Taxpayer: Michael Clifford Francis
Plea Date: 10/1/12
Banks: UBS, HSBC (Channel Islands), Commerzbank
Entities: ? [The press release does not mention any]
Guilt: By Plea Agreement
Count(s) of Conviction: Tax Perjury (1 count) and FBAR (1 count)
Admissions: Filing false income tax return for 2006; one count of failure to file FBAR for 2006
Maximum Possible Sentence: 8 years.
Highest Amount in Account in 2006: $896,157.75'
FBAR Penalty: 50% of the high amount
Age at Plea: 50
Tax Loss: ?
Court: SD CA
Judge: George H. King (Wikipedia entry here)
Per the press release (emphasis supplied):\
Francis further admitted that in July of 2007 and January of 2008, currency deposits totaling $50,000 and $99,600, respectively were structured into his domestic bank accounts. Structured deposits involve amounts of less than $10,000 that are designed to avoid laws requiring that all cash transactions of $10,000 or more be reported to federal authorities.My preliminary comments are:
- In the past, DOJ Tax generally required only a single count plea -- either tax perjury or FBAR violation, with the defendant "picking his poison." It is not clear why this defendant was required to plead to 2 counts (I assume he was required and did not insist on two counts).
- In the past, the critical mass of charges have involved accounts with entity involvement to hide the accounts. Entity involvement was considered important to the indictments. The press release does not mention entities. But the press release does make the point that structuring was involved. Perhaps that is sufficient to warrant indictment in the absence of entities.
- Commerzbank was the bank involved in the indictment of the former IRS international examiner for conflict of interest and disclosure of return information. See my prior blog, Former IRS Agent Charged with Conflict of Interest and Disclosing Return Information Including Whistleblower Name (Federal Tax Crimes Blog 9/27/12), here. The details of that adventure have not been fully disclosed, but I would think that Commerzbank has some exposure in that adventure as well.
- It is good to know that, even though insisting on 2 counts (which will probably not affect the sentence he would have received for 1 count), the IRS is not ramping up the FBAR penalty required for the bad / indicted actors. It is still 50%,
Jack,
ReplyDelete"Structured deposits involve amounts of less than $10,000 that are designed to avoid laws requiring that all cash transactions of $10,000 or more be reported to federal authorities."
Would this so-called structured deposits also mean he wanted to save some paper work (either for himself or for the bank) ? Just like we sometimes bring in Cash to less than $10,000 even we would like to bring more so it saves filing papers (not really to conceal criminal activities).
Nefarious intent or criminal activities are not a pre-requisite for violating the structuring law. All that is required is knowledge that the institution is required to file a report, and knowing trying to avoid this reporting by breaking the transaction into smaller amounts.
ReplyDelete@e2c4fc4df0aa2b0b8d2c8b6e6398cc33:disqus ,
ReplyDelete"Structured deposits" to avoid filing requirement itself is not a crime, but when in this UBS case, it added element of willfulness (avoid being detected by the authority).
If I bring cash from offshore (after having the account disclosed) in a structure way that it would not require to file a form when entering US and no need to file a form by the bank when I make a deposit. That kind of avoiding filing is not a crime, am I right ?
Structuring deposits to avoid known filing requirements IS a crime by itself. That is wilfulness: intentionally violating a known legal duty. The funds can be perfectly legal and the purpose can be perfectly legitimate. See below
ReplyDeletehttp://lawprofessors.typepad.com/whitecollarcrime_blog/2005/09/_ratzlaf_redux_.html
Now the government may have a hard time proving willfulness if there is no other illegal activity involved (but if the person involved admitted knowledge of the legal requirement, that should be sufficient).
Excellent reply Researcher! Thanks for your comments. The blog discussion to which you link is also good.
ReplyDeleteJack Townsend
@e2c4fc4df0aa2b0b8d2c8b6e6398cc33:disqus @JackTownsend:disqus ,
ReplyDeleteWow, you two legal expert/researcher are telling me if I have $10,000 bring into US but I make it $9999 simply to spend $1 before entering US. Yes, this is to avoid to file this form which specifically stated the amount requirement $10,000 I am just simply following the law (whatever the instruction on this form), and decide I don't need to file. This is against law because I know this filing requirement and to avoid file.
Same to FBAR, I have $9999 in my account, I want to avoid file FBAR to instruct bank to pay out interests earning instead of deposit into the account (assuming exchange rate stay the same), and so I don't have to file FBAR -- this is another example of avoidance.
To easy to become criminal -- that is very scary. Glad that I did not hire a lawyer to handle my OVDI/out-out -- they may scare me to pay whatever IRS asks me to do so.
@e2c4fc4df0aa2b0b8d2c8b6e6398cc33:disqus @JackTownsend:disqus , okay just read the link, it is scary.
ReplyDeleteI guess there is certain amount and number of transaction to cross this line of "structure" law.
Although it's good news that the penalty is not being ramped up above 50%, it is still quite high. For someone whose entire account represents untaxed money, and is in the high bracket, income tax plus 20% penalty (if not 70% penalty) plus interest represents around half the money; if the other 50% is a FBAR penalty, there is nothing left; and there are still legal/accounting fees to pay.
ReplyDeleteFor someone who merely failed to report interest, the actual tax, interest and penalty might only be 5% but in that case a 50% FBAR penalty would represent ten times taxes plus penalty and interest, though perhaps in such a case a 50% FBAR penalty might be unusual.
By the way, I just noticed that this blog has surpassed a million pageviews!