The key facts (or, I hope, reasonable projections from the facts) are:
Taxpayer: Dr. Arvind Ahuja, a "prominent neurosurgeon"
Conviction Date: 8/22/12
Banks: HSBC in India; also HSBC account in the Bailiwick of Jersey, a British Crown dependency located in the Channel Islands off the coast of Normandy
Enabler: HSBC India representative in New York
Guilt: Jury Conviction
Count(s) of Conviction: Tax Perjury (Section 7206(1))-one count; FBAR-1 count
Maximum Possible Sentence: 8 years.
Omitted Income: $2.7 million for years 2005 through 2009
Estimated Tax Loss: $900,000 (see discussion below; this is my estimate based on the omitted income; and assuming that the tax loss attributable to the acquitted years will be treated as a tax loss for sentencing purposes; if not, the tax loss for the year involved in the counts of conviction is reported by a commenter below to be $89,000.)
Indicated Sentencing Range: 41-51 months (based on assumption as to the relevant conduct tax loss and without considering good time credit (see discussion below); if the tax loss does not include the years other than the single year for the counts of conviction limiting the tax loss $89,000, the resulting indicated Guidelines range is 27-33 months, which would make a Booker variance down to no material incarceration much more palatable to the sentencing judge and the appellate panel, if appealed; certainly the cosmetics of $89,000 as opposed to $900,000 is significant)
FBAR Penalty: ? [No indication that this has been set; I would expect it to be agreed upon or paid by sentencing and would be 50% of the highest year, in line with the other cases; the defendant likely will want to resolve this issue prior to sentencing, but is not required to do so]
Sentencing Date:; 1/18/13
Court: ED WI
Judge: Charles N. Clevert, Jr. (Wikipedia entry here)
Other Fun Facts:
1. Trial began 8/15/12 and verdict returned 8/22/12; no indication how long the jury deliberated..
2. "Ahuja's accountant testified that Ahuja never disclosed the existence of his offshore accounts during the preparation of his tax returns."
1. The real bottom line sentencing issue is going to be whether Judge Clevert will sentence in line with the propensity to give significant Booker sentencing downward variances even though Dr. Ahuja went to trial. The sentencing guideline number on $2.7 million of omitted income is pretty high. Say, on 2.7 million of omitted income, the tax would be one-third, the tax loss would be $900,000. This would produce a Base Offense Level of 20, with a 2 point sophisticated means upward adjustment of 2. The only other upward adjustment would be for obstruction which could warrant a 2 point upward adjustment. (I have no information that this adjustment would apply, but if the judge thinks that some obstruction occurred in the trial, usually by the defendant's testimony, then it could apply but such obstruction would likely have its more important effect on the judge's willingness to do a Booker downward variance.) Setting aside an obstruction upward adjustment, there would be no acceptance of responsibility downward adjustment. The defendant might qualify for a 5K1 departure if he cooperates in an investigation of HSBC and/or its New York enabler. So, the offense level going to the sentencing hearing is likely 22, which indicates a range of 41-51 months (possible 5.3 to 6.6 months off for good time credit). Even at the bottom end, that would be a significant sentence. Note in this regard that the Assor-Cohen father son combo drew sentences for each at 10 years, but they had facts that would be perceived much worse than Dr. Ahuja in the sentencing process. See my blog on the sentencing, First Sentencing in Offshore Case that Went to Trial (2/5/11), here. So, the real issue is whether the judge will do the type of Booker variance, even with out a plea/acceptance of responsibility, that we have seen in other cases. I will note in this regard that I recall there being a lot of sympathy for Dr. Ahuja early in the process, so undoubtedly he will offer some sympathetic things for the judge to consider, provided that he did not stub his toe in the trial process.
2. Why did Dr. Ahuja go to trial rather than plead? This is not clear, but hindsight is always better than foresight (a phenomenon true also of his original decision to play the offshore bank game). The general thinking is that, even with sentencing under the Booker regime, it always sets the right tone for the sentencing judge to do a plea with lots of mea culpas and contrition. I suppose that Dr. Ahuja could now come forward and do that, if his case was principally that the Government must prove his guilt beyond a reasonable doubt. Maybe in that case, the judge would Booker vary in basically the same way the judge would have with a plea of guilty. We'll see.
3. Dr. Ahuja was originally charged with Tax Perjury (4 counts) and FBAR (4 counts). A conspiracy charge was added by superseding indictment, apparently related to the NYC HSBC enabler. The conspiracy count was dropped at the beginning of the trial. As to the convictions for only the 2 remaining counts (out of 8), apparently the counts of conviction were for the only year in which the tax return preparer's organizer asked a specific question about foreign accounts. In practical terms, the acquittal probably makes no difference, although if the judge believes that those acquitted years are not relevant conduct under the Sentencing Guidelines, the tax loss number for the sentencing Base Offense Level could be substantially reduced.
Shamik Trivedi, Wisconsin Surgeon Convicted in Connection With HSBC India Account (TNT 8/28/12)
Thomas L. Kirsch II of Winston & Strawn, one of Ahuja's lawyers, told Tax Analysts that Ahuja had accounts with HSBC India and Citibank and that unlike his accounts with Citibank, he did not receive a Form 1099-INT, "Interest Income," from HSBC. That led the jury to conclude that "he did not have [the] intent to defraud, with respect to the interest income," Kirsch said.
James N. Mastracchio of Baker & Hostetler LLP said that "it's not unusual" for foreign financial institutions not to issue Forms 1099.
What the jury did conclude was that Ahuja had foreign accounts with HSBC and that in 2009 he should have reported them, Kirsch said, adding, "The jury gutted 90 percent of the case." He cautioned that it is premature to say whether Ahuja will appeal. Ahuja has filed a motion for directed verdict, which the court is taking under advisement, Kirsch said. "The judge may throw these counts out."
John M. Colvin of Chicoine & Hallett said he noticed that computer screen shots of Ahuja's foreign bank records were admitted as evidence under the residual hearsay exception. In contrast, when Swiss bank UBS turned over account holder evidence, it signed, at the request of the government, affidavits that were designed to be affidavits by a custodian of records for use in U.S. courts, Colvin said.
"I think the defense practitioners probably assume that you really have to get the bank to cooperate to nail the client, and that assumption proved faulty in this case" because the screen shots got admitted as evidence, Colvin said.
Colvin had praise for Ahuja's counsel. "The trial team did a great job in getting him off on the other years," he said. "The government is a really formidable opponent."
* * * *
"I think that the conviction of someone with an NRI account will resonate with those NRI account holders who are not in compliance," Mastracchio said. "Those individuals should consider taking advantage of the offshore voluntary disclosure program if they are not in compliance."
Prior Federal Tax Crimes Blog Covereage:
- Superseding Indictment for Dr. Ahuja Adding Conspiracy Count (9/28/11), here.
- HSBC Client Indicted (6/28/11), here.
Note: This blog entry was revised substantially on 8/24/12 and 8/28/12.