Girls Gone Wild CEO and Deuche of the Decade winner Joe Francis lost $22.4 to the IRS last week.  The Court upheld the jeopardy assessment.   These documents are not available anywhere but here.

Here is the order:  francis.order.deny.taxrelief

The agent in great deal outlines how Joe Francis was moving money around.

Here is the agent’s declaration:  irsagentdeclaration

In 2000, Rothwell Limited, a Cayman Islands corporation (“Rothwell Ltd.”), was formed. In July 2001, a Morgan Stanley investment brokerage account was opened on behalf of Rothwell Ltd. (“Rothwell Account”). 

Colin Chaffee is listed as the administrator and/or signatory of the Rothwell Account. However, Mr. Francis has admitted that he owns 100% of the interest income generated by the Rothwell Account.  On October 4, 2002, Joe Francis established Blue Horse Trading, LLC (“Blue HorseTrading”). Joe Francis is the sole member of Blue Horse. On November 5, 2002, Blue Horse purchased a house in Los Angeles, which was then leased to Mantra Films beginning December 2002.   This is Joe’ s Bel Air home which he lives at.  Who leases their own home to their business?  This has tax scam written all over it.

Here is the background on how he got to this point:

Criminal Case

On April 11, 2007, a federal grand jury indicted Joe Francis on two counts of felony tax evasion in connection with his 2002 and 2003 personal tax returns and those of Mantra Films and Sands Media. On September 23, 2009, in the case entitled United States v. Joseph R. Francis, CR 08-494 (U.S.D.C., D.C. Ca.), the parties entered into binding plea agreement (“Plea Agreement”). Pursuant to the Plea Agreement, the government dismissed its felony tax evasion charges, and Joe pled guilty to two misdemeanor tax counts for failing to report interest income on the Rothwell Account in 2003. The agreement also provided for a time-served sentence, a restitution payment of $249,705, a $10,000 fine, and a special assessment fee of $150. On November 6,2009, the Court accepted the Plea Agreement and the terms contained therein.

The Government’s Jeopardy Assessments and Levies

On November 6, 2009, the same date the Court entered the Plea Agreement,

The IRS served Jeopardy Assessments on Joe in an amount that exceeds $33 million. The total assessment amount is for tax years 2001, 2002, and 2003.  The IRS also levied the Rothwell Account, which froze over $20 million, and a UBS Financial Services account (“UBS Account”), which froze over $2.4 million.

The total in taxes, penalties, and interest, the IRS determined that Joe Francis’s tax deficiencies to be (1) $17,658,359 for tax year 2001, (2) $11,262,006.12 for tax year 2002, and (3) $4,932,405.97 for tax year 2003.

The District Court, Judge Gary Klausner, a Bush appointee, found that following facts:

(1) Joe’s use of Blue Horse Trading to purchase his Los Angeles residence;

(2) Most of Joe’s assets residing in various corporate entities;

(3) an existing $2.8 million civil judgment; (that’s from Steve Wynn from the Wynn)

against Joe; and

(4) felony indictments, albeit dismissed under a plea agreement, that laid out a complex scheme to evade payment of tax.

With all of this going on, Joe still found time to go to Voyeur last week.  See the video below of him getting rejected while they let my client Jayde Nicole in.

Now if Joe can survive the $22.4M haircut, I will be very surprised.

He has not done well in Federal Court. He lost both his TRO and Preliminary Injuction requests.  Those were DENIED and that case dismissed.  He now has lost his summary review of the emergency or jeopardy assessment made by the IRS.  He must now prevail in tax court as the interest and penalties keep mounting.

As always, I will keep you posted of any further developments. 

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