By WILLIAM P. BARRETT from Forbes Blogs wrote the following article
The Internal Revenue Service says ex-football star linebacker Bill
Romanowski owes more than $6 million, primarily for claiming losses from a
thoroughbred horse-breeding investment whose promoters have admitted was a
fraudulent tax shelter.
Romanowski, 44, and his wife, Julie, filed a lawsuit last month in U.S.
Tax Court disputing an IRS bill for $5 million in taxes, $1 million in
penalties and an unspecified amount of interest. According to his
complaint, for the years 1998 to 2004, the Romanowskis said their total taxable
income was a negative $11 million. The IRS said it really was $14 million. The
difference is a cool $25 million.
The period covers nearly half of Romanowski’s 16-year National
Football League career, during which he won four Super Bowls as a hard-hitting
linebacker nicknamed Romocop. He played for the San
Francisco 49ers, Philadelphia
Eagles, Denver
Broncos and Oakland
Raiders.
The Tax Court case centers on $11 million in claimed 2003 losses, of
which Romanowski (pictured) applied against net taxable income in earlier
years, resulting from his involvement with the ClassicStar Mare Lease Program.
That was run out of a Kentucky farm and pitched to investors as a way to reduce
their federal income taxes through the use of borrowed money and big paper
operating losses.
Federal authorities declared ClassicStar a fraud with no economic substance
that cost the U.S. Treasury $200 million in taxes. Over the past year, its
operators, including David Plummer, his son, Spencer Plummer; an accountant and
a lawyer have pleaded guilty to federal criminal charges. Because they have
been cooperating with authorities, the Plummers have not been sentenced.
The IRS has been auditing other ClassicStar participants, some of whom also
have filed TaxCourt lawsuits to fight IRS bills. There’s no indication
that Romanowski had a leadership role in ClassicStar, which according to media
accounts attracted interest from other professional athletes. While
that’s no defense to a claim for back taxes and interest resulting from a
bogus tax shelter, ignorance sometimes can help reduce claimed penalties.
Romanowski’s lawsuit says he acted “in good faith.” His San
Francisco-based tax attorney, Emily J. Kingston, did not respond to a request
for comment.
A Connecticut native who played ball at Boston
College, Romanowski long has been a source of controversy. His pro football
career, which ended in 2003, including numerous fights with opponents and even
a teammate, who sued and won money damages. In 2005 Romanowski admitted on CBS
Corp’s 60 Minutes that he had used steroids and human growth
hormones.
He currently is a pitchman for a variety of nutritional and diet products
produced by Nutitrion 53, a company he founded incorporating his football
jersey number. One product, a shake called Lean 1, has drawn criticism from
medical experts who said it could cause heart attacks and bowel cancer.
Romanowski’s website
still promotes it.
Romanowski also has found post-football work appearing in such movies as
“The Longest Yard” and “Get Smart”. His 2005
autobiography, “Romo: My Life on the Edge: Living Dreams and Slaying
Dragons,” published by News Corp. unit William Morrow, became a
best-seller.
According to federal authorities, ClassicStar worked this way: Investors
leased the “reproductive capacity” of specific thoroughbreds. If
the horse gave birth during the lease, the investor would have ownership.
Investors could write off the losses and interest on loans from a ClassicStar
affiliate.
The fraud arose because the affiliate didn’t have the money to make
loans, so there was a lot of phony paperwork. Sometimes, less expensive
quarter-horses were substituted for thoroughbreds. Many investors made no
payments on their loans. Since the IRS considers unpaid loans to be taxable
income, ClassicStar’s promoters arranged to cancel the loans through
fictitious trades with a company said to own coal bed methane gas wells.
ClassicStar filed for bankruptcy in 2007. A trial is scheduled this fall in
Lexington, Ky. on claims by the bankruptcy trustee and other creditors against
100 defendants, including the Plummers, ClassicStar’s parent company,
GeoStar; and a publicly traded affiliate, Gastar Exploration. Many of the
defendants–Romanowski is not among them–have pointed fingers at one
another.
Romanowski is hardly the only pro footballer to run afoul of the IRS.
Earlier this year, star safety Antrel Rolle, then of the Arizona
Cardinals and now of the New
York Giants, sued in Tax Court
to fight a $2.2 million IRS bill. The suit was later withdrawn.
