Here are the key details (to be supplemented later)
Taxpayer: Moshe Handelsman
Count of Conviction (by Plea): Tax perjury, section 7206(1)
Bank(s): ? [one is a Tel Aviv bank]
Enablers: tax return preparers (who deducted the money sent offshore)
Tax Loss: ?
FBAR Penalty: 50% of the high year balance
Court: ND CA
Here are the key excerpts from the press release (JAT bold-face emphasis added):
According to the plea agreement, between approximately 1993 and 2000, Handelsman, a U.S. citizen, used three bank accounts held in the names of two different foreign corporations at foreign banks to falsely reduce his taxes. The last of those accounts was held at an Israeli bank located in Tel-Aviv, Israel. The foreign bank accounts and foreign corporations were set up with the assistance of his tax return preparers.
According to court documents, in approximately 2000, Handelsman traveled to Israel and met with a banker at the Israeli bank who referred him to an Israeli attorney to set up a foreign corporation. The foreign corporation was called Exportus Ltd. and was the named account holder of the account at the Israeli bank. From 2003 through 2008, Handelsman sent $1,808,075 from a domestic corporation he controlled called Advanced Forecasting Corp. to the Exportus Ltd. bank account. With the assistance of his tax return preparers, the funds transferred offshore were then deducted as false “Information Acquisition” expenses on the Advanced Forecasting Corp.’s tax returns. The false business expenses on the corporate tax returns resulted in an under-reporting of Handelsman’s income on his individual income tax returns for 2003 through 2008. Handelsman also failed to disclose the existence of his foreign bank account on his individual income tax returns. According to the plea agreement, in 2009, Handelsman closed his account at the Israeli bank and repatriated the money by transferring the funds into a second Israeli bank account and then to a U.S.-based Charles Schwab account in the name of a relative. The funds were then transferred from the Charles Schwab account to Handelsman to make it appear that the funds were a non-taxable gift from the relative.
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Handelsman faces a potential maximum prison term of three years and a maximum fine of $250,000. In addition, Handelsman has agreed to pay a civil penalty to the Internal Revenue Service (IRS) in the amount of 50 percent of the high balance of his undeclared accounts for failing to file FBARs.The press release does not indicate who the preparer was. Just a hunch that it might relate somehow to the preparer discussed in a prior blog. Depositor Pleads to False Return; Depositor in Luxembourg Branch of Israeli Bank (7/1/13), here.
Also, note that in this case of considerable skulduggery, the FBAR imposed is 50% of the high balance year. As I noted in an earlier blog, the IRS has just recently asserted the 50% willful penalty publicly for multiple years. See U.S. Civil Suit for 4 Years of Willful Penalty of 50% Per Year (6/14/13), here. It will be interested to see how the taxpayer in that multi-year penalty case is so much worse than Mr. Handelsman.
I tried to download the plea agreement, but apparently it is blocked to public access. I did download the information. Here is the charge made to which Handelsman pled guilty:
On or about April 15, 2008, in the Northern District of California and elsewhere, the defendant,
a resident of Saratoga, California, did willfully make and subscribe to a false United States Individual Income Tax Return, (Form I 040), and accompanying schedules, for the calendar year 2007, which defendant HANDELSMAN verified by a written declaration that it was made under the penalties of perjury and caused that tax return to be filed with the Internal Revenue Service, knowing that it contained false information as to a material matter. Specifically, defendant HANDELSMAN: (1) on Schedule B, Part II, line 7a of the 2007 tax return, failed to report that he had an interest in or a signature or other authority over a financial account at an Israeli bank in Tel Aviv, Israel; and, (2) on Line 22 of the Form 1040 of the 2007 tax return, he falsely reported his total income in that he omitted (a) taxable income diverted to his financial account at an Israeli bank in Tel Aviv, Israel; and (b) taxable income earned on his financial account at an Israeli bank in Tel Aviv, Israel.
All in violation of Title 26, United States Code, Section 7206(1).