Their reaction suggested the IRS was convinced Willie and his gypsy pirates had ferreted away their treasure in secret, faraway places. Whether it was for the show of cameras they’d brought along or out of pure ignorance, when they found so little of precious value at Willie World, they carted off his framed gold record and platinum records, recording tapes from the studio, photographs from Lana’s office, and his golf carts—anything the agents could put a price tag on—and padlocked the recording studio and pro shop. Other assets and holdings were seized in Hawaii, Washington state, California, and Alabama. The Willie Nelson General Store and Museum in Nashville, Tennessee, was chained until Frank and Jeanie Oakley convinced tax agents they really were the owners.
The raid was the cherry on the top of a long, drawn-out pissing match between Willie and the feds. What began as a tax bill of $1.6 million, presented in October 1984 for the period between 1972 and 1978, and a second bill of $9.4 million for 1979 to 1983, had dropped to a charge of $6.5 million the previous May, when a U.S. tax court ordered Willie to pay up. But by the time of the raid five months later, penalties and interest had ballooned the debt to $16.7 million.
The initial $1.6 million tab tied to the latest go-round led Willie to file a lawsuit against Neil Reshen for $12.7 million for alleged mismanagement of his finances. Reshen countersued, and the case was settled out of court, with the court documents sealed.
“What happened, basically, in broad strokes, is that from 1974 to 1977, extensions were filed but no taxes were paid, so the IRS put a lien on Willie’s properties,” explained Mark Rothbaum. After Neil Reshen had been given his walking papers in 1978, Austin attorney Terry Bray introduced Willie to Dallas representatives of the Price Waterhouse accounting firm, which took over Willie’s books.
While Willie was in the middle of a two-week engagement at Caesar’s Palace in Las Vegas, Mark Rothbaum called a meeting with Willie and Paul and accountants from Price Waterhouse. A creative tax deferment revolving around forward contracts in federal mortgage securities with First Western Government Securities and a cattle-feeding operation in Texas was proposed. Similar shelters were being set up to reduce taxes of other clients in high tax brackets. Willie and Connie signed the agreement and for two years participated in the tax shelter.
Unfortunately, the cattle-feeding operation coincided with the collapse of Texas’s economy and lost $1.6 million, and the IRS ultimately disallowed Willie’s deductions for both ventures on his tax returns for 1980, 1981, and 1982, when tens of millions were pouring in.
“Price Waterhouse had given him two great investments where you put up the money and you get credited for investing something like fourteen times as much as you put in,” said Neil Reshen, Willie’s former manager. “It was a leverage deal. You put in $10,000 and get credited for investing $140,000. Willie got Price Waterhouse to get him in on two of these investment deals. The IRS disallowed those investments that were supposed to wipe out [taxes owed]. So Willie was suddenly down ten to twelve times what he had owed the IRS. You put in a couple hundred thousand dollars in what you think is a secure profit-sharing investment that’s been recommended by the biggest accounting firm in the country, you have nothing to worry about until somebody kicks you out of bed and says you just lost all your money.”
Willie’s lawyers asked for more time for the $45 million lawsuit he’d filed earlier in 1990 against Price Waterhouse in Dallas, accusing them of recommending bad tax shelters, to go through the courts, but the clock ran out on the IRS’s patience. “He never hired us as investment advisers,” a spokesman for the Dallas office of Price Waterhouse curtly responded. They were just accountants.
The IRS had cited him almost every year since the late 1960s for failure to pay sufficient income and payroll taxes, although the debt never exceeded $8,000 and Willie always paid the bill. Early on, paying taxes had been theoretical, since his income was too small to tax. The IRS always let him know when he was making enough.
It was a rude awakening, at least for most people. On the surface, Willie seemed unruffled. He could have declared bankruptcy and made the problem far more manageable, but that would have been too easy.
Johnny Gimble sat next to Willie during a break while working a gig and asked, “This IRS thing. You worried?”
“Naw,” Willie responded. “Are you?”
Gimble nodded somberly.
