Thursday, August 23, 2012

Prominent Neurosurgeon Convicted for Offshore Accounts (8/23/12)

DOJ Tax has announced the conviction of Dr. Arvind Ahuja on one count of filing false tax returns (tax perjury, Section 7206(1)) and one count of failing to file the FBAR.  The press release is here.

The key facts (or, I hope, reasonable projections from the facts) are:

Taxpayer:  Dr. Arvind Ahuja, a "prominent neurosurgeon"
Age: ___
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
Entities: No.
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."

JAT Comments:

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.

18 comments:

  1. Jack there is new press release that should help in updating the sheet above.
    August 23, 2012



    FOR INFORMATION CONTACT:

    Dan K. Webb DWebb@winston.com (312) 558-5856

    Tom Kirsch TKirsch@winston.com (312) 375-0798

    Evan Zeppos ezeppos@laughlin.com
    (414) 270-7283 or (414) 491-6610





    Attorney Dan Webb today released the following statement:



    Yesterday afternoon, a federal jury returned a verdict of
    “Not Guilty” on five of seven counts of filing false tax returns that had been
    brought by the government against Milwaukee neurosurgeon, Dr. Arvind
    Ahuja. Two other tax related charges –
    one for criminal conspiracy and another for failing to file a tax form – were
    dismissed by Judge Charles Clevert. The
    jury retuned a verdict of guilty on two counts, both connected to the failure
    to check a box on a tax form indicating the existence of foreign bank accounts.




    Dr. Ahuja’s attorney, Dan Webb, stated that this verdict
    “was a tremendous victory for Dr. Ahuja.”
    Webb, a former U.S. Attorney, stated: “But this case never should have
    been brought as a criminal case. Failing
    to check a box on a tax return or attach some arcane form is typically handled
    as a civil matter by the IRS. This was the only conduct covered by the two
    guilty verdicts returned today.”



    The government’s charges covered a four-year period, and the
    two guilty verdicts concerned only Dr. Ahuja’s 2009 federal tax return. Prior to being indicted, Dr Ahuja had filed
    amended federal and state tax returns and paid all amounts due, together with
    interest and penalties. The underpayment of federal taxes for 2009 was $89,000.



    During the trial, attorneys for Dr. Ahuja filed motions that
    could result in the over-turning of the two guilty verdicts. Judge Clevert has requested additional
    briefing on these motions. “This is not over,” Web commented.



    Dr. Ahuja remains hopeful that the court will recognize the
    2009 tax year verdicts should be dismissed.
    “Although I certainly hoped to be found not guilty on all nine counts, I
    appreciate the jury’s and judge’s efforts and am pleased that, together, they
    concluded I was innocent of seven charges,” Dr. Ahuja said.

    ReplyDelete
  2. Jack,
    I read the following statement on this website:
    http://greendale.patch.com/articles/greendale-neurosurgeon-convicted-of-tax-fraud-involving-over-8-million
    "The defense said the case should have been handled civilly, not in criminal court, and that the issue is related to one missed tax form. Attorney Dan Webb said in a statement "failing to check a box on a tax return or attach some arcane form is typically handled as a civil matter by the IRS."
    He has made made full payments due to the IRS, including interest and penalties."
    Do I misunderstand, or should we read that the IRS prosecuted a quiet disclosure?
    The attorney's statement is a little misleading and makes it sound like the defendent filed a quiet disclosure and he still got prosecuted. Can you please comment on this.
    Also, on an unrelated note, I noticed that I kept getting a message saying that Disquss was not supported on my browser and it seems to be because the page was loading in document mode IE7. I was able to comment when I changed the document mode to IE9 standards. I don't know if other users have had this issue, but I wanted to mention it.
    Thanks for a great blog.

    ReplyDelete
  3. The HSBC banker (Ramit Bhasin) involved in this case was given a Non-prosecution agreement - go figure !

    ReplyDelete
  4. Thanks very much for the press release. Perhaps you know the answer to this question and can / will respond. I had understood that the Government moved to dismiss the conspiracy charge at the beginning of trial and had announced its intention to do so before trial. Can you confirm that?


