Tax Evasion: Special Treatment for Billionaires?

tax evasion image

By Paul Levine

Swiss banking giant Credit Suisse is set to plead guilty to helping thousands of Americans cheat Uncle Sam in tax evasion schemes. At the same time, the federal government is chasing taxpayers who hid their money overseas. It seems a good time to ask what’s fair and just in tax evasion cases.

You can’t throw a bank in jail. But Credit Suisse will pay a whopping $2.6 billion in penalties. Additionally, eight employees – though not senior executives – have been indicted by the Justice Department.  But what about the American tax cheats? Let’s look at two ongoing tax evasion cases involving secret Swiss bank accounts.

Dr. Patricia Lynn Hough, 67, of Sarasota County, and her husband sold their two Caribbean medical schools, deposited $35 million into secret accounts, and didn’t pay taxes. A federal grand jury indicted them both, and the husband, Dr. David Frederick, fled, leaving his wife to face trial alone. (Now, there’s chivalry for you!) A jury convicted Patricia Hough of filing false tax returns; her husband remains a fugitive.

tax evasion doctor
Dr. Patricia Hough, convicted of income tax evasion.

Ty Warner,69, of Oak Brook,IL, the creator of the Beanie Baby and owner of many luxury resorts, has a net worth of $1.7 billion. He deposited $100 million of undeclared income in Swiss banks and failed to pay more than $5 million in taxes. Indicted and facing certain conviction, he plead guilty to tax evasion.

tax evasion Warner
Billionaire Ty Warner, after entering his guilty plea to tax evasion

Tax Evasion: Prison or Probation?

In each case, the government sought prison sentences. Now, You Be the Judge. Prison or probation?

1. Because of the huge amounts involved, the longstanding nature of the tax evasion, and as a deterrent effect, both defendants get prison time.

2. Both defendants are elderly. Both have done good works, Warner with substantial charitable donations, Dr. Hough, as a kind-hearted psychiatrist. Probation will do for the non-violent crime of tax evasion.

3. One goes to prison; one gets probation.

If you answered number three, go to the head of the class. But who does the time?

Dr. Hough will spend two years in prison, courtesy of Judge John Steele in Ft. Myers.

Ty Warner gets two years probation (plus 500 hours of community service), as determined by Judge Charles Kocoras in Chicago. The government has taken the rare step of appealing Warner’s sentence as “unreasonable.”

In announcing the probation, Judge Kocoras said that Warner’s charitable giving “trumped” his crime. In its brief to the U.S. Court of Appeals for Seventh Circuit, the U.S. Attorney flatly rejected that reasoning: “A defendant’s acts of charity cannot ‘trump’ his criminal conduct.”

The government’s brief also scoffed at this statement of the trial judge: “The public humiliation the defendant has suffered is manifest. Only he knows the private torment he has suffered.”
Are humiliation and private torment sufficient punishment? Judges are given wide discretion in “downward departures” from Federal Sentencing Guidelines, which in Warner’s case called for a term of roughly four years.

Meanwhile, the government had asked for only one year in prison. Only a year, and the judge wouldn’t give that!

If I were the trial judge, I would have said:

“Mr. Warner, you went to extraordinary lengths to hide your money for years. You flew to Switzerland and switched banks when the Justice Department got close. You could have paid back taxes and penalties in the Amnesty Program and gone free. Was $1.7 billion not enough? Was it necessary to cheat the government out of another $5 million?”

I would have banged my gavel and ordered Warner to prison for far more than a year, perhaps the four years called for by the Guidelines. Let the sentence serve as a deterrent to others in the top one per cent of the one per centers. But I have no prediction as to what the Seventh Circuit might do on the government’s appeal.

Back in Florida, Dr. Hough will start serving her two years shortly. Meanwhile, I can’t help but think of her missing husband. In my mind, I see him reclining on a chaise on a Caribbean beach with several million dollars in a safe deposit box and a young woman in a bikini serving him a mojito. There are some wrongs, it seems, that the Justice System can’t right.

(This post originally appeared May 29, 2014 as an Op-Ed article, entitled “Private Torment Spares Fraudster Time in Prison” in The Miami Herald.  Paul Levine’s latest novel is “State vs. Lassiter.”)

How I Killed The Miami Herald’s Tropic Magazine

The Miami Herald building

By Paul Levine

The official story: there just weren’t enough ads for maternity jeans.

I’m talking about the death of Tropic Magazine, which appeared every Sunday in The Miami Herald from October 1967 to December 1998. The magazine won three Pulitzers, published Dave Barry, John Katzenbach, and Carl Hiaasen, among others, and invented Miami’s strangest event, the “Tropic Hunt.”

The Miami Herald
The Miami Herald’s Tropic Magazine invented the world’s most insane scavenger hunt.

Who Really Killed The Miami Herald’s Tropic Magazine?

I wrote a piece in the September 13, 1998 issue and then the cover article on October 25.  Six weeks later, The Miami Herald killed the magazine.  The word around the newsroom was that Tropic wasn’t making money as a stand-alone magazine.  No kidding.  But it certainly added value with some of the best writing (both journalism and fiction)  in the newspaper over those 31 years.

(Full disclosure: I was a Miami Herald reporter who once worked at Tropic in 1970, shortly before going to law school).

For the last 15 years, I’ve been happy to let The Miami Herald take the rap for terminating that wonderful little magazine. But my guilty conscience compels me to cop a plea.  Or at least raise the question: did my two articles lead to Tropic’s surprising demise?

