Senate Subcommiittee Report Discusses Offshore Account Father-Son Convictions (7/20/12)

I previously reported on the Senate report focusing on alleged money laundering by HSBC.  See Senate Subcommittee to Report on HSBC Money Laundering (7/16/12), here.  The report has many anecdotes of misbehavior, but one relates to a prosecution and conviction we have discussed before.  We noted the prosecution of a father and son team -- Mauricio Cohen Assor and Leon Cohen Levy

My prior blogs on this father-son team are:

• Father-Son Convictions Affirmed (4/21/12), here.
• First Sentencing in Offshore Case that Went to Trial (2/5/11), here.
• More Offshore Account Charges -- Of HSBC (Reputedly) and Recorded Conversations (4/21/10), here.

The Senate Subcommittee's report describes their conduct in more detail as follows (pp. 279-281, footnotes omitted):

Cohen Bearer Share Accounts. Mauricio Cohen Assor and Leon Cohen Levy, father and son, were hotel developers in Miami Beach.1667 On April 14, 2010, both were indicted in Florida on charges of conspiring to commit tax fraud and filing false tax returns.The Justice Department charged that the Cohens had used bearer share corporations and shell companies to help conceal $150 million in assets and $49 million in income from the IRS. Both resided in Miami Beach, Florida.   

The indictment explained that “bearer share corporations are often set up in tax havens to hide the true ownership of assets, because ownership records are not maintained and nominee officers and directors are often used to appear to control the affairs of the corporation.” 

The indictment named two bearer share corporations used by the Cohens to open bank accounts, Blue Ocean Finance Ltd., a Panamanian bearer share corporation, and Whitebury Shipping Time Sharing Ltd., a BVI bearer share company. The Cohens used those bank accounts to conceal their ownership of the assets deposited into them. The indictment also disclosed that, around May 2007, an unnamed international bank asked one of the Cohens to register the shares of Whitebury Shipping and, when the request was refused, the bank closed the account. 

Internal bank documents disclose that HBUS was the unnamed bank that maintained a bearer share account for Whitebury Shipping. April 2007 transcripts of several telephone conversations between Mauricio Cohen and an HBUS banker describe the account, HBUS’ request that he register the bearer shares, and his refusal to do so. According to one of the telephone transcripts, on April 23, 2007, HBUS executive Claude Mandel, the Relationship Manager who handled the bank’s relationship with Mauricio Cohen, apparently agreed to remove Mr. Cohen’s name from the Whitebury account. The next day, Mr. Cohen talked  to Mr. Mandel about replacing Whitebury with another bearer share account. Mr. Mandel offered to convert Whitebury from a BVI to a Bahamian bearer share corporation, but said that the bank no longer opened bearer share accounts. Mr. Cohen protested and told Mr. Mandel that the bank would lose clients and that other banks take bearer share accounts. The telephone transcripts indicate that, on April 25, 2007, Mr. Mandel and Mr. Cohen again discussed Mr.  Cohen’s bearer share accounts. Despite Mr. Mandel’s insisting that his bearer shares would need to be registered, Mr. Cohen convinced Mr. Mandel to check if he could convert Whitebury into a Panamanian bearer share corporation. Mr. Cohen indicated again that he did not want to put names on the shares; when Mr. Mandel said that the shares would need to state the names, Mr. Cohen said: “But, I can’t put that, otherwise I have to declare them in the United States? I can’t do that, I don’t want to declare… otherwise, I have to close the accounts with you and go to Geneva.” 

Minutes from a May 6, 2010 AML Oversight Committee Meeting at HBUS noted that the HBUS Private Bank was providing information on closed bearer share accounts opened by an “ex-client” as part of the investigation of Mauricio Cohen, a former HSBC client. 

In October 2010, the Cohens were convicted after a jury trial, sentenced to ten years in prison, and ordered to pay back taxes, interest, and penalties totaling over $17 million. This example demonstrates the risk of bearer share accounts being used to conceal ownership of assets and commit criminal tax evasion.