At the outset, I am not a tax lawyer (although I have worked on tax cases before) and I am not a criminal lawyer. With that said, let's turn to the allegations and the law.
Specifically, Affliction alleges that it agreed to pay Fedor $1,500,000 per fight (for Fedor's two fights) with Fedor receiving $300,000 per fight under a Fight Agreement and M-1 receiving $1,200,000 per fight under a Consulting Agreement.
Affliction claims "[t]he reason for the two agreements, Affliction was told, was for personal tax implications." Moreover, Affliction alleges that the "Consulting Agreement was a sham as there were no obligations created under the Consulting Agreement, other than the payment of $1,200,000 per bout directly to M-1 as opposed to Fedor."
In other words, Affliction has alleged that it intended to and agreed to pay Fedor $1.5M, but agreed (Affliction does not claim that it objected to this request and, ultimately, it agreed) to structure the transaction with two separate agreements because it was told that M-1 and Fedor wanted it that way "for personal tax implications."
In its counterclaims, Affliction alleges that the Consulting Agreement was created in "contravention to an express provision of the [tax] law" and alleges that "[a]ny willful attempt to evade or defeat taxes is a crime pursuant to Section 7201 of Title 26 to the United States Code."
Section 7201 provides as follows:
Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.This provision provides a basis for criminal (felony) liability for evading tax under Title 26 of the United States Code.
Under Title 18 Section 2 of the United States Code:
(a) Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.
(b) Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.
Assuming the allegations are true and that M-1 and Fedor can be held liable, by alleging that it agreed to pay $1,200,000 to M-1 under a consulting agreement when: (1) it was allegedly told that the transaction had to be set up this way for tax implications; and (2) it alleges the Consulting Agreement was a sham because there were no obligations created for M-1, has Affliction exposed itself to liability as an aider and abettor?
What do you think?
Fight Lawyer