    Do you know why the Government dismissed the conspiracy charge? The Government seemed to believe that the HSBC bankers or perhaps other enablers were involved. So, why did it dismiss conspiracy which is often easier to prove certainly than an FBAR violation and perhaps also easier than a tax perjury violation.


    Also, on the underpayment of taxes for the count of conviction, do you know whether the tax losses inthe years for the acquitted counts will be included in the relevant conduct for sentencing? I infer from the DOJ press release that it might press for the tax loss from the acquitted years as well.


    Finally, do you know if any foreign entities between Dr. Ahuja and the accounts were involved? And, of course, the follow on is why Dr. Ahuja was indicted if there were no entities. Was there conduct intended to deceive that might be viewed by DOJ Tax as functionally or morally equivalent to interposing entities?


    Any insight on these issues would be helpful, particularly since you seem to be close to the pulse of the defense team.


    I do wish Dr. Ahuja well.


    Jack Townsend

    ReplyDelete
  5. One other point that may be worth mentioning particularly to those unfamiliar with some of the arcane ways of criminal cases. A jury verdict of not guilty is not a finding of innocence. It is a finding that the jury believed the prosecutors did not prove guilt beyond a reasonable doubt. That difference has consequences, including at sentencing (will the acquitted years be included in relevant conduct).


    Jack Townsend

    ReplyDelete
  6. There were absolutely no foreign entities involved . There was no conduct that was intended to deceive. This case should have been civil. This case is all about the FBAR and the underpayment of taxes is small point. Taxes were paid in India for which there is a foreign tax credit on the tax return which reduces the underpayment of taxes even further.

    ReplyDelete
  7. Thanks.


    Any idea on what piqued DOJ Tax's interest, other than the sheer amount involved?


    Jack Townsend

    ReplyDelete
  8. Jack

    Different Anon here. No inside information. I speculate that DOJ Tax's interest, other than the amount, may have been piqued by the HSBC account in Jersey linked to a credit card. I gather this was a fairly common technique used by tax evaders in the late 90s/early 2000s.

    The indictment also made a lot of noise about how Dr. Ahuja asked for account statements to be sent to an Indian address, but that could have a perfectly innocent explanation. Indeed, in this day and age of paperless transactions and online access, this particular item seems to be dated. Besides, it would be very inconsistent for someone to transfer millions out of a US account openly and then try and hide foreign account statements for secrecy purposes.

    ReplyDelete
  9. I surmise part of the reason Dr. Ahuja chose to fight the case is that he did not want to lose his medical license, which he would (I think) if convicted of a felony. Whatever the reason, it was a grave risk since he could have been convicted on many counts and could (at least in theory) have faced ruinous fines and a huge prison sentence. the jury found him not guilty for all but the 2009 tax and FBAR charges (maybe a little jury nullification there ?), but it could have gone worse for him.

    I presume he will face the civil FBAR penalty for 2009 (50%) and because of estoppel, will not be able to contest that. The government could try for civil penalties for other years as well, but it would need to bring and win the charges in a civil action. It will be interesting to see if they will do that, also to see whether they would try and go beyond 100% of balance. I doubt it, and in all fairness, Dr. Ahuja's actions don't seem to justify a civil penalty beyond 50%.

    ReplyDelete
  10. A feature of our system is that a not guilty verdict does not mean that the jury found you innocent. As a result, any civil penalty for the acquitted counts (e.g., the FBAR willfulness penalty) could still apply. That means that acquitted years could be in play for the FBAR willfulness penalty and the civil fraud penalty, as well as an unlimited civil statute of limitations.

    Moreover, one must keep in mind that he was only acquitted of tax perjury. This means that, even if a not guilty verdict on a tax evasion count were preclusive of fraud (it is not), these were not tax evasions counts -- only tax perjury. Still, I suppose, with the convictions of tax perjury, the Government would have to allege in the civil case some act of tax fraud other than the items for which it alleged perjury in the criminal case.

