I'm not sure what to say at this point. Walt Anderson, bankroller of several emerging space companies (some of which I've worked for and with), has been arrested for tax evasion:

IRS Commissioner Mark Everson said the allegations mark the largest criminal tax case against an individual.

Anderson, 51, earned millions by dealing in telecommunications companies after the AT&T breakup and became a global figure about five years ago when he embarked on a mission to try to rescue the ailing Russian Mir space station.

I hadn't talked to him since last June, at the first SS1 flight into space, in Mojave.

Without speaking to the merits of the case, it's safe to say that this will put a severe crimp into the capability of the first dotcom millionaire who was putting his money where his mouth was to continue to support space entrepreneurs.

[Via NASA Watch]

[Update on Tuesday morning]

Here's more from the New York Times:

The Justice Department said that Mr. Anderson was involved in starting long-distance telecommunications businesses as the industry was being deregulated, and that he realized in the early 1990's that the merger of his first successful company, Mid-Atlantic Telecom, with another company would result in substantial taxable earnings.

To avoid paying those taxes, the department said, he formed an offshore corporation called Gold & Appel Transfer in the British Virgin Islands and hired a trust company to serve as Gold & Appel's registered agent and sold director. Gold & Appel was owned by another British Virgin Islands company previously formed by Mr. Anderson, the department said.

Mr. Anderson structured his dealings so that he had complete, albeit hidden, control of the corporations, prosecutors said. They said he further obscured his holdings by forming another offshore corporation in Panama, transferring Gold & Appel shares to that entity and having the shares sent to a mail drop in Amsterdam that he had rented under an alias.

The indictment said Mr. Anderson concealed his illegal dealings from his accountants, repeatedly tried to thwart I.R.S. inquiries, sometimes used the alias "Mark Roth" and falsely proclaimed himself a citizen of the Dominican Republic when he opened accounts with a New Jersey bank.

Gold & Appel (prounounced "Golden Apple") was the investment source for many of his investments, including Rotary Rocket, Mircorp, and others. I don't know, but suspect that it also provided the seed funding and endowment for the FINDS fund.

Well, can't have that money funding projects that could get us off the planet. Much better to sink it in that vast black hole known as the federal budget, of course.

[Update at 9:45 PM EST]

Here's more (though for some unaccountable reason the NYT reporter consistently misspells Gold & Appel as "Gold and Appeal"):

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...

...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.

I guess that occasionally it's possible to be a little too libertarian.

[Update at 11:20 AM EST]

Here's one more, the longest piece on the story yet, from the WaPo.

The fact that he could build up enough to be indicted for not paying $210 million in taxes suggests that there is a great deal of profit to be had in not being a U.S. citizen. Are we sure we can sustain a system where that large of an incentive to not participate?

If this guy was making that kind of money, why didn't he just change his citizenship? With that kind of money, its very easy to become a citizen of Singapore, various European countries, or other places that do not tax global income.

The U.S. is one of the few countries in the world that taxes global income.

The article suggests that this guy made most of his money doing business in the U.S., but using foreign business entities to conceal the fact that he is an American. If this is true, then he is definitely guilty of tax evasion.

In my previous posting, I was under the impression that he was doing business internationally and living abroad while doing so.

Regular as clockwork.

Did you ever notice? Every year, just prior to the filing deadline, the government files a high profile tax evasion case, pour encourager les autres.

Actually, it's not easy to stop being an American citizen, *especially* for tax reasons.

I can't recall how or why I know this, and I may have some details wrong but the gist of it was that renouncing your American citizenship for any reason makes you a personna non grata in America, which basically means they don't necessarily have to let you back in again even for a holiday.

And if they determine that you renounced your citizenship for tax reasons, then it's even worse and they still claim the tax on your entire income for something like 10 years.

Would have been cheaper in the long run to just pay the tax, huh?

Rand, anybody else,

How well do you know this guy? I don't know him at all. The WaPo article makes him out to be a real flake.

I know him better than most people (which isn't saying much) and much less well than a few. He is...eccentric. Rich people often are.

