Wednesday, March 19, 2014

U.S. Attorney Enabler Sentenced for Assisting Offshore Evasion (3/19/14)

DOJ Tax announces that attorney Christopher M. Rusch, who enabled two U.S. taxpayers, Messrs. Stephen M. Kerr and Michael Quiel, via offshore bank accounts, has been sentenced to serve 10 months.  See press release here.  (For other blogs on these various players, I suggest readers use the search feature above.)  Key excerpts of the press release (omitting the hype) are:
California attorney Christopher M. Rusch was sentenced to serve 10 months in prison for helping his clients Stephen M. Kerr and Michael Quiel, both businessmen from Phoenix, hide millions of dollars in secret offshore bank accounts at UBS AG and Pictet & Cie in Switzerland 
* * *. 
According to the evidence presented at trial, Kerr and Quiel, with the assistance of Rusch and others, including Swiss nationals, established nominee foreign entities and corresponding bank accounts in Switzerland to conceal Kerr and Quiel’s ownership and control of stock and income they deposited in these accounts.   Rusch testified at trial, admitting that he and others caused the sale of the shares of stock through the undeclared accounts.   Rusch further testified that, at Kerr and Quiel’s direction, he transferred some of the money in the secret accounts back to the United States through Rusch’s Interest on Lawyer’s Trust Account before dispersing the money for Kerr and Quiel’s benefit, including the purchase of a multi-million dollar golf course in Erie, Colo.   According to court documents and evidence presented at trial, with Rusch’s assistance, Kerr and Quiel each failed to report more than $ 4,600,000 and $2,000,000 of income, respectively, during 2007 and 2008 which they hid in the undeclared accounts with Rusch’s assistance.  

19 comments:

  1. ...........To implement what critics call their nightmarish vision of a “World Tax
    Organization” — supposedly aimed at stopping tax evasion — the G-20
    asked the United Nations-linked Organization for Economic Co-operation
    and Development (OECD) to take the lead. The widely criticized “cartel”
    of tax-hungry politicians,
    infamous primarily for fanatical efforts to crush national sovereignty
    and for bullying jurisdictions with relatively low taxes into
    surrendering their competitive advantage, is now working to develop the taxation regime and prod its member governments into adopting it................

    ........The deeply controversial U.S. tax scheme, adopted in 2010 as part of an
    Obama administration “stimulus” ploy, is working to turn foreign
    governments and financial institutions into unpaid agents of the IRS. It is also causing havoc for middle-class Americans abroad.
    Despite mounting outrage and growing efforts to repeal FATCA or
    challenge it on constitutional grounds, it is set to go into effect in
    mid-2014. Critics are already warning of economic and human devastation.
    At the OECD and the G-20, though, top officials are hoping to spread
    the misery worldwide in the scramble to extract more wealth from the
    public.

    http://www.thenewamerican.com/economy/item/17337-globalists-exploit-new-u-s-tax-law-for-world-taxation-regime

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  2. One effect of FATCA is that foreign companies are avoiding having US persons as signatories on bank accounts. Not good for job seekers, as hiring an American comes with baggage. Not good when you are an executive and you cannot be a signatory on your firm's bank accounts.

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  3. Jack, The title is captivating -- I thought it was a US Attorney (from DOJ) who has enabled offshore tax evasion. What is the difference between US Attorney and US lawyer ?

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  4. Ah, yes, there is ambiguity there that, perhaps, got you to read the blog entry whereas, had I been more precise, you would not have.


    And,of course, had it been a Swiss attorney, I could have used "Swiss attorney" without the ambiguity. But then Swiss attorneys engaging in this behavior are -- perhaps hyperbolically -- a dime a dozen. U.S. attorneys -- Not USAs -- doing that appear to be not so prevalent, at least on a relative scale.


    Thanks for alerting readers to the ambiguity.


    Jack Townsend

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  5. uscitizenshipnightmareMarch 21, 2014 at 3:55 AM

    While I don't have any particular patience for the activities of the Swiss banking industry, I think it's a bit jingoistic to lay so much blame at their feet. We have to remember, the principals here, the ones who actually evade taxes, as US citizens. And according to almost all reports, domestic evasion dwarfs by an order of magnitude offshore activities. Finally, it does raise an interesting question: which actor is more culpable: the evader or the enabler? From a prosecutorial perspective, the enabler is probably a better target but it does that mean he/she is morally more culpable?

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  6. FATCA
    1. Even Tax Compliance Experts Decry Looming “Train Wreck,” Impossibility of Meeting IRS’s Requirements.
    2. Treasury (Inadvertently) Admits FATCA is a “Fishing Expedition.”
    3. Lack of “Reciprocity” Fatally Undermines Both FATCA and OECD “Information Exchange.”
    4. Rob Portman (Ohio): Big Pickup in Senate for Repealing FATCA.
    5. Canadians Fight Back.

