Saturday, February 5, 2011

First Sentencing in Offshore Case that Went to Trial (2/5/11)

Maricio Cohen Assor and Leon Cohen-Levy, previously blogged here, were sentenced yesterday. I include below links to the SD FL USAO press release and some articles, but here are the bullet points I found interesting:
1. Each was convicted of one count of conspiracy (Klein conspiracy) under 18 USC 371 and 2 counts of filing false tax returns under 26 USC 7212.  The maximum permissible sentence for those counts of conviction was 11 years each.

2. Each received 10 years incarceration (mitigated only if they qualify for the rather minimal good time benefit).

3. Restitution was imposed in the amounts of $9,379,849 and $7,761,959, respectively. I presume that the restitution in each case was the amount of the sentencing tax loss but the articles I have read do not clarify that point, but I think in this context that is fair conjecture (maybe not correct conjecture but fair).  Restitution was not permitted for the tax crimes but was permitted for the conspiracy count under Title 18.
4. Each was fined $100,000.

5. In terms of the key sentencing factors (including Guideline factors) that apparently prompted the lengthy sentences were:
a. The large tax loss, which is the key determinant under the Tax Table in S.G. 2T4.

b. Offshore accounts and entities are the quintessential sophisticated means in S.G. 2T1.1(b)(2).

c. The judge found that they perjured themselves at trial, thus obstructing justice under S.G. 3C1.1. See my prior blog "My Lawyer Did Not Advise Me of the Consequences of My Perjuring Myself in My Defense." At the sentencing, the judge also reportedly found that the defendants suborned perjury in a New York proceeding and directed or encouraged others to testify false or make false statements in a federal investigation. No acceptance of responsibility downward adjustment under S.G. 3E1.1.

d. No apparent contrition at sentencing. Government play on the need to set example (more below, and see S.G. 2T1, Introductory Commentary "Because of the limited number of criminal tax prosecutions relative to the estimated incidence of such violations, deterring others from violating the tax laws is a primary consideration underlying these guidelines. Recognition that the sentence for a criminal tax case will be commensurate with the gravity of the offense should act as a deterrent to would-be violators."

e. The defendants had typical toys of the rich and puerile -- expensive homes, expensive cars, and other expensive items, including a helicopter.

f. The defendants also stole and used the identities of unwitting employees and relatives to open and operate accounts using their names.
g. There seem to have been no material positive factors going for the defendants.

h. According to the prosecutors, "The defendants have maintained the fiction that they are penniless and not obligated to pay United States taxes."

i. I would like to make one editorial comment here about the defendants' choice to testify at trial. That testimony permitted the sentencing judge to find that they had perjured themselves and likely was a material factor in the guilty verdict. With the other negative factors in the case, one has to wonder what the logic of having them testify was. Of course, it is not uncommon that the Government's evidence in the case in chief is so overwhelming that conviction is certain unless the defendant testifies and hopes for the jury to like and believe him, particularly when the crux of the case turns upon whether the defendant intended to violate a legal duty actually known to him.
6. Misc.
a. The named offshore bank involved is HSBC's Swiss affiliate.
b.  I did not see a report on this, but presumably they will get credit against the sentence for time served -- they have been held since April.
7. Soundbites: 
a. The Government sound bites:

“The IRS is vigorously pursuing unreported income in hidden offshore accounts. We urge citizens to consider whether tax fraud is worth the price of going to jail. The smart choice is to use the IRS voluntary disclosure program to get right with the U.S. government.”

“This case is important, both nationally and internationally,” prosecutor Mark Daly told the judge. “This will send a message to the wealthy -- they can no longer hide behind the impenetrable wall of Swiss bank secrecy.”  
b. Defense:  
The lawyer for the father, age 77, said: “I think 10 years essentially is a death sentence.”  [I think she perhaps meant life sentence, but the use of death plays better as a sound bite -- e.g., the death tax.]
c. The Press :
From Forbes Blog: "Here’s news that will make you report every last dime of income, and come clean if you have an offshore bank account, say in Switzerland."
I will update my spreadsheet, hopefully by Monday, to include these convictions and some analyses based on sentencing results for convictions by plea and by guilty verdict.

USAO SDFL Press Release
Bloomberg Report
Forbes Blog by Ashlea Ebeling


  1. Rich and puerile indeed! And of course consumable items like cars and bijoux are classic methods of spending otherwise unreported income. This has worked for a long time in Greece. May we gather from the above that they do not intend to pay up, and, if so, what happens? If they are in for the max anyway, what incentive do they have?

  2. Harshest sentence thus far of all the recent offshore account cases. The prior cases had probation, home detention, etc. These defendants did not fare as well, no doubt because of the factors that Jack listed above.

  3. Am I correct that restitution in the criminal case is treated as an offset or credit in the civil case? A back of the envelope calculation suggests the substantial restorative amount would be grossly inadequate to compensate the IRS for taxes payable by the defendants, taking into account the 75% fraud penalty at least.

    Good post Jack.

  4. Asher,

    Given the sentencing factors that I could identify, I wonder whether DOJ Tax would have been willing to offer its standard plea deal (1 count of 7206(1) or FBAR). At least that has been the standard to date.

    In these defendants case, the sentences were far out of what to what people were getting who took the plea deal. But then, the facts were a lot more egregious -- so much so that DOJ Tax might not have been willing to offer that standard plea deal. And, if DOJ Tax would have insisted on 2 counts, likely one would have been conspiracy, so the minimal possible plea deal would have been 8 years max (5 for conspiracy and 3 for tax perjury). But, even so, with acceptance of responsibility and contrition (real contrition if they could muster it up), they probably would have gotten a sentence much lower than 8 years. They paid a lot to go to trial.


  5. Anonymous,

    My understanding and experience is that the restitution is applied to tax dollars, so long as the restitution is for the tax dollars. In a pure tax case (even with Title 18 charges for the tax conduct), the victim is the IRS and the quantum of the loss is the tax liability, so these defendants will be given credit. Note that I assumed that the restitution amount was the same as the sentencing tax loss amount.



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