Plea to Offshore Bank Charges Related to Israeli Banks (4/12/13)

DOJ Tax announces a plea in the following press release:  California Businesswoman Agrees to Plead Guilty to Conspiracy to Conceal Israeli Bank Accounts (DOJ Tax 4/12/13), here.  Key Facts:

Defendant:  Guity Kashfi
Conviction: By Plea
Count: Conspiracy (1 count)
Banks:  2 Israeli Banks (perhaps Mizrahi-Tefahot (Israel) and Bank Leumi (Israel) involved in similar conduct charged against Zvi Sperling (see here), whose charge and plea is referenced in the news release).
Court: CD CA
Judge: ?

Key narrative:

According to court documents, Kashfi, a U.S. citizen, maintained undeclared bank accounts at an international bank headquartered in Tel Aviv, Israel. The accounts were held in the names of nominees in order to keep them secret from the United States government. Kashfi used the accounts to obtain “back-to-back” loans from a branch of the bank in Los Angeles. Although the loans were secured or collateralized with certificates of deposit held in Kashfi’s undeclared offshore accounts, that fact was concealed to keep Kashfi’s offshore accounts secret.

According to the plea agreement, in 2008, Kashfi was told by a banker in Los Angeles that the bank was going to use the funds in her account in Israel to pay off her back-to-back loans in Los Angeles.   Rather than pay off the loans, Kashfi transferred approximately $2 million to an account located in Luxembourg at a branch of a second Israeli bank. Kashfi did this to avoid repatriating funds from her first Israeli account back to the United States to pay back her loans in Los Angeles.   Kashfi eventually used the funds in Luxembourg to obtain a new back-to-back loan from a branch of the second Israeli bank located in Los Angeles. In 2009, Kashfi went to Luxembourg to close her account. While there, two foreign bankers advised Kashfi that her money was safe in Luxembourg because the bank was a private bank and no one could get information relating to bank accounts located in Luxembourg. In 2011, Kashfi closed all her accounts in Luxembourg by signing paperwork in Los Angeles. She then transferred the funds to banks in the United States.
According to the plea agreement, Kashfi never told her accountant about her undeclared accounts, and failed to report any income from the accounts on her individual income tax returns that were filed with the IRS. For tax years 2005 through 2011, Kashfi failed to report interest income of approximately $221,306.   The highest balance in Kashfi’s undeclared accounts was approximately $2,501,469. 

Kashfi is the second defendant charged in the U.S. District Court for the Central District of California with failing to report income from undeclared accounts in Israel.

On March 29, 2013, Zvi Sperling of Beverly Hills, Calif., appearing before United States District Judge John F. Walter, pleaded guilty to conspiring to defraud the United States in connection with back-to-back loans obtained in Los Angeles that were secured by funds in undeclared bank accounts in Israel. For tax years 2005 through 2008, Sperling failed to report income of approximately $381,563. The highest balance in Sperling’s undeclared accounts was approximately $4 million. 

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Both Kashfi and Sperling have agreed to pay a civil penalty in the amount of 50 percent of the high balance of their undeclared accounts to resolve their civil liability with the IRS for failing to file FBARs.

The blog entry related to the Sperling plea is New Plea Agreement Involving Israeli Banks (2/15/13), here.