“I guess I should be too,” said Willie.
But he wasn’t. He was still trying to laugh it all off. He told the writer Bill Minutaglio, “I want everybody to know I’m all right. I still double-bogey a lot.” He confided to Ed Bradley of CBS News that he was more worried about the IRS than he was about what he owed. “I wonder what kind of guy is running that place to let a guy like me get that far in debt.”
Waylon viewed Willie’s shrug-and-yawn reaction as the same ol’ same ol’. “If anybody doesn’t give a shit, it’s him,” Waylon said. “He’s gonna be all right because he’s an original free spirit.” But almost $17 million?
“That’s not a lot if you say it real fast,” Willie told Waylon with a glint in his eye. He was circumspect about his situation. “There were enough reasons for them to come down on me,” he said. “They needed headlines to put the fear of God in everybody.”
On the other hand, Willie didn’t need more trouble. He had plenty of hassles to deal with. He was divorced from Connie (ironically, Amy Irving had divorced Steven Spielberg in 1989 and received $100 million in the settlement). Their daughter Paula was in rehab. His first wife, Martha, had passed away, as had Connie’s mother. Connie’s brother was sick and dying from AIDS. No way was this irritant going to get to him.
Willie Nelson became the punch line for jokes told by comedians on late-night television as his troubles worked their way into the public eye. According to the hype, Willie’s lavish lifestyle and white-trash ways had caught up with him. But he’d given up his Lear Jet long ago. “It was fun for a while, then it got old,” he said. “It was very expensive. Then when I missed two dates because of the weather, I said this ain’t working. Anything is better than flying. There’s no security. You’re flying into weather. At least if you’re on the road, you can dodge the weather. But if you’re in a plane on the runway in Austin and you’ve got a gig in Kansas City and the weather in Kansas City is not good, they won’t let you leave Austin. You end up sitting in Austin and missing the gig in Kansas City. I don’t blame the guys who fly wherever they want anytime. But if you’re going to do one-nighters, it’s not a good idea. If you hadn’t ever had a plane and wanted one, you got one. And you realized it was like having a boat.” There were always reasons to pour more money into it.
On the day Honeysuckle Rose rolled up to the IRS regional office in Austin so Willie could begin negotiations with the taxing authority, he was besieged by employees asking for autographs or for Willie to pose for a photograph with them. On the second day of negotiations, he was shunned. A memo had been issued: No IRS employee was to speak to or request an autograph from Willie Nelson while he was in the building. On the third day, Willie arrived early, stepped off the bus, and plopped down in a folding chair outside the bus, where he read the newspaper until employees drifted outside on their breaks to hang with him in the parking lot.
The IRS held several auctions of seized property to recoup some of the $16.7 million owed. The first auction in January was held at the former Pedernales Country Club. The recording studio was sold to a consortium headed by Willie’s nephew Freddy Fletcher. A friend from whom the band leased their buses bought the studio’s Bösendorfer piano for $18,500 and gave it back. Willie’s fishing camp just down the road from the Pedernales Country Club sold for $86,100. Frank and Jeanie Oakley, who ran the Willie Nelson General Store in Nashville, bought several framed gold records and some Indian headdresses for the souvenir shop and museum. No bid for the golf course and the rest of the Pedernales Country Club was high enough to be accepted.
Ex-wife Connie Nelson was allowed to ke
ep the family ranch in Colorado. Willie managed to hold on to the home in Abbott where he was born, his vacation home on the Hawaii island of Maui, two buses, band equipment, some of the condos, and his beloved battered Martin guitar, Trigger.
Following the auction of his ranch in San Marcos, a third auction was held in March back at the golf course. Coach Darrell K Royal, with the backing of his business partner, Jim Bob Moffett, the developer of Barton Creek Resort and designated bad guy in Austin’s environmental wars, purchased the country club and golf course for $117,350, only to have the IRS buy it back. Higher-ups at the IRS didn’t like hearing Coach was holding it for Willie and refunded Coach’s money plus 6 percent interest, insisting they belatedly received higher offers. The golf course and country club were sold again in May for $230,000, still well under the IRS minimum asking price of $575,478.16. The buyer this time was James Noryian of Investors International, an Austin investment group. Asked if he intended to sell the club back to Willie, as Coach said he’d intended to do, Noryian replied, “Absolutely not.”
