Wednesday, March 4, 2015

Another UBS Client Sentenced Lightly (3/4/15)

According to a press release from the USA for ND GA, here, a former UBS client, Gregg A. Kaminsky, has been sentenced for four months incarceration and two years supervised release for an FBAR violation.  My blog report on his guilty plea is here:  Another UBS Depositor Pleads Guilty (Federal Tax Crimes Blog 12/19/14), here.  The key excerpts from the press release are:

ATLANTA - Gregg A. Kaminsky has been sentenced for wilfully failing to file a Foreign Bank Account Report with the U.S. Department of Treasury in connection with his concealment of income and assets in accounts in Switzerland, Hong Kong, and Thailand over several years, as well as his failure to report certain income earned in the virtual world, “Second Life.” 
* * * * 
            Kaminsky is an Internet entrepreneur who serves as the Chief Executive Officer of Circlenet LLC, based in Atlanta, Georgia.  From 2000 through mid-2009, Kaminsky owned and controlled a foreign bank account with Union Bank of Switzerland AG (“UBS”), one of the biggest banks in Switzerland and largest wealth managers in the world.  By 2006, Kaminsky’s UBS account held approximately $1.1 million.  From time to time between 2002 and 2009, Kaminsky caused funds to be wire-transferred from his UBS account in Switzerland to other foreign bank accounts controlled by him in Thailand and Hong Kong.  Also during that time, Kaminsky caused his income from at least two different U.S. companies to be direct-deposited into his UBS account in Switzerland. 
             Yet, over this period, Kaminsky did not disclose his UBS account or other foreign financial accounts to the U. S. Treasury Department as required, and thereby concealed several hundred thousand dollars in taxable income, interest, and dividends from the U.S. Internal Revenue Service (IRS).
            In addition, in 2007 and 2008, Kaminsky omitted his UBS account and associated income from Free Applications for Federal Student Aid (FAFSA) that he electronically filed with the U.S. Department of Education in order to qualify for need-based federal financial aid to fund his tuition for an Executive MBA program at Emory University.  At the time of the FAFSA applications, Kaminsky controlled over a half million dollars in his UBS account, which would have made him ineligible for federal student loan assistance. 
             On June 30, 2008, the U.S. Department of Justice sought court approval to compel UBS to disclose the identities of U.S. account holders who may be using UBS accounts to hide assets overseas and thereby evade U.S. taxes.  The request and the order authorizing it were widely reported by the media throughout the United States, and this coverage continued throughout 2008 and 2009 as the U.S., UBS, and Switzerland negotiated a resolution and UBS began disclosing U.S. account holders to the IRS. 
             Following this news, Kaminsky closed his UBS account and transferred the balance of his UBS account to an account that he controlled at HSBC Bank in Hong Kong.  Further, in spring 2010, Kaminsky filed FBARs for his Swiss and Hong Kong accounts for the very first time, also filing amended individual income tax returns for 2007 and 2008 that disclosed the previously unreported income in his UBS account.  However, in his amended 2007 and 2008 returns, and in his subsequently filed returns for 2009 through 2012, Kaminsky still failed to report nearly $150,000 in taxable income earned from his business activities in the virtual world, “Second Life.”   
             Participants in Second Life, referred to as “residents,” can engage in a wide variety of business activities, including buying, renting, and sub-leasing virtual land and buying and selling other virtual goods, services, and experiences for their “avatars.”  Transactions are conducted using a virtual currency, “Linden Dollars.”  Linden Dollars can be bought and traded on the “Linden Exchange,” and are redeemable for cash.   
             Including his virtual world income, Kaminsky failed to report over $400,000 in income to the IRS between 2000 and 2012, resulting in a loss to the IRS of approximately $125,000. 
             Kaminsky, 46, of Atlanta, Georgia, was sentenced today to serve four months in federal prison to be followed by two years of supervised release, two months of home confinement, and 200 hours of community service.  Kaminsky was also ordered to pay restitution to the IRS in the amount of $91,983.  Kaminsky was convicted on these charges on December 18, 2014, after he pleaded guilty.  As part of his plea agreement with the United States, Kaminsky was also required to pay a civil penalty to the IRS in the amount of $250,635.20, which is equivalent to fifty percent of the value of the balance in Kaminsky’s HSBC account in Hong Kong as of June 30, 2009.    
 * * * * 
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit
JAT Comments:
  1. I continue to be amazed at the light sentences.  Based on the facts reported, he evaded substantial tax, he violated the FBAR law, he took substantial affirmative acts to continue the deception, and cheated on his student loan application.  And, for all this, he got 4 months.  Ordinary tax cheats (those who do it the old-fashioned way without foreign accounts) to paraphrase that great line from When Harry Meets Sally, would like to get what he got.  (The line is "I'll have what she's having," after Meg Ryan fakes an orgasm for Billy Crystal in a public restaurant.  The scene may be viewed in its glorious entirety here.)
  2. FFETF has not been a regular subject on this blog.  Indeed, it has only appeared once in a short blurb on the creation of its stopfraud web site.  See FFETF Establishes New Financial Fraud Website (Federal Tax Crimes Blog 4/19/10), here.

1 comment:

  1. What is your sense of the ratio of offshore prosecutions that involve offshore accounts that hold reported, post-tax income but then generate unreported, untaxed investment income and offshore accounts that hold unreported, pre-tax income and generated further unreported, untaxed investment income (as in this case). Does seems strange that the latter cases, which involve multiple layers of tax evasion would benefit from the leniency shown to the former.


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