Probations means you don't have to pay after all?

[Demosthenes]

Tables turned in tax case
Web Posted: 04/15/2008 01:32 AM CDT
Guillermo Contreras
Express-News
Nothing in this world is certain but death and taxes.
That famous quote by Benjamin Franklin resonates loudly with San Antonio's John M. Mathewson.
For more than 10 years, Mathewson, 82, who ran an illegal offshore tax shelter used by hundreds of Americans, helped the U.S. government recover more than $3 billion. His help prompted officials from all three branches of government to label him one of the most important cooperators in tax revenue history.
But today, he's in a legal battle with the Internal Revenue Service over $11.3 million in unpaid taxes dating to the 1970s and 1980s. The agency said the amount has ballooned — with interest and penalties — to more than $31 million.
Mathewson argues that, after he was sentenced for tax evasion and money laundering in 1999, he was told by the feds that they were not worried by his tax debt and they would not pursue it, as long as he continued to cooperate. The IRS says Mathewson has no proof that conversation ever happened.

The IRS is going after him administratively, based on a civil judgment it obtained against him in 1993. In 2006, the IRS filed a lien on his San Antonio home and notified his employer, an oil and gas drilling company.
Separately, IRS agents in San Antonio have been investigating Mathewson criminally for two years, spurred partly by an informant who is involved in a legal partnership dispute with Mathewson's employer, Garrison Ltd., records show.
Mathewson, through his lawyers, turned down a request to be interviewed. He sued the IRS in 2005 after he tried to get his tax records, and after the IRS responded that it could not find his old tax returns and that others had been destroyed. The suit asks U.S. District Judge Fred Biery to issue an order saying he had a deal.
His attorneys argue that the government has double-crossed a man who paid his debt to society — he served five years of probation for his guilty plea — and kept his side of the bargain.
"They waited until all the (other people's) cases were over and now say, 'You've been hiding assets and intentionally not paying your tax,'" said one of his lawyers, Mike McCrum, who oversaw tax prosecutions as a former federal prosecutor in San Antonio.
Since his sentencing, "he's filed tax returns every year," McCrum said. "They've never on those taxes said, 'You owe us more.' They've even given him a refund that was applied to his taxes the following year. What a coincidence that now that the cooperation is all over, they say, 'You owe us over $30 million.'"
A spokeswoman for the IRS, Lea Crusberg, said in an e-mail that the agency is barred from discussing tax issues related to any individual and that the IRS does not discuss criminal investigations.
In court records, IRS lawyers claim federal law prohibits the courts from forgiving taxes against anybody, and that Mathewson has yet to provide a name of any agent who told him his debt would be wiped off the books.
Amid his tax woes, Mathewson's importance to the government has come to the forefront. Mathewson, who started out in the construction and remodeling business in Chicago, set up his own bank in the Caymans, Guardian Bank and Trust, after vacationing there.
Hundreds of people, 95 percent of them Americans, put their money in his bank. During other criminal investigations targeting people later learned to be his customers, FBI agents in New Jersey and Miami targeted Mathewson and arrested him. He immediately cooperated.
Mathewson turned over a list detailing information of more than 1,000 customers, and encrypted tapes documenting their financial transactions — a treasure trove for the IRS. But when the IRS, its experts and computer whizzes in the private sector could not fully decode the tapes, Mathewson, using European contacts, helped decrypt them.
One of the most important pieces of his cooperation included how tax cheats hid the money. His bank, like other shady offshore banks, issued credit cards to customers allowing them to make purchases or pay expenses of up to $1 million per month. The expenses were covered by whatever was in the customers' bank accounts, and because the Cayman government would not cooperate with U.S. officials, the IRS did not know about that hidden money.
He also provided background information that helped unrelated prosecutions and in federal stings. He later testified at grand juries across the country and before Congress.
"He sat in jail that first night with FBI agents who arrested him and by the next morning, the government had learned more about offshore banking and the operations of the Guardian Bank than we could have learned in years of conventional investigation," a federal prosecutor told the judge who sentenced Mathewson in 1999.
Paul O'Neill, former secretary of the Treasury Department, which includes the IRS, said in 2001 that the IRS developed dozens of tax-evasion cases with Mathewson's help. With Mathewson's information, the IRS was able to persuade judges to force U.S. credit card companies to open their client lists so the IRS could see who was hiding assets.
"These cases were made possible because of Mr. Mathewson's extraordinary cooperation," O'Neill told reporters in May 2001. "Without it, ... this large-scale illegal tax evasion would have gone unpunished. ... When the entirety of (Mathewson's) cooperation is utilized, the benefits to both the criminal and civil law enforcement authorities of the United States will be immeasurable."
Despite his help, the IRS says Mathewson shouldn't get a pass.
San Antonio lawyer Oscar C. Gonzalez, who defended Mathewson through his sentencing in 1999, got him a deal to dodge the 10 years in prison he faced. Gonzalez said he recalled no agreement regarding Mathewson's tax debts.
"We were going to try to get credit (for the tax debt), a finder's fee, but we made a decision that with his age and his health — he had a couple of strokes — it would be better to just keep him out of prison," Gonzalez said. "If he did go to prison, he certainly would be dead."

[Quixote]

Mathewson, 82,

He'll never pay a dime to Uncle Sam. But his heirs may never see a penny either.

In court records, IRS lawyers claim federal law prohibits the courts from forgiving taxes against anybody, ...

But Matheson isn't asking that the government forgive the taxes, just not actively collect them.

... he was told by the feds that they were not worried by his tax debt and they would not pursue it, as long as he continued to cooperate.

(Emphasis added.)