“Most people obey the tax laws: they report their income to the IRS and pay the taxes due ... honest taxpayers deserve the assurance that those who willfully dodge their tax obligations will be investigated, prosecuted, and punished," said Assistant Attorney General O'Connor.[3] This has definitely held true. Growing up, Anderson was surrounded by an affluent lifestyle and endless opportunities, but such stature did not preclude a thorough investigation into his illegal activities.[4] During his sentencing, Anderson’s friends and relatives went as far as describing him as a “caring man who made a mistake,” but that his mistake was not motivated by personal greed or luxury, detailing his donations to space exploration, helping budding entrepreneurs and establishing a philanthropic foundation.[5] While Anderson may have put his illegally acquired money to smart use, he was still unjustified in his attempt to defraud the IRS in obtaining such funds. The subsequent charitable use of the stolen funds could never be sufficient to wipe the slate clean for a tax-evader such as Anderson. If such were to be the case, any money launderer would remember to donate some small portion of his loot, so as to remain in good terms with the IRS.

Anderson’s scheme was not some small ploy to avoid paying a few dollars. Rather, it has been coined the “largest tax-scam ever.”[6] He had earned millions from telecommunications companies after the AT&T breakup and was subsequently known for his goal to reform the failing Mir space station.[7] His grand jury indictment was due to, over a five-year period, conducting billion dollar business through offshore corporations in Panama and the British Virgin Islands in order to make it seem like he himself was not personally earning the income.[8] Ultimately, Anderson’s vision included forming an offshore corporation named Gold & Appel Transfer and hired a trust company to serve as the registered agent and sole director.[9] Gold & Appel was previously owned by another company also formed by Anderson and he then granted himself an exclusive option to purchase Gold & Appel shares for a nominal sum, ensuring no one else could have access to the shares.[10] The unique way in which Anderson formed the companies was not by chance. Anderson purposely concocted his plan so as neither the option nor Anderson’s name was recorded in public records, yet he was able to maintain total control.[11] In addition, during the time of the tax evasion scheme, Anderson claimed to be living in Florida, which does not have a state income tax requirement, while he actually resided in two different residences in the District of Columbia. 

Anderson’s failings, while largely comprised of tax fraud, also involved breaches of fiduciary duties to shareholders. While Anderson was the sole shareholder for Gold & Appel, he was not the sole shareholder of his other companies and thus had a duty to run those business for the benefit of the shareholders. However, it was not his shareholder’s wealth maximization that he was concerned with, but his own. It would seem imperative that in order to run a business for the benefit of the owners, the director/CEO not jeopardize the company’s functioning by leaving it vulnerable to illegality. Anderson owed a duty of loyalty to his shareholders that he breached when he made business decisions in order to compile a hefty stack of money for his own benefit and did not take into account the shareholders’ potential loss when the company would be shut down.[12] In the end, it is clear that Anderson felt he could plan a magic scheme that would not be uncovered by the revenue regulators. Anderson may have viewed the benefit of saving millions through tax evasion as taking precedent over staying in compliance with the law, but now he is left to deal with a hefty $200 million fine and loss of reputation, in addition to a potential 80 year prison sentence.

[1] Telecommunications Entrepreneur Indicted and Arrested in $200 Million Tax Evasion Case, DOJ Release No. 078 (Feb. 28, 2005).

[2] Carol D. Leonning, Mogul Sentenced to 9 Years For Tax Evasion and Fraud, washingtonpost.com, Mar. 28, 2007, http://www.washingtonpost.com/wpdyn/content/article/2007/03/27/AR2007032702122.html?nav=rss_technology.

[3] Id.

[4] Id.

[5] Matt Apuzzo, Tax Cheat Escapes $100 Million Repayment, USAToday.com, Mar. 31, 2007, http://www.usatoday.com/news/washington/2007-03-28-2808877398_x.htm.

[6] Pete Williams, Entrepreneur Accused of Biggest-Ever Tax Scam, MSNBC.com (Mar. 31, 2007), http://www.msnbc.msn.com/id/7046153/.

[7] Bloomberg News, Entrepreneur Gets 9 Years in Tax Case, NYTimes.com, Mar. 28, 2007, http://www.nytimes.com/2007/03/28/business/28tax.html?ex=1332734400&en=66079ef6550ead84&ei=5090&partner=rssuserland&emc=rss.

[8] Id.

[9] Telecommunications Entrepreneur Indicted and Arrested in $200 Million Tax Evasion Case, supra note 1.

[10] Id.

[11] Id.

[12] Del. Code Ann. tit. 8, § 404 (2002).