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  7. Canada is a “must have” country for FATCA’s survival. As the US biggest
    trading partner, tightly integrated into the U.S. financial system,
    there is no way that Treasury could undertake a sanctions war against
    Canadian institutions without tanking those of the US as
    well. Jack, are you aware that , a legal challenge to Ottawa’s FATCA sellout is underway, centering on abrogation of Canadians’ rights under the Charter of Rights and Freedoms ? The British Columbia Freedom of Information and Privacy Association has also weighed in.

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  8. Banks getting tired of incomplete information and spiralling costs of Fatca

    Financial institutions are tired of dealing with the Foreign Account Tax Compliance Act (Fatca) amid continued confusion over what needs to be done, one expert warns.
    Jon Watts, director and head of banking and securities, Fatca at Deloitte New York, told delegates at an Inside Reference Data conference in New York this week that even the largest financial institutions are fed up with Fatca.

    "Some of the biggest major financial institutions have had major programmes structured around Fatca going on for three or four years now. Fatca as a programme-wide concern has been going on for quite some time and I deal with a lot of the bigger banks, brokerages, securities firms and asset-servicing firms and really there is almost a point of fatigue. Everybody's been working hard at this for a long time. There has been a lot of confusion, a lot of waiting around for guidance and forms and a lot of changing of dates; and all along this journey a lot of money has been spent."
    He pointed out that many larger institutions have now spent upwards of $100 million on their Fatca compliance programmes getting ready for the July 1 deadline and are likely to spend more.

    "There are still a lot of requirements to come. This has been expensive, it has been time consuming, and it has taken a lot of time, attention and resources from tax, operations, compliance and risk just to focus on getting to the point we're at today."

    http://www.risk.net/operational-risk-and-regulation/news/2335249/fatca-fatigue-setting-in-expert-warns

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  9. As you know Jack, FATCA and CBT violate both the 14th and 5th amendments of the U.S.
    Constitution..perhaps other provisions of the Constitution as well. When you look back at some
    Supreme Court cases relevant to FATCA and CBT practices, while there is
    still some distance to go, there are already surfacing a number of cases that indicate the Supreme Court would be heavily
    inclined to nullify FATCA and CBT if a challenge were brought before the
    Supreme Court. Would you be interested to participate in a working group to bring a US Constitutional challenge against FATCA,CBT and FBAR ?
    FBAR would need to be challenged in a seperate brief.

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  10. ChiTownTaxAttorneyMarch 23, 2014 at 11:29 AM

    I previously offered a comment on the St. Charles Russian recently indicted, saying it probably wasn't a political stunt and maybe even a segue into forfeiture, seizure, or other collection actions by both DOJ and IRS knowing the defendant was out of reach. It might take a large amount of resources to prosecute all these enablers, bankers, and advisers IF THEY SHOW UP? But we generally assume IRS-CI and then DOJ only indicts nearly guaranteed conviction tax crimes. If the defendants don't show up, couldn't you implement a very efficient in absentia process? I may be completely wrong and that's simply not available.

    In any event, I'm not particularly thrilled DOJ would indict someone intending or believing they could not or would not, as a practical matter, be able to pursue them. I think it sends the wrong message that if you run, you can hide. Of course, my personal view on that would completely depend upon whether any SOL's are in play or they intend to go after the money.

    So, in the end, I think it would be wise for DOJ if they thought someone was outside of their reach to bring an indictment to preserve or avoid any SOL issues and to effectuate collection activities (hit them where it hurts).

    Overall, I'm weighing in on DOJ's side and assuming they've thought this through a bit more than Sens Levin and McCain.

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  11. Offshore Accounts: FATCA Background, Developments, and Key Issues

    The SSRN paper is sketchy, just a series of points, headings. It floors me that his footnotes/reference list points only to his own writings.

    J. Richard (Dick) Harvey
    Villanova University School of Law and Graduate Tax Program
    March 24, 2014
    Villanova Law/Public Policy Research Paper No. 2014-1006

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2410846##

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  12. Is FATCA already a failure? Reading the Senate report one is struck by their pessimism :
    (see page 6)..."FATCA will not, in fact, solve the disclosure problem. FATCA’s
    implementing regulations have created multiple loopholes, with no statutory basis, in the law’s disclosure requirements".....

    This looks an awful lot like what the French call "la chasse aux coupables" (the hunt for the guilty). But "chasse aux coupables" is misleading in that it is not meant to catch just
    the guilty. It's a chasse aux innocents, too. It's a fishing expedition
    with a very wide-cast net, meant to take in everyone out there,
    innocent or not, whether they owe any tax, or not.

