Tuesday, May 24, 2011

Another UBS Client is Sentenced - 1 Yr Home Detention (5/24/11)

Taxpayer: Harry Abrahamsen
Banks : UBS AG
Entities: Yes
Guilt: By Plea Agreement - FBAR violation (one count)
Incarceration (in months): 0
Home Detention: 1 year
Probation: 3 years (apparently including the home detention)
FBAR penalty: $300,000 +
Fine: ?
Court: D NJ
Judge: Denis Cavanaugh
Age at sentencing: 69

USAO D NJ Press Release

His daughter, Lucille Abrahamsen Jackson, was sentenced yesterday.  See blog on her sentencing here.
The press release raises two questions just off the cuff.

1,  The income taxes, interest and penalties disclousre in the press release appears odd:
Abrahamsen also admitted that he funded the UBS accounts with approximately $1.3 million in false and inflated expenses paid by his pre-press printing business, SJT Imaging, Inc., to a Swiss company. The inflated expenses were then deducted on SJT Imaging, Inc.’s corporate tax returns, which allowed Abrahamsen to under report personal income for the years 1999, 2000, 2001, 2002 and 2003.

* * * *

In addition to the term of probation with home confinement, Judge Cavanaugh ordered Abrahamsen to pay back taxes, interest, and penalties totaling more than $600,000. * * * *
Now, here is my quick and dirty estimate of the taxes involved for these years which presumably would be open because of fraud. The estimated corporate tax would be $455,000 ($1.3MM x .35%), and the estimated individual tax would be 364,000 ($1.3MM x .28). The civil fraud penalty (75%, although for settlement perhaps the IRS would do 20%) and interest on tax and penalty would easily double that amount. Perhaps Abrahamsen had already paid some in, however.

2.  The FBAR penalty disclosed in the press release is curious.  The going FBAR penalty for these types of pleas is 50% of the highest amount in the account.  Somewhere I had an indication that the highest amount in Mr. Abrahamsen's account exceeded $1,000,000 whereas the press release says that he paid an FBAR penalty $300,000+.  I wonder whether the IRS gave some type of credit in the FBAR penalty base for the proceeds that were transferred to his daughter.  The daughter also pled and was sentenced and presumably paid the FBAR penalty on the amounts in her account received from her father.  So it would be double counting -- at least in one sense -- if the amounts that were transferred from the father to the daughter were put in the father's FBAR penalty base.  Does anyone know the answer to that question?  (I have a similar question in a pending OVDI 2011 situation that has not yet been resolved.)

1 comment:

  1. Jack,

    I agree your points... The reduced FBAR penalty must have been in this case on the same money.

    Even in OVDI, the 25% (12.5%, 5%) penalty will be applied once if thre is a transfer between accounts. But the burden of proof of the same source is on taxpayer..

    In this case, the Gov has proved the link between father and daughter which is part of this investigation, so the penalty should be only applied once.


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