Dallas' Richest Man Sues IRS for $200 Million

Categories: Biz, Legal Battles

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Andrew Beal
When Forbes estimates your net worth at $8.5 billion, dropping $1 million to solve a math problem or losing $16 million in a particularly disastrous weekend of poker amounts to little more than rounding errors on your checking account. But once the debits creep into nine figures, once you start flushing $200 million down the toilet in a failed rocket-launching enterprise, for example, or when the IRS declares $200 million in tax deductions invalid, you feel it.

Dallas billionaire Andrew Beal has been fighting the latter battle for several years now. Two years ago, the Department of Justice issued a boastful press release declaring victory in its tax battle with Beal after the 5th U.S. Circuit Court of Appeals in New Orleans handed down its decision in the case.

The specifics of the matter are complicated, but the court basically ruled that Beal and his accountant had established a sham partnership, Southgate Master Fund, LLC, purchased a lot of bad Chinese debt on the cheap, then sold it to make it for what on paper was a $1 billion loss, which they claimed as a deduction on Beal's personal income tax return.

The government's victory was only partial, however. The court ruled that Beal had, in fact, intended to make profit when he formed Southgate Master Fund but had decided instead to use it as a tax shelter once the investment tanked, and it voided tens of millions of dollars in penalties the IRS had levied against him.

Matter of fact, the opinion was mushy enough that Beal also could declare victory, as he did Monday in pair of lawsuits against the IRS. The agency hasn't yet refunded the penalties and interest to which the appeals court said he was entitled, he claims. More than that, the IRS has gone after his investments with relentless zeal, levying $450 million in taxes and penalties that are "grossly incorrect, arbitrary and capricious even under the IRS's flawed theory of liability."

So, he wants the agency to refund $200 million he's handed over to the IRS since 2002. He'll take more, if the court will allow it.

He has four lawyers on the case, possibly more behind the scenes. It's their job to convince a federal judge to rule in their client's favor and, it seems, to dig up another judge's description of Beal as "an aggressive risk-taker, a noted gambler who makes big bets. Sometimes he wins, and sometimes he loses -- but he plays the game above board."

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27 comments
bealbankfraud
bealbankfraud

Don't let this man fool you. He is nothing more than a thug and crook. He creates thousands of sham companies to launder money overseas. He steals homes from the elderly, the disabled, minorities and single Moms and anyone else who has worked hard all their lives to build up equity in their homes. Quoted from one of many such cases: "Beal demonstrated its aggressiveness in this action by suing on an altered promissory note. Beal switched the signature page on one of the notes to make it appear that Kay Sarich signed the note when, in fact, she did not.3Defendants/Respondents Steve and Kay Sarich are Seattle residents. They have been married for nearly 60 years.Steve is 85 years old. Kay is 81." http://www.scribd.com/doc/91593456/Andy-Beal-Fraud-Sarich-Beal-Bank-Admits-Switching-Note

The man had someone break into his ex-wife's house to steal her computer equipment when she filed for divorce. He's supposedly only worth $8.5 Billion but she was asking for $20 Billion in the divorce pleadings. I don't think Simona Beal is mathematically challenged. I think she knows a lot more than the rest of us about how much Beal is really worth and how he hides his money. He uses many variations of his wives and children's' names to create sham companies. He had a gag order put on the divorce hearings... I hope the IRS takes a look at that.. He needs to be CRIMINALLY charged for money laundering, fraud and racketeering.

Every time Beal or someone like him cheats the IRS we all suffer. Next time you hit a pothole in the road and break an axle you can blame Beal because he doesn't pay his fair share of taxes and the government doesn't have money to fix the roads. Next time your taxes go up you can blame Beal because he isn't paying his fair share of the taxes.

bvckvs
bvckvs topcommenter

He did nothing wrong.
His friends knew he was a gambler, but "invested" in him anyway.
There's nothing the courts could possibly do to protect them from THAT level of ignorance.

YaValioCacaWates
YaValioCacaWates

God, don't you feel sorry for the top 1% getting the shaft.

lzippitydoo
lzippitydoo

And in another bit of good news - the IRS has allowed Obama to write off the entire first half of his second term as a total loss!

Americano
Americano

If the IRS can screw this guy, they can screw anyone.  Don't let your desire for class warfare overload good sense.

holmantx
holmantx topcommenter

Do I owe something to the beggar on the street? If so, can I discharge that obligation by writing him a check? Does he have a claim against me? If so, can he make that claim by presenting me with a bill?

Is my obligation smaller if the beggar lives in another city? What if he lives across the Rio Grande? What if he lives in Africa?

More generally, there are one billion people in the world living on about $1 a day and another one billion living on about $2 a day. If the beggar on my street earns more than that, is my obligation to him smaller than my obligation to the two billion people in the world who are worse off than he is.

