Justice Department’s $100 Million Error

An embarrassing mistake by federal prosecutors will allow the biggest convicted tax evader in U.S. history to avoid paying the government more than $100 million he had agreed to pay as part of a plea agreement.

The Washington D.C. telecommunications entrepreneur, Walter Anderson, pleaded guilty to tax evasion and defrauding the government for hiding more than $365 million from the Internal Revenue Service over the years. As part of a plea agreement, the disgraced businessman agreed to return $23 million in back taxes to the District of Columbia and about $175 million to the federal government.

But a federal judge in Washington pointed out this week that he cannot order the huge restitution be paid to the federal government because a “poorly drafted” binding plea agreement authored by federal prosecutors listed the wrong statute. The judge, Paul Friedman, said he reached the ruling very reluctantly and hoped the government would actually appeal it.

Embarrassed federal prosecutors focused on the convicted man’s nine-year prison sentence, saying that it was a significant victory for the government. The fact remains, however, that Anderson cheated the country out of hundreds of millions of dollars and would have paid some of it back had prosecutors not botched the case.

Anderson admitted that between 1995 and 1999, he used the assets of one of his companies to invest in other business ventures that generated more than $450 million in earnings. He conducted most of the transactions through bank accounts in the United Kingdom’s Channel Islands, a known tax haven, and he omitted hundreds of millions of dollars of additional income.