Joe Francis Now a Free Man After Judge OKs Plea Deal

U.S. District Judge S. James Otero gave Francis credit for 301 days already served in jail. The plea deal also required him to pay $250,000 in restitution.

Otero accepted the terms of a plea deal between Francis and prosecutors, who struck the deal after learning on the eve of trial that his former accountant had lied to them.

Outside the federal courthouse in downtown Los Angeles, Francis said he has asserted his innocence on the felony charges for two years.

“It’s all over now … I think we won that,” Francis said. “I trusted people who turned out to be crooks.

“It is unfortunate that the IRS and the Department of Justice were duped into squandering so much energy, and more importantly, so much taxpayer money, on coming after me, based on absurd and false accusations by a person who has since confessed to lying and committing crimes against me.”

Francis and his companies Mantra Films Inc. and Sands Media Inc. were indicted on two counts of tax evasion by a federal grand jury in April 2007.

Federal prosecutors claimed Francis reported taxable income for 2002 of $13.9 million and paid $3.5 million in taxes, "when in truth and fact, he then and there knew well and believed that he had omitted additional income," according to the indictment. For 2003, Francis paid $352,000 in taxes on reported taxable income of almost $1.16 million.

The government also claimed that Francis used offshore accounts to conceal income and his companies claimed more than $20 million in phony deductions.

In addition, the government alleged Mantra overstated deductions by including more than $1 million for construction as "false footage" and professional service expenses, and falsely claimed more than $1.9 million as insurance expenses.

The amount Francis underreported, according to the plea — about $563,000 — is far less than the more than $20 million in bogus deductions prosecutors alleged Francis made. The deductions were for a Mexican home where Francis entertained celebrities, a Porsche and other items.

Francis also will acknowledge giving more than $5,000 in goods to a pair of Washoe County, Nev., jail workers in exchange for food. Francis was held at the jail from June 2007 to March 2008.

The plea deal approved Friday was proposed two months ago just weeks before the start of Francis' trial, which included a recent delay after a key government witness, Francis' former accountant, turned over hundreds of previously undisclosed emails.

Francis used the emails as a basis of a suit field at Los Angeles Superior Court against his former accountant, Michael Barrett, and other former key Mantra executives, contending they set up a bogus company and fraudulently billed him for hundreds of thousands of dollars.

Francis claimed that after Barrett resigned in 2004 as the company's chief financial officer he contacted the IRS and falsely accused Francis of tax evasion.

Francis, according to the suit, said that Barrett was "hoping that the IRS would prosecute and incarcerate Francis, thereby removing the possibility" that he would "catch the ongoing theft.”

"While Barrett was secretly trying to get Francis investigated by the Reno [Nev.] division of the IRS to recover his bounty from the mistaken books he previously prepared, provided and vouched for to Francis' tax return preparers, he never disclosed any problem to Francis," the Los Angeles Superior Court suit said.

Barrett's credibility as a witness came into question, with Otero warning prosecutors that Barrett posed problems for them.

Otero noted that Barrett had sought a reward for turning Francis in, even though he may have also committed a crime.

Francis, outside the courthouse, said that he intends to sue the three Mantra execs.

"This is just the tip of the iceberg," Francis said.

David R. Houston, Francis’ attorney, said that he hopes that the government reevaluates the IRS whistleblower program, “which is fraught with the potential for financial manipulation.”

“In this case the government obviously had an itchy trigger finger and when they were presented the opportunity to go after Mr. Francis, they fired without thoroughly investigating the allegations or looking into their star witness’ motives,” Houston said.

“It is unconscionable that the person who prepares a third-party’s tax returns can then seek a financial reward for accusing that party of falsifying those returns. It is like putting the fox in charge of the hen house.”