Friday, January 24, 2003

Rose owes $150,000 in back taxes

Accountant says lien isn't related to earlier troubles

By Robert Anglen
The Cincinnati Enquirer

A decade after serving five months in jail for tax evasion, baseball legend Pete Rose has been hit with federal and state tax liens totaling more than $154,000.

Records show that Mr. Rose, who has been fighting to get reinstated into Major League Baseball and secure his place in the Hall of Fame since being banned for life 13 years ago, now owes the Internal Revenue Service $151,690 for problems with his 1998 income tax filing.

The California Franchise Tax Board also filed a $2,772 lien against Mr. Rose over his 1997 state tax filing, but it was paid off in 2000.

Both liens were filed with the recorder's office in Los Angeles County, where Mr. Rose owns a $1 million condominium.

"We're dealing with this issue," Mr. Rose's accountant, David Stern of Marina Del Rey, Calif., said Thursday. "It is absolutely, 100-percent not related to the stuff that happened in the late '80s and early '90s."

Unlike what happened in 1990, when Mr. Rose pleaded guilty to tax evasion, Mr. Rose has reportedly acknowledged his debt to the IRS and is negotiating repayment terms.

Mr. Stern said the federal lien is separate from the tax problems that landed Mr. Rose in a Marion, Ill., federal prison for five months. He said it is not a result of Mr. Rose failing to report income or trying to cheat on taxes. Rather, he said, Mr. Rose could not pay the total amount owed when he filed his 1998 tax return.

But Mr. Stern could not address the 1997 California lien because he wasn't working for Mr. Rose at the time. He noted that the state has released the lien.

Neither Mr. Rose nor his lawyer, Roger Makley, returned repeated calls.

Mr. Rose's agent, Warren Green, said Thursday that the lien was being dealt with.

"At no time can anyone tell you Pete has avoided or ducked it," he said. "The issue is that the Roses have filed everything in a timely fashion."

Mr. Green said Mr. Rose is now in a very sensitive position as baseball considers rescinding its 1989 ban.

Mr. Rose appears closer than ever to being reinstated since his ban in 1989 for allegedly using bookies to bet on sporting events while manager of the Cincinnati Reds. In November, Mr. Rose met with league officials in Milwaukee. And three of his friends told the Enquirer this week that Mr. Rose is ready to admit that he bet on baseball games in exchange for full reinstatement.

Despite bookie sheets, phone logs and statements by former associates saying that Mr. Rose bet on baseball - sometimes from the Reds' own ballpark - he has adamantly denied the accusations for years. Baseball commissioner Bud Selig said the ban might be lifted only if Mr. Rose admits that he bet on baseball, apologizes for it and agrees to serve probation.

Baseball has demanded that Mr. Rose clean up his life and change the behavior that got him kicked out of the sport.

Major League Baseball spokesman Rich Levin would not talk directly about the tax lien.

"We're aware of a lot of things about Pete, some of which may be debts," Mr. Levin said. "But we won't discuss what we know at this time."

In addition to the five months in prison, Mr. Rose also served three months in a halfway house, paid a $51,000 fine, did 1,000 hours of community service and was forced to repay $366,043 in back taxes, penalties and interest.

He pleaded guilty to underpaying his income tax by $162,000 from 1984 to 1987. He admitted earning $350,000 in unreported income from gambling, autographs, personal appearances and the sale of memorabilia.

Throughout the 1990s, federal investigators cracked down on several baseball legends for not reporting income from baseball card shows, publicity events, autograph signings and memorabilia shows that have became million-dollar businesses.

Among those caught were Hall of Famers Duke Snider of the Brooklyn and Los Angeles Dodgers and Willie McCovey of the San Francisco Giants, both of whom pleaded guilty to tax evasion.

Former New York Mets outfielder Darryl Strawberry pleaded guilty to failing to pay between $75,000 and $120,000 in taxes between 1986 and 1990. Mr. Strawberry was given six months home confinement and ordered to pay $350,000 in back taxes and penalties.

Friends and business associates of Mr. Rose say he still makes the majority of his income from appearances at baseball card shows and autographed merchandising contracts.

"That is how he makes his living today, most of it anyway," said Steve Wolter, owner of Sports Investments Inc. in Montgomery. "It is his primary source of income. He makes $20,000-$30,000 for a three-hour show."

Mr. Rose, who broke Ty Cobb's career record for hits, might have been the first unanimous selection to the Hall of Fame in Cooperstown, N.Y., had he not gotten in trouble over his gambling. The Cincinnati native broke in with the Reds in 1963, went to Philadelphia as a free agent in 1979. He returned to Cincinnati in August 1984 and managed the Reds until he was banned.

Mr. Wolter, who knows Mr. Rose and markets signed memorabilia, said the demand for Pete Rose merchandise has never been higher.

"It's the best. It's better than any other Reds player and better than a lot of national figures," he said. "The vast majority of his appearances are at card shows. ... His line is almost always the longest one."

But Mr. Wolter also said that Mr. Rose has recently signed a lucrative contract with a memorabilia dealer that has offices in Colorado and Florida.

On the Pete Rose Web site, www., people are invited to request guest appearances via e-mail. "Pete Rose is available to appear at many different types of events including keynote speeches, cocktail parties, golf outings and many more." A questionnaire indicates a price quote will be given over the phone.

The federal lien was filed against Mr. Rose in 2000. Records with the Los Angeles County recorder's office show that the amount of the lien has not decreased since it was filed.

The lien is attached to any property Mr. Rose owns in Los Angeles County and makes it virtually impossible for him to sell his house without first paying off the debt.

Charles Cain, vice president of Land America, which handles thousands of title transactions in Greater Cincinnati, explains that this type of lien is the easiest way for the state and the IRS to recover back taxes.

"Typically, the IRS is pretty reasonable," he said. "I've had IRS agents attend closings, pick up their checks and then sign a release for the lien."

Chances are, if you have ever bought a house or property, a title company has researched that property to check for liens filed against it. Mr. Cain says it is one of the first things title agents check during record searches that accompany most property sales.

When liens are found, banks won't usually lend money until they are released. If a buyer acquires property with a lien attached to it, the liens don't go away. Mr. Cain said he has seen cases where the IRS has forced new buyers to deal with liens on property they had just paid for.

Liens, like the one Mr. Rose faces, are not specific to a piece of property. But the IRS - or any other agency that is owed money - can file a lawsuit and obtain a judgment in court that would result in a lien being placed on an individual property.

"We could go to the court and get a judgment against him and the property," said IRS Special Agent Ross Brown, adding that privacy laws prevent him from speaking specifically about Mr. Rose. "But if we did that, we would be in court all the time. This is the best of both worlds. We get the money the best way we can."

He said the lien against Mr. Rose is the most common type his agency files.

"We file everywhere we think a person is going to operate," he said. "The lien is attached to a person so that if he sells any (property) in the county, we can get what is owed."

He said it likely took two years for the lien to get filed against Mr. Rose because the IRS has an 18-month backlog.

"We are behind," Mr. Brown said. "But we always catch up."

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