November 22, 2010 | 7:00am
We must be in the wrong business. Looks like the big money is in knickknacks, trinkets, and doodads.
According to court documents in a federal criminal case, Kristin Haynes, creator of the Dreamsicles line of collectible ceramic figurines (like the one pictured here) raked in nearly $3 million (and that's just counting the years between 1999 and 2006) from sales of her freaky-looking adorable little cherubs. (A recent eBay search shows these things sell for as low as 99 cents for a tiny used one, but certain individual pieces are listed for more than $100, and a set is going for $900.)
However, rather than stick around Washington state and pay tax on that income, in 2004, Haynes and her husband/business partner Scott Haynes, both now 56, moved to the tropical island of Roatan, off the coast of Honduras (a country that doesn't have an extradition treaty with the United States). Before enjoying the laid-back Caribbean lifestyle, the pair continued to earn hundreds of thousands of dollars a year while never filing tax returns.
But they did not go quietly. They gave the proverbial middle finger to the Internal Revenue Service on their way out of the country.
The couple joined the so-called "tax defier" movement, insisting that they had no obligation to pay federal taxes. Or, as the federal government put it in court papers, "For years, the defendants denied that any law made them liable for tax, citing absurd pseudo-legal theories that self-servingly coincided with their own economic interests." In the government's sentencing memorandum, U.S. Attorney James McDevitt wrote, "The reality is the defendants stopped filing tax returns because they were greedy."
The couple subscribed to theories made famous by a tax protester named Irwin Schiff
, who proposes that federal income tax is beyond the scope of the Constitution and that filing tax returns is voluntary. (He's in prison until 2016 for tax fraud and therefore could not be reached for comment.)
According to court documents, faced with requests from the IRS between 2000 and 2004, the Hayneses wrote back (and also to U.S. Supreme Court Justice William Rehnquist) saying the agency was "harassing" them and interfering with their right to "life, liberty, and the pursuit of happiness." In 2000, the IRS sent them a letter requesting their tax returns, but they sent it right back, marking it "Returned for Fraud." In 2001, Scott Haynes followed Schiff's lead and amended his 1997 return, putting zeroes on all the lines for income for their company, Dicky Duck Spring Inc. In fact, he even asked for a $262,692 refund. On internet messageboards, Scott Haynes posted as "The Evader" and also identified himself as a member of the Joy Foundation, which helps people in the process of "un-volunteering" from the federal income tax system.
In letters to federal agencies, Kristin Haynes renounced her U.S. citizenship and let the IRS know that "if you proceed further against us, we will take action against you."
The couple refused to pay more than $1 million in taxes, all while racking up $800,000 in tropical real estate. Court documents include photos of their sprawling pads in paradise, including a stunning view of the sunset from their dock.
Perhaps the couple should have stayed there.
On June 22, the pair flew from Honduras to Fort Lauderdale and were nabbed by federal agents at the airport. Eventually they cut plea deals and pleaded guilty to five counts of failing to file tax returns (for the years 1999 to 2003). Last Tuesday, November 16, a federal judge in Washington sentenced them to prison -- 40 months for him, two years for her. They've also been ordered to pay more than $800,000 in penalties, fines, and interest.
The funny thing? Kristin had written a letter of remorse to the court 12 years ago -- after Scott had been busted the first time for tax evasion. (In 1998, he was sentenced to 21 months in prison and ordered to pay $1.27 million in back taxes.) "He tells me again and again that we will never again find ourselves in this situation... I believe him," she wrote.