spent years trying to imprison him for other non tax-related crimes.
2) Wesley Snipes
In October of 2006, actor Wesley Snipes was indicted for committing tax fraud against the federal government. He was accused of owing the federal government over $12 million in unpaid taxes and failing to file tax returns for over six years. In 1997, Snipes tax return reported his adjusted income as $0, when according to the government his income was over $7 million. Snipes was taken into custody in December 2006, and entered a plea of not guilty. He was later released on $1 million bail. If found guilty Snipes could face up to sixteen years in prison.
Snipes had his taxes prepared by American Rights Litigators, a firm with a history of filing false returns to help clients avoid taxes. The firm's principals, Eddie Kahn and Douglas Rosile, are also facing federal charges.
Why he made the list?
Snipes made the list because he attempted to cheat the government out of millions of dollars, and has attracted massive amounts of media attention in the process. Snipes’s defense has made several claims including that claim that Snipes was a victim of bad tax advice. Snipes has also claimed he was the victim of selective prosecution due to his race, not because of the $12 million he owes in taxes.
1) Walter Anderson
On February 26th, 2005 the Justice Department arrested Walter Anderson in the largest tax evasion case in U.S. History. Anderson was accused of hiding income and assets by setting-up offshore companies in Panama and the British Virgin Islands. These companies reportedly generated over $500 million in revenue during a five-year period.
However, at the time of his arrest, Anderson claimed he was not a tax cheat. He claimed that he was going to use the money to change the world. Anderson planned to fight for arms control, human rights, family planning, and increased space exploration. Yet, at the time of his arrest Anderson had not donated any money and said he planned to begin doing so within the next year.
Anderson pled guilty to two felony counts of tax evasion and one felony count of defrauding the District of Columbia. He admitted to hiding $365 million in income and was sentenced to nine years in prison. He was also ordered to pay $200 million to the government. However, that figured was later dropped to $23 million by a federal district judge.
Why he made the list?
At the time of his arrest it was widely agreed that Anderson’s case was the largest tax evasion case in U.S. history. Anderson had accumulated a massive fortune through telecommunication investments, but avoided paying nearly any taxes on his income. It was reported that in 1998 Anderson had earned more then $126 million, but only claimed $67,939 on his federal income tax return. That year he only paid $495 in federal taxes. If he had properly reported his income he would have paid millions more.
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