Saturday, November 7, 2009

Another UBS Client is Sentenced

Press reports note that another UBS client was sentenced on 11/6. The highlights from the first I have seen, a Bloomberg report here.

1. Guts of the Guilty Plea (DOJ Tax Press Release here): The guilty plea was a bare bones plea to a single count of filing false income tax return (§ 7206(1), with a maximum possible sentence of 3 years (less good time credit of about 15%). The details which are often seen in plea agreements were left to flesh out in the sentencing process.

2. Key Sentencing Factors as Reported; (i) taxes evaded apparently "less than $26,000 for 2001-2007 (so why'd this guy do it???); (ii) $1.89 million FBAR penalty (this amount may include the civil tax penalty which, in any event on the numbers report would have been around $19,500 (does require accrual of interest)); and (iii) contrition for having done it (subtext for having been caught).

3. Sentence: 2 months of home incarceration; 150 (about 5 months) days home confinement; 215 days probation (about 7 months).

4. Leniency. Prosecutors sought leniency because of substantial assistance. I have not seen the prosecutors' motion, but will post further when and if I see it. The article does report that publicity about his case (presumably his guilty plea) helped spur more than 7,500 taxpayers to join the voluntary disclosure program that ended 10/15/2009. (As I have mentioned before, counsel in all criminal cases should encourage the Government to publicize the indictment, conviction and sentence so that this downward sentencing factor may be in play).

5. Judge's comments about offshore accounts:
“I think the public has become weary about people with all the trappings of success becoming involved in tax evasion,” said U.S. District Judge James Cohn in federal court in Fort Lauderdale, Florida. “Why does one set up offshore banking accounts? I’m sorry, it’s to set up to hide money and deceive the government.”
6. Collateral Consequences. Moran is a yacht broker. The article reports that, according to this lawyer, he will lose his Florida license to sell new yachts. [JAT tacky comment: Perhaps he will take that business offshore, which would not seem to be too difficult for yacht sales.] Tax crimes practitioners and students are aware that there may be collateral consequences of guilty pleas. One of the problems that surfaced in the voluntary disclosure initiative was whether such collateral consequences might attend entering the program; even though there will be no conviction, the required cooperation may require a taxpayer to admit facts from which a crime may be inferred (even if perhaps not a direct admission).

JAT additional comment: the lenient sentencing relative to other tax crimes continues. See my question to readers here.


  1. But according to the Bloomberg article, he did a voluntary disclosure....??!

  2. Anonymous:

    The article says: "Moran, who tried to disclose his account to the IRS on March 17, couldn’t avoid prosecution because the agency already knew of his account, his lawyers said in court papers." I have not read the filing the article is referring to, but I assume that the March 17 is 2009. The criminal information (indictment substitute) and guilty plea were announced on April 17, 2009. So the Government not only had his name but was likely already significantly into an investigation of him by the time he attempted the voluntary disclosure. Indeed, an question I have is whether his attempt at voluntary disclosure this close to the information was an attempt by him (and his lawyers) to seize victory from defeat (i.e., they knew his name had been turned over and had nothing to lose by the attempting a "voluntary" disclosure). If any readers know the answer to the question, I would appreciate hearing it and suspect the other readers would also.


    Jack Townsend

  3. So, if someone does a voluntary disclosure that is untimely... and there is no benefit in terms of the charges or sentencing, that means that the only thing the client has achieved is massive self-incrimination by serving up a case on a silver platter. Shouldn't this be a violation of Fifth Amendment rights? Or even entrapment if the government has someone's name but lets them move forward with the voluntary disclosure process to supply incriminating evidence without alerting them or rendering the voluntary disclosure inadmissible as evidence?

  4. Anonymous:

    I don't know precisely what occurred when Moran attempted his voluntary disclosure. However, the normal song and dance routine for the noisy voluntary disclosure is to piecemeal the information so that the process can be stopped at the earliest indication of some limiting factor. In Moran's case, the attorney handling the noisy disclosure should not have gotten past providing the name before it became evident that Moran would not qualify. (By the way, this piecemeal name preclearance was the practice most attorneys used during the noisy disclosure under the special program that ended 10/15/2009.)

    Now, if Moran and his attorneys knew that Moran was already in the Government's crosshairs and that the Government had it's case virtually made on the disclosures from UBS and whatever else they knew, then a run at a voluntary disclosure might not be a bad strategy. It would not hurt to ask. It might at least be something one could offer up to the jury. It is similar to the decision taxpayers and their attorneys make as to whether to file amended returns after a criminal tax investigation has started. It is true that the amended returns can be admission as to certain key elements (or components of elements) of tax crimes, but it is also true that the filing of amended returns might be consistent with an innocent mistake (willfulness is still a key element in most tax crimes) that the taxpayer set about to correct when he or she learned about it.

    Finally, Moran may have been well-served by being proactive after the client and the attorneys knew Moran was in the crosshairs because they may have forced his case to the forefront when the Government was offering sweet deals (with promises of requests for leniency) to promote its offshore voluntary disclosure initiative. Had Moran not been in the early wave, he may have found himself in a later wave when the Government may be less charitably inclined. It will be interesting to see the pleas and sentences that are in the next wave (post-10/15). I do note that the sentencing judge in Moran was clearly irritated. Note that the sentence imposed was very light, but that might have been a reflection that the tax loss number was so low ($26,000) which produces a low sentencing (even with sophisticated means).


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