The cover story on September 13, 1998 was titled “On Being Beautiful,”  a series of essays commissioned by Editor Tom Shroder on physical beauty.  A 24-year-old woman wrote the lead article entitled “Don’t Hate Me For Being Beautiful.”  A young male model wrote a piece about putting on unwanted weight when working in Paris.  “What is happening?” his agent  asked.  “You look like a giant croissant.”

Oh, the humanity!

I wrote “In Defense of Wrinkles.”  Yep.  And this was more than 15 years ago!  Miami Herald photographer Charlie Trainor, Jr. took a photo about three inches from my face and then had some fun with it.

Miami Herald Tropic
No plastic surgery for me. I earned my wrinkles.

The Miami Herald: A Plastic Surgeon Ruins My Day

Here’s my little piece, which ran adjacent to an ad for $16.99 maternity jeans:

Just when I was getting used to my looks, when life had bestowed the dubious blessing of crinkly eyes and a furrowed brow, when it might be said that my face had acquired character, a plastic surgeon suggested he could take 10 years off my appearance by drilling holes in my head, slicing some muscles, yanking up my forehead, and fastening it to my skull with metal pins.

I received this heartening offer while standing in the gym near the bench press, having lifted a respectable amount of iron for a lanky fellow whose work requires mere mental gymnastics while seated in a cushioned chair.

“Look at that vertical crevice between your eyes,” the sawbones said with the same awe Spanish conquistadors must have expressed upon seeing the Grand Canyon.

“I know,” I replied. “It looks as if Lizzie Borden hit me with an ax.”

“We can get rid of it,” he promised. “And while we’re at it, we’ll take out some muscles to keep you from frowning or raising your eyebrows.”

“I need to raise my eyebrows to express irony,” I said, raising my eyebrows.

“Wrinkles!” he shouted. “It causes wrinkles.”

Smoothing out my forehead and plucking the fat from beneath my eyes, he promised, would leave me with a youthful demeanor reminiscent of my bar mitzvah photos.

“If you don’t do it,” Doc Hollywood warned me in solemn tones, “with gravity and aging, your forehead will slide even lower and eventually cut down your vision.”

“OK, so I’ll give up my dream of landing an F-14 on the deck of a carrier.”

But his words cut even deeper than his scalpel. I pictured myself as a beady-eyed Chinese Shar-pei, peering out from under a corrugated brow. Rushing to the mirror, I saw that he was right. Just when had my forehead slipped south? Most men aren’t aware of such subtle changes. As a man ages, I once read, his genitalia shrinks. Now, that we would notice.

“If you’re afraid of the surgery,” the surgeon continued, “I could simply inject Botox into your forehead. It’s derived from botulism and will paralyze the muscles and smooth out the wrinkles.”

“So would a ball peen hammer,” I replied.

I sometimes think that every crease and crevice can be attached to a specific trauma, so now I chart my face as a botanist might the rings of a giant Redwood. Aha, there’s the year of my career change, my divorce, my father’s death.

My past is littered with youthful humiliations, including being dateless for the junior prom. Adolescence began with huge black eyeglasses and a four-inch-high dirty blond flat-top that resembled an Iowa wheat field.

I did, however, have a sparkling personality and a deadly wit that I mistakenly believed could convince a girl — once sprawled across the front seat of my ’56 Ford at the drive-in theater — to shed her blouse. This strategy failed, notwithstanding soaking my turquoise vinyl upholstery with English Leather, which I understood to be a powerful aphrodisiac.

Later, with anti-war rebellion in the late ’60s, I let my hair grow long and bushy until it must have appeared that a muskrat was sleeping on my head. But now, three decades later, with a decent haircut and having grown accustomed to my face, I do not want to be reminded that the downhill slide may be even more painful than my awkward adolescence.

Aging means more than sagging jowls and a wrinkled brow, of course. In the past three years, I have had knee surgery, two hernia operations, and my first colonoscopy . . . clean as a whistle, thank you very much. I have bone spurs in both thumbs; I have trouble with the small-print on menus in darkened restaurants; and I get whipped in wind sprints by my 17-year-old son.

When I turned 50 earlier this year, I began receiving mail from the American Association of Retired Persons and a men’s health magazine that promises sturdy erections into my 90s if I would only buy a variety of food supplements favored by ancient Indian tribes from Peru.

I Am the Sum of My Aging Parts

Oh, Botox, schmotox! No plastic surgery. I don’t want an eye job, a chin implant, or penile enlargement. Keep your liposuction, collagen injections, and endoscopic forehead lifts. I know men are doing these things, but it’s all too trendy for me, a guy as up-to-date as a Ban-Lon shirt. I don’t carry a pager or a purse or wear suspenders, cuff links, or even a watch.

I don’t have an earring or a tattoo, and I don’t smoke cigars or wax melodic over the smoky essence of single-malt Scotch. I’m not in touch with either my feminine side or my inner child. I’m not a man of the ’90s, much less the millennium. OK, OK, I’m a throwback. So sue me . . . but don’t slice me.

It’s not that I am unconcerned about my appearance. I will swim my laps and hoist my weights in vain efforts to stave off gravity and the passage of time. I will eat low-fat foods with an occasional timeout for an oversize steak at Morton’s. I will drink gallons of water, hide from the sun, and imbibe martinis only in moderation. I will be the sum of my aging parts, and the wrinkles will bother me not a whit. After all, I earned them.

Paul Levine
Formerly of The Miami Herald

(Much has been written about the agonizing death of newspapers. Locally, the Miami News died in 1988, Tropic in 1998. The Miami Herald building, pictured above, is being demolished, and the newspaper now resides in the Everglades. Well, actually the burg of Doral, FL. Nonetheless, the newspaper’s staff, stretched thin, continues to l produce excellent journalism. I still read the newspaper and always will).