Saturday, October 4, 2014

Two Enablers Caught in Sting Investigation Sentenced (10/3/14)

According to a DOJ Press release, here, two offshore financial account enablers -- Eric St.-Cyr and Patrick Poulin -- were sentenced "to serve 14 months in prison and three years of supervised release each for conspiring to launder monetary instruments."    The sentences were lighter based on the defendants' substantial cooperation with ongoing investigations.  Links to prior blog entries related to these sentencings are the end of this blog entry.

Key excerpts from the press release are:
According to the plea agreements and statements of facts, Vandyk, St-Cyr and Poulin conspired to conceal and disguise the nature, location, source, ownership and control of property believed to be the proceeds of bank fraud, specifically $2 million.  Vandyk, St-Cyr and Poulin assisted undercover law enforcement agents posing as U.S. clients in laundering purported criminal proceeds through an offshore structure designed to conceal the true identity of the proceeds’ owners.  Vandyk and St-Cyr invested the laundered funds on the clients’ behalf and represented that the funds would not be reported to the U.S. government. 
* * *   “This investigation, which lasted years, involved extensive undercover activity as well as cooperation from multiple foreign law enforcement agencies.  The undercover IRS agents in this investigation went to Canada, the Turks and Caicos and the Cayman Islands to develop the evidence.  These two defendants are cooperating with the IRS, and we anticipate that other investigations will develop from the information they have provided.” 
 * * * * 
According to court documents, Vandyk and St-Cyr lived in the Cayman Islands and worked for an investment firm based there.  St-Cyr was the founder and head of the investment firm, whose clientele included numerous U.S. citizens.  Poulin, an attorney at a law firm based in Turks and Caicos, worked and resided in Canada as well as Turks and Caicos.  His clientele also included numerous U.S. citizens.  Vandyk, St-Cyr and Poulin solicited U.S. citizens to use their services to hide assets from the U.S. government, including the IRS.  Vandyk and St-Cyr directed the undercover agents to create an offshore corporation with the assistance of Poulin and others because they and the investment firm did not want to appear to deal with U.S. clients.  Vandyk, St-Cyr and Poulin used the offshore entity to move money into the Cayman Islands and used Poulin as a nominee intermediary for the transactions. 
According to court documents, Poulin established an offshore corporation called Zero Exposure Inc. for the undercover agents and served as a nominal board member in lieu of the clients.  Poulin transferred approximately $200,000 that the defendants believed to be the proceeds of bank fraud from the offshore corporation to the Cayman Islands, where Vandyk and St-Cyr invested those funds outside of the United States in the name of the offshore corporation.  The investment firm represented that it would neither disclose the investments or any investment gains to the U.S. government, nor would it provide monthly statements or other investment statements to the clients.  Clients were able to monitor their investments online through the use of anonymous, numeric passcodes.  Upon request from the U.S. client, Vandyk and St-Cyr liquidated investments and transferred money, through Poulin, back to the United States.  According to Vandyk and St-Cyr, the investment firm would charge clients higher fees to launder criminal proceeds than to assist them in tax evasion.
Readers should note that one of their colleagues, Joshua Vandyk, an attorney, caught up in the same conduct and indicted at the same time, was previously sentenced to 30 months.  See Offshore Enabler Nabbed in Sting Operation Sentenced (Federal Tax Crimes Blog 9/5/14), here.  There is no specific indication as to the differences in the sentencings, but the St.-Cyr and Poulin sentencing press release emphasizes their cooperation, but the Vandyk sentencing press release does not indicate cooperation.

Other Prior Related Blog Entries:
  • Enabler Guilty Pleas from Sting Operation (Federal Tax Crimes Blog 7/12/14), here.
  • IRS Sting Investigation Nabs Offshore Bank Account Enablers (Federal Tax Crimes Blog 3/24/14), here.

4 comments:

  1. Jack, a few questions arise with regards to the timeline before 10/6/2014 which I could not find in the US District Court documents.

    1. tax year 2008 with 6/30/2009 as FBAR filing deadline etc.

    2. criminal SOL 6/30/2014 .... when was CI initiated ?