    Bottom line, at least in theory he could have potential FBAR penalties for all years involved, so long as the Government can prove willfulness in the civil penalty case (by either MLTN or clear and convincing, rather than beyond a reasonable doubt). But, if the year of conviction is close to 50% in the highest year, I suppose the Government will just go with that without further ado on the FBAR penalty. Now, the civil fraud matters -- civil penalty and unlimited statute of limitations - well, those are other issues that will get sorted out later. Dr. Ahuja has a long road ahead of him.

    Jack Townsend

    ReplyDelete
  11. Thanks, different Anon there!

    These are excellent points. The use of a credit card as a method for stealth repatriation of offshore account funds is certainly a highly negative factor. The IRS / DOJ has known of and disapproved that gambit for years.

    And, the direction of account statements or, as is the case for many offshore account depositors cheating on their taxes, not getting account statements at all, that is highly suspicious as well. As to the latter, not getting statements at all, in at least some (I suspect many), the U.S. depositor would get periodic updates on the account via some protected communication format (e.g., phone with a code) just to avoid the account statements existing anywhere except on the bank's servers which the U.S. depositors imagined could not be breached.

    I have always wondered why rational people would have such secrecy tied to their accounts in Switzerland. That happened with many Jews in the WWII and run up era, and the Swiss just stole the money when the Jews disappeared. While mass disappearance of Swiss depositors is (we hope) not likely now, still, I am sure that it happens enough that the Swiss banks add to their profit line with such forgotten accounts. The Swiss will protect their depositors only so long as it is no longer profitable to do so. They truly follow the money.

    Jack Townsend

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  12. I wonder what is going to happen to his banking career now and if his current employer is aware of this Non-prosecution agreement and what action his employer will take if and when the employer finds out about such a agreement.

    ReplyDelete
  13. Speaking of my own experience, I was never offered, nor would I have bothered with, the opportunity to check my account balances periodically by phone. For someone with a managed account or sending money in or out, it might have mattered. I have mostly savings accounts or CDs. If I want to see the value of my CD I just need to look in the newspaper to see the value of the franc or euro. I have one year CDs so I know how much interest I will have when it matures.
    Although I am now in OVDI I still do not need to "check my balance."
    I also have a mutual fund in the US, an index fund of the S&P500 stocks. They only send statements every 3 months and I have no need to look at them.
    As to forgotten/dormant accounts, I don't think that the banks' lack of effort in tracing depositors is any worse in Switzerland than elsewhere. I know of similar things happening in a large country that borders Switzerland. Likewise in the US, if you've looked at unclaimed funds lists in the papers, you'll easily recognize well-known companies that maybe changed location or people whose name has letters transposed; if someone is listed as Jonhson it doesnt take a rocket scientist to look in the phonebook under Johnson.

    ReplyDelete
  14. I do agree with you
    Anonymous,


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    ReplyDelete
  15. Dr. V. P. Singh is a Consultant Neurosurgeon at Indraprashta Apollo Hospital, New Delhi, India. Dr Varindera Paul Singh's competence covers all aspects of neurosurgery spinal, Neurosurgeon in India epilepsy surgery, radiosurgery and brain tumors.

    ReplyDelete
  16. Dr. V. P. Singh is a Consultant Neurosurgeon at Indraprashta Apollo Hospital, New Delhi, India. Dr Varindera Paul Singh's competence covers all aspects of neurosurgery spinal,Neurosurgeon in Delhiepilepsy surgery, radiosurgery and brain tumors.

    ReplyDelete
  17. Dr. V. P. Singh is a Consultant Neurosurgeon at Indraprashta Apollo Hospital, New Delhi, India. Dr Varindera Paul Singh's competence covers all aspects of neurosurgery spinal, Neurosurgeon in Delhi epilepsy surgery, radiosurgery and brain tumors.

    ReplyDelete
  18. Meditrina HospitalJanuary 12, 2013 at 2:59 AM

    It is really a bad news.But such actions are necessary.

    Regards:neurosurgery india

    ReplyDelete

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