Monday, February 10, 2014

Corporate Corruption Case Charged With Swiss Bank Accounts to Hide the Loot (2/10/14)

According to a DOJ press release here (emphasis supplied by JAT):
Asem Elgawhary, the former principal vice president of Bechtel Corporation and general manager of the Power Generation Engineering and Services Company (PGESCo), was indicted by a grand jury in Maryland today on charges that he defrauded his former employers, laundered the proceeds of the fraudulent scheme and violated federal tax laws. 
* * * *\ 
The eight-count indictment alleges that from 1996 to 2011, Elgawhary, 72, of Maryland, was assigned by Bechtel – a U.S. corporation engaged in engineering, construction and project management – to be the general manager at PGESCo, a joint venture between Bechtel and a state-owned and state-controlled electricity company (EEHC).   PGESCo assisted EEHC in identifying possible subcontractors, soliciting bids and awarding contracts to perform power projects for EEHC.   The charges allege that Elgawhary used his position at PGESCo to provide preferential treatment to three power companies attempting to secure projects with EEHC in exchange for kickbacks from those power companies and their third-party consultants.   The court documents allege that the power companies and their consultants paid more than $5 million in kickbacks into various off-shore bank accounts under the control of Elgawhary, including various Swiss bank accounts.   In return, the power companies secured more than $2 billion in lucrative contracts. 
The indictment alleges that Elgawhary then also attempted to conceal the kickback scheme and the proceeds he obtained from it.   Elgawhary allegedly sent to Bechtel executives and members of the PGESCo board of directors in Maryland various documents and “Representation Letters” that falsely represented that he had no knowledge of any fraud or suspected fraud at PGESCo and that there were no violations or possible violations of law or regulations whose effects were material and should have been considered for disclosure in PGESCo’s financial statements.   In addition, when Elgawhary was interviewed by counsel for Bechtel in April 2011, he claimed that he never received money from power companies or their consultants and that he did not maintain control over any foreign bank accounts.   With the help of other employees at PGESCo, Elgawhary also allegedly caused evidence about the kickback scheme to be deleted and destroyed, according to the charges. 
The court documents also allege that Elgawhary used money from one of his Swiss bank accounts to purchase a $1.78 million home in Maryland for two close family members.   In order to conceal the origin of the money, however, Elgawhary and others made it appear that the money was from an unsecured loan from a marketing company owned and operated by another relative. 
Elgawhary also allegedly obstructed and impeded the administration of U.S. tax laws by falsely claiming that he maintained only one foreign bank account and denying that he received any income from any foreign bank account.   Elgawhary also allegedly failed to report any of the kickbacks as income for the tax years 2008 through 2011.
The mail and wire fraud counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $250,000 or twice the value gained or lost.   The conspiracy to commit money laundering count carries a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.   The tax count carries a maximum penalty of three years in prison and a fine of $5,000.
This is what I call an atypical offshore account case.  The corruption charges (Mail and Wire Fraud and Money Laundering Conspiracy) are the gravamen of the misconduct and really swamp the alleged tax crime.  Although, the press release indicates that four years of returns will false information (underreported income) is involved, which could have been charged as tax perjury, apparently the charge is for a single count of tax obstruction, Section 7212(a), here.

It is not clear why the charges did not include one or more FBAR charges.  The press release suggests that he reported one of the Swiss accounts, apparently on  his return, and presumably therefore would have filed an FBAR for that one disclosed account.  The other undisclosed  accounts are the problem.  Perhaps the IRS did not charge an FBAR violation because, so I've heard, there is some concern that filing a false FBAR cannot be prosecuted as a Title 31 crime.  Failure to file an FBAR can clearly be prosecuted.  So, at least I have heard, that sometimes the recommendation for criminal charges for false FBAR filing are made under 18 USC 1001 (false statements).  In this regard, the FBAR instructions, here, state:  "Willful violations may also be subject to criminal penalties under 31 U.S.C. section 5322(a), 31 U.S.C. section 5322(b), or 18 U.S.C. section 1001."  Section 5322 may be viewed here.  But, of course, that still does not explain why there was no false statement charge.  Of course, if  the Government makes the case that it charged, additional counts are meaningless.

1 comment:

  1. And how many US bank accounts are are used to hide ill gotten gains?


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