The Tax Division has assisted the Internal Revenue Service (IRS) in tracking down tax cheats who use offshore accounts, combating abusive tax shelters, stopping tax defiers and shutting down tax schemes and scams. During FY 2008, the Tax Division also successfully defended refund suits against the United States representing claims of nearly $803 million, and collected, through affirmative litigation, over $178 million. The Division’s budget in that period was less than $93 million.
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Combating Offshore Tax Evasion
The Tax Division has devoted significant resources this past year to combating offshore tax evasion and locating hidden offshore assets. In June 2008, Bradley Birkenfeld pleaded guilty to conspiring with an American billionaire real estate developer, Swiss bankers and his co-defendant, Mario Staggl, to help the developer evade payment of $7.2 million in taxes by assisting in concealing $200 million of assets in Switzerland and Liechtenstein.
In February 2009, the Tax Division, together with the U.S. Attorney’s Office for the Southern District of Florida, entered into an unprecedented deferred prosecution agreement (DPA) with UBS AG, Switzerland’s largest bank. As part of the agreement, UBS agreed to provide the U.S. government with the identities of, and account information for, certain U.S. customers of UBS’s cross-border business. UBS also admitted in the agreement, in great detail, how it had conspired to defraud the United States by impeding the IRS. UBS also agreed to promptly exit its cross-border business with U.S. clients, to provide continuing cooperation with the government’s investigation, and to pay the United States $780 million.
As part of its continuing review of offshore account information received, in April 2009, the Tax Division, together with the U.S. Attorney’s Office for the Southern District of Florida, charged Steven Michael Rubinstein, of Boca Raton, Fla., with filing a false income tax return. According to court records, Rubinstein, a chartered accountant, failed to disclose in his 2007 Form 1040 that he had an interest in, or signature authority over, a financial account at UBS in Switzerland. Additionally, Rubinstein failed to report the income he earned on any UBS Swiss bank accounts. According to court records, from 2001 through 2008, it is alleged that Rubinstein repatriated approximately $3 million into the United States to purchase property and build a personal residence in Boca Raton. Additionally, it is alleged that Rubinstein deposited and sold more than $2 million in South African Krugerrands through his UBS Swiss bank accounts.
The Tax Division is also seeking from UBS approximately 52,000 additional names and account information of United States taxpayers. In February 2009, the Tax Division filed United States v. UBS (S.D. Fla.), a petition to enforce an IRS summons issued to UBS to obtain this information.
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Curbing High-End Tax Shelters
During the past year, the Justice Department and the IRS have continued their civil and criminal enforcement efforts against the promoters and facilitators of abusive tax shelters. Abusive shelters for large corporations and high-income individuals have cost the U.S. Treasury many billions annually, according to Treasury Department estimates. The Tax Division also has had great success in federal court defending the U.S. Treasury against tax shelter-related claims of large companies and individual investors. The Tax Division is currently litigating approximately 94 civil tax shelter cases or groups of cases. Among the successes during the past year in this area are the following:
• In September 2008, attorney Peter Cinquegrani pleaded guilty to conspiracy to commit tax fraud, aiding and abetting tax evasion, and aiding in the submission of false and fraudulent documents to the IRS, in connection with a fraudulent tax shelter called PICO.
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Stopping Tax Defiers
The Tax Defier Initiative, which the Tax Division announced in April 2008, targets persons who attempt to undermine our entire tax system. Tax defier cases traditionally involve individuals who spout rhetoric denying the fundamental validity of the tax laws as an excuse for not paying taxes, while also availing themselves of the benefits and rights that the United States provides to its citizens and residents. The number of tax defier cases referred for investigation or prosecution increased significantly during fiscal year 2008.
The success rate in tax defier prosecutions is very high. Some examples:
Tuesday, April 14, 2009
DOJ Tax Division Promo Piece on 2008 Accomplishments
On April 13, 2008, DOJ Tax issued a self-promotion press release its accomplishements in 2008. Much of the release is related to criminal prosecutions. I excerpt those portions.