Austin American-Statesman
January 13, 1991
Pete Szilagyi
Day in and day out, on the road again or at home in Austin, another $5,516 in penalties and interest is added to the income tax bill of Willie Nelson.
So far, he owes about $17 million, an amount that would send the average person staggering to bankruptcy court. But not the laid-back country singer, who says he is unhappy but not intimidated about his debt and the Internal Revenue Service raids in November that seized the rewards of 15 years as one of America’s best known entertainers.
Nelson returned to Austin recently after several weeks in Hawaii observing from afar the fallout from the highly publicized IRS seizures, which included real estate in six states and Lake Travis hilltop home, movie ranch and the studio in which he has recorded dozens of familiar songs.
Nelson, 57, also poked fun at a recent National Enquirer cover story that portrayed him as homeless, distitute and suicidal.
“That’s some of the best reading I’ve had in a long time — 99 percent of it is bull,” Nelson said after several tiring hours in front of the cameras for the CBS TV movie Another Pair of Aces in which he will co-star with Kris Kristofferson.
“I don’t worry about money — fortunately I never did. This situation is actually kind of comical to me. I laugh when I think about how much it wasn’t my fault,” Nelson said.
Nelson’s friend and golfing partner, comedian Turk Pipkin, said it’s “not like he’s concerned because he wasn’t trying to pay it. He’s missing that normal guilt that comes with bankruptcy or tax stuff because he’s still making money and still trying to pay it. He just says, ‘What he hell.”
The singer is staying at the Lake Travis vacation home of Dallas Honda dealer Bill McDavid or aboard one of his leased tour buses, the Honeysuckle Rose II. The California movie company also has provided Nelson, his companion Annie D’Angelo and their two children with a suite at the Stouffer Arboretum hotel during filming this month.
Nelson and his high-profile New York attorney, Jay Goldberg, who lists Donald Trump as a client, say the entertainer has kept current on his income taxes since 1983, paying $8 million to the IRS for the years 1983-89. The unpaid taxes that led to the raids on Nelson’s properties were from the late ’70s and early ’80s when Billboard’s charts were heavy with Nelson’s albums, and he was on the cover of Newsweek and Rolling Stone and earning millions from royalties and sold-out concerts.
The IRS sued Nelson for the unpaid tqaxes, and last June the singer agreed that he would pay 6.5 million in back taxes and about $10 million in penalties and interest, which the IRS says continues to accrue.
Nelson’s legal advisers acknowledge that the IRS and Nelson, through the years, have disagreed on numerous deductions he has claimed as business expenses. But they blame the majority of his tax debt on what they say were disastrous investments Nelson made in cattle operations and federal home loan mortgage forward contracts similar to futures contracts.
The singer said the investments were proposed and handled by Price Waterhouse, which he hired in 1979 to overse his investments and file his taxes. The mortgage securities and cattle investments were intened to shelter some of Nelson’s earnings from income taxes, but the IRS ultimately disallowed the massive deductions Nelson had claimed on his tax returns and then added millions of dollars in penalties and interest, his advisers say.
In a case that could go to a jury trial in a Dallas federal court later this year or in 1992, Nelson and hs manager, Mark Rothbaum of Danbury, Conn., have sued London-based Price waterhouse for fraud, seeking $45 million in triple damages under federal anti-racketeering statutes and an additionl $50 million in punitive damages. Price Waterhouse, one of the so-called Big Six accounting firms, denies proposing the investments to Nelson and denies culpability for his tax deficiencies, according to documents filed in federal court.
“We do not believe as a result of any profesional servies to Willie Nelson, that we are responsible for any losses he might have suffered. We think we exercised due care and we acted resonsibily,” said Allen young, deputy general counsel for Price Waterhouse. “If Willie Nelson incurred losses, it was because of decisions he made.”
Nelson and his attorneys express confidence that the singer will win a large enough judgment from Price Waterhouse to pay the heavy tax debt. The IRS has taken the precaution of slapping a lien on any judgment or settlement that may result from the case. The agency also has liens on his future roayalties from records and songwriting.
The IRS didn’t seize every possession of Nelson’s in raids the night of Nov. 9, but agents either removed or padlocked enough of his belongings, including cash in bank accounts, to serously inconvenience the singer and his family. For example, his daughter Lana has been told by the IRS to leave the Hays County ranch house owned by her father, and the IRS seized the Evergreen, Colo., ranch that had been awarded temporarily in 1989 to Nelson’s estranged wife, Connie, by a Travis County district court. She now lives in San Diego with the couple’s teen-age daughter; their divorce is still pending.
Also taken were more than a dozen other properties including the boyhood home Nelson was restoring in Abbott, and the centerpiece of his life in Austin, the complex in the Village of Briarcliff that included a nine-hole golf course, a recording studio, his hilltop home and movie sets. Nelson is most upset by the loss of the recording studion. “You can play golf in a lot of places, but the studio was really my little temple where i liked to go and make music, a little church,” he said.
The IRS allowed Nelson to keep his secluded beach house on Maui, two leased tour buses, and the suite of some condominiums near the recording studio.Â
“I had a lot of things I owned, I needed to get rid of,” he said. “I had a lot of people around and needed to back off and stop supporting half the world so I could stop and look at my situation. It’s give me time to take inventory,” said Nelson, who manages to put a positive slant on everything.
“I’m not completely broke — I did a show in Hawaiii and promoted it myself,” he said. “We didn’t make a lot of money, but I’ve got spending money ’till I can get out on the road again.”
Although Nelson is reluctant to accept charity, McDavid and other wealthy friends may buy back Nelson’s studio and other properties when they are auctioned by the IRS in a couple of weeks, and then sell them back to Nelson. McDavid suggests but won’t confirm that it has been discussed.
Nelson said he has no doubt he’ll get it back, “I really can’t imagine it being that big a problem because I’ve already had a lot of people say, ‘Let me know when I can help.’Â Hopefully, we could get it worked out before it could go up for auction — that the IRS could see the (moneymaking) potential of the studio.”
His immediate goal, discussed at a meeting with IRS officials last week, is the return of dozens of master audio tapes seized by the agency and the use of his studio. To pay the tax debt, Nelson hopes to release one or more albums called the IRS Tapes, of unreleased material from the seized tapes, which he contends were taken wrongfully because they belong to his record company, CBS.