For eight months, band and crew were put on hold as his advisers tried to sift through the mess. For the first time ever, doubt crept into the Family.
But for a gambler wise to the fact that his luck should’ve run out a long time ago, Willie’s reaction was succinct and shrewd. If he was broke, he vowed to do what he always did—play the clubs. He figured he could play every club he knew on the right side of I-35 from Laredo all the way to Canada, then turn around and head south, playing all the clubs on the other side of the highway for the rest of his life.
A partial solution to Willie’s tax problems was being hatched by his lawyers and him. Twenty-five audio tracks that had been seized from Pedernales Studio were being assembled into a two-disc record album. The tracks, valued at $2 million, would be sold on television with all profits going straight to the IRS, compliments of its coproducer WN Music. The arrangement marked the first time the Internal Revenue Service partnered in a record deal.
“The whole thing was very unique and very complicated,” Austin attorney Mike Tolleson explained. “Willie and Larry [Trader, the album’s executive producer] called me to come out and talk about setting up a record company to handle sales of the recordings. [Producer] Bob Johnston wanted to be involved as the guy to pull out the old recordings for record release. There was need for mixing and mastering. There were questions about Sony’s rights and ownership of the masters. There was the question of IRS’s rights to the masters under their lien.”
Nashville publicist Evelyn Shriver was hired to generate interest in the album. “Willie was in a very vulnerable position. People were throwing money at Willie onstage and he couldn’t deal with that. He said, ‘If people feel so strongly they want to help me, then let them buy this record and make this music for sale. That way they don’t have to feel like they need to throw me tens and twenties.’ That was the whole theory behind it.”
Shriver observed that although Willie appeared unflappable on the outside, “I could tell it devastated him. His whole life was under scrutiny by the IRS.”
IRS Tapes: Who’ll Buy My Memories? released by Sony Special Products, was one of Willie’s most profound artistic expressions on record. It was just him and his guitar, singing twenty-five of some of the saddest songs he’d ever written, beginning with the prophetic “Who’ll Buy My Memories?” followed by “Jimmy’s Road,” his protest song about the senselessness of war (written twenty-one years earlier but timed perfectly with an ongoing war in Iraq). A string of classics followed—“I Still Can’t Believe You’re Gone,” “Yesterday’s Wine,” “It’s Not Supposed to Be That Way,” “I’d Rather You Didn’t Love Me,” “Country Willie,” “Permanently Lonely,” “Home Motel,” “Lonely Mansion,” “Summer of Roses/December Day,” “Remember the Good Times,” “Wake Me When It’s Over,” and the philosophical chestnut he wrote with Hank Cochran, “What Can You Do to Me Now?”
The recording was sparer than Red Headed Stranger. Of all the sessions he was involved in from 1981 to 1989, the one that became The IRS Tapes was engineer Bobby Arnold’s favorite. “It was in December 1984 [when it was recorded] and Willie sat down in the studio with Coach Royal, Lana, Larry, and Jody, on this cold, cold day. It was just Willie, his voice, and his guitar. I’ll never forget that. It was like a private concert.
“When it was released, Sony Records had to pay Willie a bunch of money for the recording and Willie gave it away to everybody who was involved in it. So out of nowhere I get a check for several thousand dollars right around the time we were having our first child. He said, ‘This is money used to produce this album. You are the people who produced this album—here’s your money.’”
Good-time Willie had the blues, and it showed on the album. He had the gift of writing words in lyrical rhyme set to melody in three-minute chunks that revealed his emotions. They were songs of hurting, pain, breaking up, and love lost, haunted memories of lonely nights on the Jacksboro and Hempstead highways, of struggling to stay one step ahead of whatever threatened to pull him down, of trying to please strangers in beer joints when headed nowhere but down while an angry wife and crying kids waited for him at home, if he managed to make it home.
