He made so much money in the telecommunications industry that he talked about launching a vacation paradise for his friends -- in space. But now reclusive tycoon Walter Anderson is grounded, locked up after federal authorities accused him of evading more than $200 million in federal and local income taxes.
Federal agents arrested the lean, white-haired, 51-year-old entrepreneur Saturday at Dulles International Airport after he stepped off a flight from London. He was in court yesterday as the target of what authorities described as the largest case of personal tax evasion in U.S. history.
While keeping a fairly low profile, Anderson built a fortune during the telecommunications boom of the 1980s and 1990s by starting and selling companies for huge profits. Authorities said that he hid more than $450 million in income through various tactics, including the creation of shell companies in offshore tax havens.
Internal Revenue Service Commissioner Mark W. Everson said Anderson "ended up in a class by himself" among tax dodgers. In his income tax return of 1999, for example, Anderson reported earning $67,939 and he paid $494 in taxes; prosecutors allege that he made $126 million that year.
"He ran the table on tax violations," Everson said.
Anderson pleaded not guilty to all 12 counts of tax evasion, and his attorney said that the government's case is grossly exaggerated. During the hearing in U.S. District Court, Anderson complained through his attorney of not being able to make crucial business telephone calls since his weekend jailing, and he looked agitated as prosecutors sought to keep him in custody while awaiting trial.
"He's got plenty of places to hide and plenty of money to spend," said Assistant U.S. Attorney Susan B. Menzer. "All he's done in this case is lie, your honor. He cannot be trusted."
In painting Anderson as a flight risk, prosecutors held up a phony passport bearing his picture and several books with such titles as "Poof" and "Disappear Without a Trace" that tell how to create a new identity. The items were seized, they said, during a raid in 2003 on Anderson's residence in the Washington Harbour condominium complex -- one chapter in a long-running investigation.
U.S. Magistrate Judge Alan Kay decided to hold Anderson, a Northern Virginia native, without bond until a follow-up hearing Thursday.
Although Anderson was well-known in the upper echelons of the telecommunications industry, details that emerged in court and government filings show that he prided himself on his privacy and tried to avoid attention.
He was one of the first employees of MCI Corp. and later owned such companies as Mid-Atlantic Telecom and Telco Communications Group. As the money from his deals flowed in, authorities said, Anderson bought expensive artwork, including paintings by Salvador Dali and Rene Magritte. His company owns a jet and a mansion in Madrid, authorities said.
He once invested $21 million in the Russian space station Mir, saying that he hoped to rehabilitate it and charge hefty fees for millionaires to tour space. That led to a rare burst of public notice, including a profile in the New York Times Magazine in 2000 which quoted Anderson as saying he had a "personal" hatred for government. The article said his apartment had a painting based on a Smashing Pumpkins lyric, "I'm still just a rat in a cage." The story said Anderson viewed the Earth as his cage and that, as a child, he dreamed of leaving it.
In court yesterday, defense attorney John Moustakas said Anderson manages but does not entirely control a philanthropic trust that made half a billion dollars from his telecommunication company sales in the 1990s.
"Let's not let innuendo, rumor and information frankly that lacks any indicia of reliability . . . control this, your honor," Moustakas said. "He was the fund manager, and he was paid a fee for those services and he declared that fee on his income tax."
Authorities said that Anderson owes taxes for a period of almost two decades. The amount includes $170 million in income taxes due the federal government, $40 million in income taxes due the D.C. government and $250,000 in use, or sales, taxes also owed to the District, they said. Anderson could face as much as 24 years in prison if convicted. Federal officials said they hope to recover the money but alleged that some of Anderson's valuables have been shipped overseas.
Prosecutors said Anderson was "creative" in hiding income and keeping his name from being connected with the shell companies. He used an alias, Mark Roth, to register one company, and had stock certificates from another sent to a post office box in Denmark, they said.
The IRS has tangled with Anderson over the years and at one point filed a lien against him for $390,000 in unpaid federal taxes from 1987 to 1993. The criminal investigation was launched in 2000.
Everson acknowledged that the case did not move as quickly as he would have liked, in part because the IRS lost funds for criminal investigators in the 1990s. He said that "there is no doubt that the [tax] enforcement activities of the federal government did decline" in the wake of Senate Finance Committee hearings into charges of IRS misconduct in 1997 and 1998. He pointed to an increased emphasis on enforcement recently.
Throughout Anderson's dispute with the IRS, his place of residence has been a point of contention. He told his accountants that he lived in Florida, where there is no personal income tax, according to court filings. In one bank account application, he said he was a citizen of the Dominican Republic. His cars were registered in Virginia, and he had a Virginia driver's license. Yesterday he listed his residence as Washington Harbour, where his trust owned a unit.
Staff researcher Robert Thomason contributed to this report.