Joe Francis Pleads Not Guilty to Tax Dodging

Mon., Jul. 21, 2008 12:12 PM PDT by Josh Grossberg

Dimitrios Kambouris/WireImage.com

The taxman cometh for Joe Francis.

The Girls Gone Wild mastermind pleaded not guilty this morning to two felony tax-evasion charges in federal court in Los Angeles.

Francis, 35, is accused of unlawfully deducting more than $20 million in bogus business expenses on his 2002 and 2003 corporate tax returns, according to Thom Mrozek, spokesman for the U.S. Attorney's Office.

The titillation tycoon, who has maintained his innocence and called the charges part of a witch hunt, is tentatively scheduled for trial Sept. 16.

"We're going to win!" Frances yelled to reporters before entering court.

If convicted, Francis faces a possible sentence of 10 years in federal prison and $500,000 in fines, although he would more likely receive a lesser punishment.

Following an IRS investigation, Francis was initially indicted last year by a federal grand jury in Reno, Nev., on multiple counts of bribery and tax evasion. After spending nearly a year in the slammer awaiting trial, Francis won a key victory and was granted a change of venue in May. The case was relocated to L.A., and he was released on $1.5 million bail.

He is due back in court this afternoon for matters concerning his release.

"We're not seeking to have him held without bond, because he's got the money," said Mrozek. "The issue is what terms and conditions will restrict him, like travel and things like that."

Francis' lawyer, Robert Bernhoft, said the charges were bogus and the case was spurred by a disgruntled former employee, an unidentified CPA.

"[The allegations are] about an accountant who thinks he should be rewarded for his own mistakes, mistakes that will cost Joe milions of dollars," the attorney said in advance of the arraignment.

Bernhoft is best known for helping Wesley Snipes win an acquittal on some charges in his tax-dodging case earlier this year.

"Many wrongly assumed Wes Snipes was guilty of the felony charges against him," said Berhoft. "When we raised various facts for Wes during his trial, the local press said we were crazy. The jury heard the same facts and acquitted Wes of all felony charges. I challenge those in L.A. who presumed Joe's guilt on these felony charges to stick around and look at the actual facts of Joe's case. It will surprise and shock many."

According to the indictment, Francis deducted more than $20 million in bogus business expenses on his companies' 2002 and 2003 corporate income tax returns. One of his companies is the Santa Monica-based Mantra.

Prosecutors also allege that Francis transferred $15 million from an offshore bank account to a California brokerage account in the name of a Cayman Islands company under his control.

Other alleged illegal deductions include $3.78 million used to build a home in Mexico that was listed as a business expense, $10.4 million in bogus consulting services and a $500,000 phony insurance claim.