The packaging was as spare as the music, in marked contrast to most “As sold on TV” albums. The cover was a photograph of Willie sporting a cowboy hat, white beard, and a smile, his long red tresses falling on an open jacket revealing a black high-neck T-shirt with white letters that spelled “Shit Happens.”
He wrote a note in his loopy cursive script, little changed over the course of fifty years:
Thanks for adding these songs to your collection. These are all original songs from thru the years with just me and my guitar. I hope you enjoy them. Thanks again for being my fan and friend.
Love
Willie Nelson
On the opposite side of the centerfold, song titles were imposed on a black-and-white photograph of Willie in jeans and boots, sitting down, leaning against a cedar post topped by a rusty bucket, looking pensive perhaps, but not necessarily worried.
On the back cover, the recordings were identified as coming from “The Willie Nelson/Internal Revenue Service Tape Library.”
Mike Tolleson, a lawyer from the old Armadillo World Headquarters, had introduced Willie to the Television Group, a business with extensive experience in television production and time buys. TVG paid Willie (meaning the IRS) an advance to market the tapes, along with a second album, The Hungry Years, of Willie’s earliest recordings. A telemarketing operation was set up in Nashville with a bank of operators to process credit cards, and a fulfillment center to process and ship orders. A television commercial was produced and legal clearances were negotiated.
Four months of saturation advertising on television, mostly late at night, generated sales of 160,000 copies, far short of the four million figure that was needed to erase Willie’s debt. But Willie feigned hope. “You got to be positive,” he said. “It’s not unheard of. I could sell three million albums. I’ve done it before.” The problem was The IRS Tapes wasn’t Stardust or Red Headed Stranger. The album was eventually released through traditional distribution channels and retail stores. But the idea of salvation through album sales pretty much fell apart when the Television Group got into its own financial straits and declared bankruptcy.
“I spent many hours, days, and weeks dealing with the aftermath of that, including processing all the orders that had come in but were now in the pipeline waiting for fulfillment,” attorney Mike Tolleson said. “There was inventory in Nashville, orders unfulfilled due to lack of payment to the fulfillment house, money tied up in bankruptcy, and Willie customers wanting their records. Meanwhile, the IRS wanted answers, and the TVG business had claims and creditors lining up.” Eventually, customers either got their record or got their money back.
The album and the auctions of Willie’s properties generated about $3.6 million, with Willie reportedly promising to pay another $5.4 m
illion in the coming years, on top of the nearly $8 million he had already paid for the periods in question. A settlement with Price Waterhouse was reached out of the public eye. According to several sources, the balance Willie owed the feds was taken care of as one of the conditions of the settlement.
In spite of his relatively straightforward attempt to resolve his debt, a perception lingered that Willie was a tax dodger. “None of that was true,” Mark Rothbaum said. “Willie had the option of bankruptcy and chose not to use it. He wasn’t so much stubborn as honest, and he no more believed in setting aside his tax obligations than he did his personal bills. He wasn’t going to choose to use that as an option. So we fought the hard fight, and it was very creative and stressful, and at the same time, it took up so much of our time that music was really all we had.”
The debt was officially settled in 1993. Evelyn Shriver was on the conference call that made it official. “I’d ended up working with quite a few people in that department [at the IRS] and they were all crying. Those people loved Willie too. Everybody’s heart broke for him in that situation. When it came to a resolution everybody could live with, they cried. They were happy because it was over.”
“His stubbornness got him in trouble, but it also got him out of it,” Willie’s cohort Kinky Friedman believed. “He has made the point to me that one of the things he has prided himself in since he was a child was getting into trouble and then getting himself out of it. He’s done it his whole fucking life, and this was trouble. He didn’t do it the easy way and plead bankruptcy—he did it the cowboy way. But in the end, the IRS loved Willie.”
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