Ignorance of the Law Does Not Excuse Anyone, Not Even Billionaires
Ignorance of the Law is a legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely because he or she was unaware of its content. Every citizen is made aware of this principle from an early age. It applies to all laws including minor civil offenses to the most heinous criminal offenses as well as tax evasion and fraud laws.
Somehow, former billionaire and entrepreneur, Samuel Wyly seems to be unaware of the principle or so he claims. Kind of odd since he helped build the arts and crafts retailer Michaels Stores, Inc. One would think an astute businessman like Mr. Wyly would be aware of that basic legal principle.
According to an article in Bloomberg, “Wyly, 81, and the estate of his late brother Charles joined forces for a trial against the IRS in Dallas, seeking to wipe out the agency’s $3 billion claim for back taxes in their Chapter 11 bankruptcy cases.”
In a subsequent issue of the same publication, “Wyly told a federal judge that he filed for bankruptcy to avoid burdening his children with that $3 billion tax claim by the Internal Revenue Service.”
Despite the finding of a federal jury in Manhattan that discovered back in 2014 that Wyly and his brother Charles “hid stock offshore and made illegal trades for 13 years, taking in $550 million in illegal profit, Wyly maintains his reliance on “lawyers and accountants to set up offshore trusts at the center of the IRS’s claims.” His claim of ignorance came when he said, ““People knew a lot more about accounting and tax than I do.”
It was as a result of the 2014 Manhattan case that triggered the IRS’s demands for years of back taxes and penalties and which supposedly forced Wyly and his brother’s widow, Caroline “Dee” Wyly, into bankruptcy according to the Bloomberg article.
Apparently, as the IRS accounts, the Wylys dodged taxes by funneling their money to the offshore trusts, and then directed the trusts to buy property and luxury items for use by the family in the U.S. Among the items were a $735,000 diamond necklace, a 298,00 diamond bracelet, a $32,400 George III breakfast table, three residences in Dallas, a condominium in Aspen, and a ranch in the Rockies that includes six custom houses.
Sam Wyly’s oldest son, Evan who is 54, according to the same article, “called the luxury homes “investment opportunities” for the trusts.” The article continues adding, “The son, who testified that he has his own offshore trust, said the entities were like 401(k) plans that let assets grow pre-tax. The IRS attorney, Jonathon Blacker pointed out that 401(k) participants can’t take money out of their accounts to buy art and jewelry without paying income taxes.”
It would appear that like father, like son, Evan was taught to plead ignorance of the law by his dad. Everyone knows you can’t withdraw money from a 401(k) for luxury purchases or any kind of purchase without paying taxes. I don’t know about you, but my heart just doesn’t feel a pang of sympathy for those “poor Wyly kids” who were going to be left with a $3 billion tax burden.
Most taxpayers who get in trouble with the IRS are regular people, not billionaires like the Wylys. However, the burden anyone feels with the accumulation of penalties and fees on outstanding tax bills gets heavier by the day and is serious business. But when you’re dealing with that kind of wealth, being left with just a few hundred million might feel like being in poverty.
If you find yourself in trouble with the IRS, make sure you get an experienced tax attorney. And if you’re going to claim ignorance of the law be aware that your chances of getting off scot-free are minimal at best.