HSBC India Depositor Sentenced (7/10/13)

Sameer Gupta, an HSBC depositor, was sentenced yesterday to 19 months in prison, according to a press release from the USAO D NJ, here.  Some details are:

Defendant:  Sameer Gupta
Conviction (by Plea):  Tax Evasion, 7201 (5 year maximum)
Foreign Bank(s):  HSBC India.
Omitted Income: $1,198,054
Tax Loss: $383,475.
Fine: $20,000
FBAR Penalty:  $259,045 (doesn't say how derived)
Court:  D NJ
Judge:  Faith Hochberg (Wikipedia entry here)

The following is from the press release:

Gupta is the 50 percent owner of J.S. Marketers Inc., which sells adult paraphernalia to large adult store chains and smaller retail video stores and bodegas. From 2006 through 2009, Gupta diverted $822,916 of the business’ receipts into 17 different personal bank accounts held in the names of various individuals, including himself and family members. He directed more than $250,000 of those diverted funds into six different accounts held offshore at a branch of HSBC in India. From 2007 through 2009, Gupta caused 22 J.S. Marketers corporate checks to be made payable to himself and family members in amounts identical to invoices from the business’ suppliers. Gupta endorsed those checks, which totaled $375,138, and deposited them into bank accounts that he controlled. Gupta filed individual income tax returns for the years 2006 through 2009 that did not report his income from the diverted funds. 

As a result, Gupta evaded taxes on $1,198,054 in income for 2006 through 2009. He also failed to file Reports of Foreign Bank and Financial Accounts, (FBARs), for 2006 through 2008. The tax loss resulting from Gupta's conduct, not including interest and penalties, is $383,475. 

In addition to the prison term, Judge Hochberg sentenced Gupta to serve two years of supervised release. As part of his plea agreement, Gupta has paid to the United States Treasury a one-time FBAR penalty of $259,045 and has cooperated with the IRS in the investigation of his outstanding taxes due and owed for 2006 through 2009. Judge Hochberg also ordered Gupta to pay an additional $20,000 fine.

JAT Comments:

1.  The plea was for tax evasion, a 5-year felony offense.  Tax evasion is a more serious offense than tax perjury, a 3-year felony offense, which is the tax offense usually charged in these offshore bank cases.  (The non-tax offense frequently charged in lieu of a tax offense is an FBAR five-year felony offense.) It is not clear why DOJ insisted on tax evasion rather than tax perjury.

2.  The sentence is higher than normally observed in convictions with respect to tax evasion.  Presumably, the factors which motivated DOJ to insist on an evasion plea played into the tougher sentence as well.