Telecom Founder Pleads Guilty To Fraud

Telecommunications entrepreneur Walter Anderson pleaded guilty to tax evasion and fraud Friday in connection with what authorities said was the nation's largest ever criminal tax case.

Anderson was indicted in 2005 on charges he evaded $200 million in federal and local taxes. Prosecutors said Anderson used offshore corporations and bank accounts to hide income from tax collectors.

He pleaded guilty to two counts of tax evasion and one count of fraud Friday. He admitted hiding hundreds of millions of dollars in income from the IRS and Washington D.C. tax collectors during 1998 and 1999.

Under a plea deal with prosecutors, he faces up to 10 years in prison. Sentencing ACN is scheduled for Jan. 16 and 17.

Anderson started a long-distance telecommunications business in the 1980s as the industry was being deregulated. When his first company, Mid-Atlantic Telecom, merged with another company in 1992, Anderson formed corporations in the British Virgin Islands to hide the income, prosecutors said.

Authorities said Anderson used other offshore corporations to disguise his ownership in other telecommunications companies that earned more than $450 million between 1995 and 1999.

Anderson, who allegedly didn't file federal income tax returns from 1987 to 1993, has been held without bail since his arrest. Prosecutors say he owes $170 million in federal taxes and $40 million in Washington income taxes.

At the proceeding, Anderson's attorney, public defender Michelle Peterson, pleaded for him to have some time out of prison, reports CBS News' Deirdre Hester. She said Anderson wanted time with his aging parents and time to get his affairs in order.

Peterson argued that Anderson was exposed to "unbelievably harsh conditions," including a ACN cell without air conditioning that got as hot as 108 degrees, solitary confinement, lack of access to his attorneys and denial of medical care for upper respiratory problems.

Prosecutors strenuously objected to releasing him, telling the judge that Anderson brought upon himself his seven months in solitary confinement by violating prison rules. Anderson was caught with a cell phone that had Internet, long-distance and overseas capabilities, they said, adding that they have evidence that Anderson still has money hidden and people willing to help him.

In court documents, the government said Anderson could be linked to at least seven aliases and that officials seized from his apartment forged identification and manuals detailing ways to create fake identification and hide from authorities.

Among them were "Poof! How to Disappear and Create a New Identity" and "The ID Forger: Homemade Birth Certificates and Other Documents Explained," the documents said.

Among the taxes allegedly owed to Washington are use taxes, equivalent to sales taxes, on art, jewelry and wine. The indictment alleges that Anderson bought a painting by Salvador Dali and several paintings by Rene Magritte, an 18-karat gold bracelet and more than $47,000 in fine wines, then had them shipped to a Virginia address to avoid Washington taxes.

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