    The report implies that elements of the final regulations and those
    negotiated agreements do not have the support of U.S. lawmakers. That's
    a very troubling message to send to banks that desperately need those
    final regulations to be frozen, and to all the countries that have
    signed (or are about to sign) FATCA IGAs.
    FATCA is counter-productive because it seeks the same money as the
    penalty driven OVDI/P programs. Increased compliance fewer penalty
    dollars, more renunciations less tax dollars.
    FATCA is a massive
    cover up of the actual cause of the fiscal gap. Most of the fiscal gap
    is by multi-nationals which lobby for concessions in the tax code
    thereby decreasing tax revenue and also asking for subsidies for their
    industries. FATCA allows congress to claim credit for trying to solve
    while continuing to make it worse by creating more tax concessions and
    giving more subsidies.


    Of course it's too soon to tell if FATCA will be a catastrophic failure, a limited
    success, or a rousing triumph, but it's not a good sign that U.S.
    politicians are already looking to assign responsibility for its
    shortcomings.


    Success or failure, pro-FATCA or anti-FATCA, let's put the blame for the
    outcome of this legislation squarely where it belongs: the U.S.
    lawmakers who made the darkness.

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  13. Article on foreigners with US accounts and their US banks attempts to block disclosure to foreign governments:

    http://www.caplindrysdale.com/files/10552_Enforcing_non-US_tax_authority_requests_for_taxpayer_information.pdf

    (Jack the headline of this blog post should be 3/18 not 4/18)

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  14. ........" I understand Switzerland can become somewhat claustrophobic and isn't known for its beaches and nightlife........"
    Kind of stereotype and wrong statement but for sure its known for its great food, great (working) infrastructure, low crime rates, great (working) healthcare system, great(working) pension system and of course low unemployment.
    I guess except for the food part the US can learn from CH !

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  15. In addition to the increasing open pessimism amongst Senators there is not a single day that goes by where I cannot find headlines like this now :

    "IRS Expects ‘Glitches’ with FATCA Tax Law on Offshore Accounts"

    Wow , ...." we expect a learning curve - for the IRS as well as for everyone affected...."

    http://www.carriermanagement.com/news/2014/03/24/120266.htm

    Except that FATCA failures have significant life altering consequences and sanctions (confiscatory penalties, extension of statute of limitations, etc.) for “everyone affected” – particularly if they are ordinary taxpayers and accountholders with little access to expert advice and representation, and not so much for the IRS who is the source, the implementer, the designer and the enforcer of FATCA. “Everyone affected” is the rest of the globe, while the IRS and Treasury think that with all that is at stake for all of those FORCED and EXTORTED to participate, it is acceptable to expect a ‘learning curve’ from the enforcers who created, maintain and will apply the threat.
    And FATCA has no built in method for recourse in the event of errors. And neither do the IGAs. The IRS and Treasury ignored the report by the GAO – a US government
    dept. who said that even just the 8938 FATCA form and reporting for
    individuals was confusing, duplicative, etc. See: http://www.gao.gov/products/GAO-12-403

    And the IRS/Treasury is still not finished some of the FATCA forms, guidance, etc. – yet insists that everyone else meet their deadlines and ‘obligations’.
    What arrogance and hubris. One can only hope that indeed “pride goeth before
    a fall……”. And that they don’t drag everyone else down with them.

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  16. Is the IRS not ready for FATCA ? It seems more and more likely.

    ...."“One of our biggest challenges lies in having the resources to build and
    maintain systems that can effectively use all of the incoming data,”
    Koskinen said today at the Tax Executives Institute conference in
    Washington. “As with any major new initiative, we expect a learning
    curve — for the IRS as well as for everyone affected.”......

    So after bullying and arm-twisting on a global scale, imposing massive costs on non-US banks, banking services denied for expats and millions of sleepless nights, the US is just going to store the info.

    This is btw. something I have been suspecting that the exact same thing has been happening with the FBARs for many years now !!
    Next time, Mr. Koskinen, how about you do your “learning curve” first before you trouble the rest of the world !!!

    http://www.bloomberg.com/news/2014-03-24/irs-budget-crunch-limiting-use-of-foreign-government-data.html

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  17. Re. beaches and nighlife.

    There are lake beaches but the water is a bit cold.

    Lausanne is one of the major nighlife locations in Europe.
    Skiing much better than Chicago.
    Switzerland not known for slums, or irresponsible government spending.

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  18. As far as FBARs they are available to the IRS upon request but there has been no automatic info exchange. That seems to be the reason the IRS is now requesting info on foreign accounts on tax forms.

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  19. ChiTownTaxAttorneyMarch 29, 2014 at 11:03 AM

    The last time I checked, Chicago has about as liberal an extradition policy as you could get with the United States of America. So Chicago would not be a good choice for most federal tax fugitives. I do have two words for you and Global Capitalism: Raoul Weil. Was Mr. Weil claustrophobic, psychotic (varying degrees of reality detachment including schizophrenia) and thinking he wouldn't be picked up, or something else? I guess I must begrudgingly give Marc Rich credit for his patience.

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