Does inequality by itself create moral claims and obligations? If so, is income inequality the most important kind of inequality? Or, is inequality of IQ, attractiveness, life expectancy or social status more important?

These are interesting questions, provided you start with the premise that need is a claim. They are not very interesting if you start with the Jeffersonian idea that we each have a right to pursue our own happiness — and that the needs of others do not obviate that right.  It is a good thing when we choose to be charitable, but the recipients of our generosity are not entitled to our gifts.

Does The Beggar Have a Claim On My Earnings? - John Goodman, Forbes

Angela Williams
Angela Williams

I'm team Beal. I cannot in good conscience side with the IRS on anything.

primi_timpano
primi_timpano topcommenter

This a variant of the Son of Boss tax shelters sold across America. To my knowledge none were upheld and accountants and lawyers went to jail. Locally, this shelter shut down Jenkins and Gilchrist.

Gary D Baker
Gary D Baker

as long as he does everything above board as the court claims then I hope he beats them...

Sheri LeNoir
Sheri LeNoir

bless his heart, there isn't a better way to spend your money than fighting the man. Oh wait....he is the man.

Cary Ellis
Cary Ellis

i'm pullin' for the underdog, billionaire that he is .....

Brock Darr
Brock Darr

I would think with his wealth if he had any real trouble or something to hide, he would just pay the bill and get the funds back in interest over the next so many years. Maybe he really has no issues and the IRS is wrong? Good going...

roo_ster
roo_ster

What does it take for me to sympathize with a billionaire?  Oh, maybe gov't bureaucritters running around like the own the place.

ThePosterFormerlyKnownasPaul
ThePosterFormerlyKnownasPaul topcommenter

" The court ruled that Beal had, in fact, intended to make profit when he formed Southgate Master Fund but had decided instead to use it as a tax shelter once the investment tanked, ..."


This is what the IRS based their decision on.  That the purpose of this entity was solely to produce a tax loss and that there was never any intent to produce a profit through this activity.  


The main difficulty is that the IRS can declare that you never intended to make a profit and therefor disallow the losses; whereas, you have to prove that you did intend to make a profit.


The IRS, where "innocent until proven guilty" is a foreign and alien concept.

bealbankfraud
bealbankfraud

@AmericanoThe IRS is not screwing these guys - Beal and others like him are screwing the rest of us. When he cheats on his income tax and evades paying his fair share of taxes the rest of us suffer. Each time he cheats and fails to pay 1% of his income in taxes it costs the rest of us $80.5 Million dollars. (1 percent of 1 billion = 10 million - Beal is allegedly worth $8.5 Billion) Why should he get away with paying 15% or 17% of his income in taxes when the rest of us pay nearly 30%? Do you really want to subsidize his gambling with your hard earned money????????? When was the last time you lost $16 Million in a poker game??????

bealbankfraud
bealbankfraud

@holmantxYou are a very narrow minded person. How did a person become a beggar is the question you need to first ask. It didn't happen in a vacuum. It happened due to the way all of us think, act and behave towards others.

I do not in any way think that you or me or anyone else is obligated to give a beggar money. In fact we would do him harm by giving him a hand out. There is a saying "teach a man to fish he eats for a lifetime, give him a fish he eats for a day." We are obligated to make an effort to understand why we have beggars in the first place and why they failed to learn "how to fish."

The problem with government programs that supposedly help the poor is the same problem we see with big bank fraud and corruption. The financial incentives are all screwed up and there is no accountability.

bealbankfraud
bealbankfraud

@Angela Williams I suppose you have the resources to build your own roads and to send your children to private schools? And I suppose you don't care if we don't have a military to defend us from outside attackers? Taxes pay for these things. Do want to rely on the charity of people like Beal? Look back into history to the days of fiefdoms and land lords who controlled everything and every one living in their realm. Is that the life you want. What about civil rights? Without a central government and taxes you do you think you'd have any if your life was at the mercy of people like Beal. Bigotry, discrimination and civil rights violations thrive in locally controlled isolated governments. Do some homework before you side with a creep like Beal.

bealbankfraud
bealbankfraud

@Gary D Baker He doesn't do anything above board.

bealbankfraud
bealbankfraud

@Brock Darr No the IRS is not wrong in Beal's case. Beal is a sore loser and seems to be some kind of ego maniac. When he lost a lawsuit in New York he took out full page ads in major papers blasting the New York Courts. 

bealbankfraud
bealbankfraud

@Linda Moll Smith The precedent he sets in the courts is with foreclosure fraud. 

DSmithy3211
DSmithy3211

@ThePosterFormerlyKnownasPaul This isn't a criminal case. There is no presumption of "innocence" (or whatever that would mean in this case), nor does the IRS have to prove he never intended to make a profit beyond a reasonable doubt. There is no, nor has there ever been, any presumption that your tax deductions are legitimate. Except for perhaps your standard personal deduction, as a practical matter.

So where exactly is the problem?

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