Intimidation, Secret Income and Nasty Divorces
This is an unbelievable, yet true story.
We counseled a man that was desperate for help in his divorce. He was afraid that his wife had the unfair advantage in the proceeding, and that she had become hostile and unyielding during the case. So he wanted to level the playing field. This is what the man asked:
“Write me a letter, to give to my wife. Tell her that unless she cooperates with me in the divorce, I am going to disclose all my income that we never filed on our joint tax returns.”
His plan was for me to draft a letter, and present it to his wife’s divorce attorney. He supposed this threatening letter would motivate his wife to fully cooperate with his desires, in the marital dissolution. He reasoned that if he provided information of unreported taxable income to IRS, then his wife would surely have significant IRS worries:
• The increase in tax would dilute her share of their accumulated wealth. It would cost her, financially, when the assets were divided in the divorce; and
• The reporting of intentionally unreported income is dangerously criminal. Since she was aware of the income, she would share exposure to criminal prosecution.
Husband was absolutely convinced that this “Letter to IRS”, albeit only intended for his wife (and her attorney) to see, was the very best course of action. I explained to this gentleman why this plan was less-than-advisable.
Here are his immediate problems with that plan:
1) He would acknowledge to his adversarial, uncooperative wife that he failed to report his own taxable income. He would provide this information, in writing. She could choose (for a number of reasons) to provide that information to IRS and the state government. Not only would he be taxed on the income, but the IRS would assess him an additional 75% fraud penalty under Tax Code §6663. What is more, the penalty (and probably the tax too) would be his alone … not hers.
2) Certainly his wife’s attorney would present that information to the Internal Revenue Service, and use it to request innocent spouse relief from the additional tax. The intended leverage would only help to insulate her from the threat of his greatly-increased tax liability.
3) He would provide a written confession of his own (not his wife’s) substantial tax crime. The intentional underreporting of income (to avoid paying tax) easily falls within the provisions of Criminal Tax Code §7201, Attempt to evade or defeat tax. The commonly known crime of “Tax Evasion” is a serious felony, and includes up to 5 years of imprisonment. It also carries a fine of up to $100,000 per tax year.
4) He would provide, in writing, a deliberate attempt to intimidate his wife, by threatening to expose her silence, regarding his crime of tax evasion. Just let that one sink in.
This is the very definition of extortion. At the very minimum, this would be intimidation, which is also a crime. Under Illinois law, 720 ILCS 5/12-6, intimidation is a felony, requiring a prison sentence of 2-10 years. Intimidation and extortion are serious crimes. Even in the case Becker v. Zellner, a judge even considered “extortion” and “blackmail” to be synonymous terms. No judge ever deals gently with blackmail.
We handle separation of assets and associated tax matters in some of the more complex marital dissolution cases. But we chose not to represent this person. Obviously, we did not write his letter, either. Instead, I thought it would be more helpful to explain to the man that he needed to rethink his “leverage strategy” in his divorce. I hope he listened.
Maybe this is helpful to someone you may know.