Friday, November 18, 2011

HSBC Indian Client Indicted (11/18/11)

Ashvin Desai of San Diego has been indicted various counts related to offshore accounts.

Here are the key bullet points:

Taxpayer: Ashvin Desai
Bank : HSBC
Counts: Evasion (7201) - 3 counts, Aiding and Assisting (7206(2)) - 2 counts, and FBAR - 3 counts
Entities: ? (This is not included in the DOJ Tax press release; but it is indicated that he held the account in the name of one of his children which, perhaps, served the same function to disguise the real owner)
Maximum incarceration period: 552 months *
Tax Loss: ? (unknown, but the amount of unreported interest income for Desai for three years is $1,306,810 and interest income for children for whom he prepared false returns for three years is $189,000)
Amount in Account: $8.8 million (2009)
Court: SD CA
Judge: ?

The DOJ Tax press release is here; the indictment is here.

* The amount is high because the press release states that each FBAR count carries a maximum penalty of 10 years. Normally, the maximum FBAR penalty is 5 years. Section 5322(a). However, an FBAR violation while "violating another law of the United States or as part of a pattern of illegal activity involving more than $100,000 in a 12 month period" is subject to a 10 year penalty. Presumably, that is what the indictment (which I have not yet seen) alleges here. Section 5322(b).  (Note to readers, if anyone has the indictment, I would appreciate receiving a copy.)  Here is my latest attempt to explain how this "double up" provision works:
Although a case might be made that the disjunctives in the double-up statutory text might catch the prototypical tax crime or the failure to file FBARs involving foreign accounts exceeding $100,000, anecdotal evidence implies that the Government and courts do not apply the statute to cover such conduct. In the criminal convictions to the date of this article arising from the Government’s offshore financial account initiative commencing with the UBS onslaught in 2009, several defendants have pled to FBAR violations. In those cases which have been sentenced to date, all parties involved in the process – the Government, the defendant, the Probation Office and the court – seem to have acted on the assumption that the five year criminal penalty applied. Of course, in those cases, it seems clear that the courts were not going to actually impose penalties beyond the undoubled penalties, so these anecdotal instances may not be true indicators of whether the doubled penalties could apply to an extreme, but prototypical, tax crime. Finally, a word of caution. Similar language on the double up is contained in S.G. 3S1 which is the Sentencing Guideline applying to FBAR criminal violations.
Now, I will have to say that it is unlikely that this particular defendant will get even close to the undoubled FBAR penalties, so perhaps the issue is moot.


  1. This is the 4th HSBC client. 3 of whom had more
    than 8million parked in HSBC India.

  2. Look through the indictment, in particular 2 and 3 regarding obligation on Schedule B and TD F 90-22.

    The indictment was misleading by using US citizen instead of US taxpayer.

    This might not be so significant for US citizens, but it meant a lot for immigrants who often pay much attention on their immigration status which is totally irrelevant with their status as taxpayers.

    As a legal document, DOJ should have done better job to use US taxpayers in all the indictment on tax related crime.

  3. Actually, ij, to be technically correct, the DOJ probably should have used "US Person", as that seems to be the all encompassing IRS legal terminology. Of course, my wife, a US Greencard holder didn't realize that she was a "US Person", so maybe the generic "US Tax payer", as you suggest, would be better. She could identify with that better.


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