The trial will determine whether he is guilty. However, if this guy was using foreign corporations to do business in the U.S. as an American citizen, he is definitely guilty of tax evasion. Even as a non-lawyer, I can clearly see that this is tax evasion.

On citizenship change, very few people do it. It was a letter to the editor in Fortune magazine some time ago (mid 90's I think) that started the whole bruhaha over this. In the letter, some retentive spincter went on and on about how evil it was for anyone to leave the U.S. to live in some tropical paradise, especially for tax purposes. I believe this is the information source that Ian Woolard is refering to.

I believe that if you change your citizenship from U.S. to, day, Singapore, then ypu would be treated as a Singaporian citizen as far as entry into the U.S. is concerned. Visitors from Singapore, like Japan, are granted 30 day visa-less stays in the U.S. Anything longer than that and you have to apply at the U.S. embassy for visa prior to arrival in the U.S. This is perfectly reasonable. Of course, the U.S. government may hold a grudge against you and not even allow you in for business travel. However, presummably anyone doing such a thing would be wantling to leave the U.S. permanently and would not want to come back even to visit. In which case, its not a problem.

I may be wrong about this. But I spent alot of time in Asia and that was how it worked for these two countries. Presummably, one would not renouce U.S. citizenship unless one became naturalized in another country, like Singapore. I, for one, would never give up U.S. citizenship unless I got into a place like Singapore. Despite its warts and parasites (which exist on all social economic levels) the U.S. is still, by far, the best country to live in.

Singaporians, like Japanese and Americans, can pretty much visit any country in the world without extensive visa hassles. Generally, if you're a citizen of a rich country, getting visas to visit anywhere else is easy. If you're a citizen of a poor country (like Bangadesh or Indonesia) its very difficult to get visa to go anywhere else.

If an American gave up U.S. citizenship and became a Singaporian citizen, how would the U.S. government collect taxes on your income once you became a Singaporian citizen? I am assuming that a person doing this has no assets in the U.S. and does not do business in the U.S.

Actually, I found the rules somewhere or other on the web, it wasn't some letter by an old lady.

Check out:

http://travel.state.gov/law/citizenship/citizenship_776.html

I think basically, they are going after the Billionaires, trying to stop them leaving the country taking great gobs of money with them. Billionaires nearly always have businesses in the US, and the tax men would probably seize assets and stuff. If not, the US would probably apply for extradition.

Ian,

I had a look at the link you posted. The part about tax obligations only applies to income made while still a U.S. citizen. It does not apply to income made by the person once he or she is no longer a U.S. citizen (where presummably they would be paying the taxes of whatever country they are now a citizen of).

I did a good bit of research on this many years ago and this is what I found out:

1) When you do renounce your US citizenship the IRS assumes you have 'died' as far as tax purposes are concerned. That means that do a basis adjustment of all of your holdings to whatever value they deam is appropriate and then tax you on that as income. Secondly, they also tax you on an inheritance tax from U.S. self to your new foreign self.

2) If it appears you are giving up your citizenship for tax reasons then they tax your worldwide holdings for 10 years afterward and tax it at extremely high levels.

3) if you hold more than $1 million or have made income in excess of something like $250,000 a year in the past 5 years then you are automatically assumed to have renounced for tax reasons and you can't appeal that ruling.

4) The US always taxes you on your worldwide income (I think only two other countries do that). So even if you leave the IRS will track down any holdings you have worldwide and confiscate them. Due to strong arm tax collection stuff passed in the 90s we have tax agreements in place with all industrialized countries that the IRS can confiscate and extradite you for not paying your taxes. So even if you aren't a US citizen the IRS will take whatever share they want for 10 years after that.

In order to avoid all of this you must do two things:

1) live abroad for 10 years, building significant familial, business and community ties to some other non-U.S. community

2) ensure that you are provably making less than $250,000 a year and that you never have more than $1 million in assets.

Do those and you can renounce and move fairly easily. 10 years is a long time though. Like I said early, the incentives for not being a US citizen are growing better and better by the day.