    3. account balance 6/30/2009 was $0.00 (account closed in 2008)

    4. max. balance in 2001 was $930K

    5. In criminal cases the penalty is a max. of 5 years in prison and a fine of max. $250K plus

    https://www.law360.com/banking/articles/584210/accountant-pleads-guilty-to-hiding-swiss-bank-account

    http://www.dailyreportonline.com/home/id=1202672351191/Accountant-Pleads-to-Swiss-Bank-Charge?mcode=1202617074542&curindex=3

    ReplyDelete
  2. GlobalCapitalism:

    Quick and dirty (but hopefully reasonably correct) answers:
    Just for clarity, I presume that you are referring to the Howard Bloomberg case. http://www.justice.gov/usao/gan/press/2014/10-03-14.html

    1. Historically, if the IRS made a criminal case, the civil tax consequences are deferred until the criminal case is resolved. Now, if you are talking about enablers as to the tax evasion they enabled, they do not owe the tax (unless awarded as restitution) and hence there will be no tax consequences to them. The taxpayers involved (except the IRS sting "nontaxpayers") should be assessed and, assuming their statutes are open, may be assessed appropriate penalties, including fraud (if appropriate).
    2. Noted. Not sure there is a question here.
    3. Noted. If you are focusing on the statute of limitations, when the CI investigation was initiated is not relevant. The criminal statute would normally be 5 years, but I believe the target of an investigation can consent to extend the criminal statute of limitations. Targets will not normally extend the criminal statute, but there may be strategic reasons to do so in some cases. I have no idea why he might have or even if he did. Also, there are concepts that might refresh the statute of limitations. These apply particularly in tax contexts. I have not seen them apply in FBAR contexts, but keep in mind that FBAR criminal prosecutions are relatively recent and we may just not have seen those issue surface yet because DOJ Tax can usually find a clearly open year for FBAR prosecutions.
    4. Noted, but could not figure which case you are referring to.
    5. Same. Normally the FBAR penalty is assessed on the amount on 6/30, so if the assessment year was 2008 and the account balance $0 on 6/30/09, it may be that there should be only a $100,0000 penalty for 2008. However, as you know, the mitigation guidelines provide another high amount in year basis for the penalty. I have not looked to see whether those mitigation guidelines could apply. And, of course, if the taxpayer agrees to even an FBAR penalty, then I think he is going to be stuck with it.
    6. Noted. Warning, to readers, though, the maximum fines are determined under the CFEA, 18 USC § 3571, rather than any lesser amounts stated in the criminal statute (such as $100,000 for individuals under § 7201.
    7. Noted and see comments above.
    8. Don't know. Could only speculate and won't do that.
    9. Noted.

    I have not considered your analysis, but just off the cuff it sounds reasonable.

    Jack Townsend

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  3. Jack I appreciate your answer but there is more depth to the case than you might think for various reasons. If IRS or DOJ Tax would have pursued the civil arm of the wilful FBAR penalty it would have netted only $100K
    for tax year 2008 (higher of $100K or 50% of 6/30 balance) and no headline of a "criminal" prosecution success.
    In criminal tax fraud prosecutions the punishments which follow settlements, plea bargains and guilty pleas usually include one single FBAR penalty equal to 50% of the highest balance year, not 50% for each year which the law would otherwise allow.

    Lets summarize what in this criminal case before United States District Judge Thomas W. Thrash has to be decided on?
    1. sentencing of 0 to 5 years of a prison term and/or 3 years of supervised release
    2. fine of 0 to $250K
    The next phase of the proceeding involves the district court determining the precise amount of the penalty and then entering a judgment.........(btw. the defendant in a civil enforcement action had a right to a jury trial on liability, but that the district court had the ultimate responsibility to determine the amount of the civil penalty)
    3. Title 31 penalties a) correct amount of years b) correct account balance for calculating the violation (liability and penalty)
    Now in this case only 1 year (2008) was open with regards to the criminal SOL or 2 for the civil SOL. That makes it relatively easy in case of a no plea agreement. But what would happen in case 4 years were still open under the criminal SOL ?
    Would Judge Thrash have the discretion to go with 1,2,3 or all 4 years independently or does DOJ Tax have to state their claim if they are seeking 1,2,3 or for all 4 years the max. wilful FBAR penalty ?
    And of course as a consequence to this would the defense Finestone&Morris have to raise with the District Judge now that the Title 31 penalties would violate the Excessive Fines Clause of the Eighth Amendment to the U.S. Constitution ?

    And finally since the defense stated that they are preparing corrected tax returns (plural) maybe for 1997 to 2008 does this mean in a plea agreement (I do not know if civil fraud was asserted) tax SOLs are meaningless or is Mr. Howard Bloomberg only amending his 2008 return (which is still within the 6y SOL) ?

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  4. I don't understand why he would offer up 278,397, when under the law the most they could have gotten him for was 100,000. Was he hoping if he offered up 1/2 the value ogf the highest balance they would go easy on him in other areas?

    ReplyDelete

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