Another Plea to Offshore Account Tax Crimes (9/28/16; 9/29/16)

DOJ Tax announced here a new information, here, and guilty plea today.  Excerpts:

New York City Resident Pleads Guilty to Using Sham Foreign Entity and Secret Foreign Accounts in Switzerland and Israel to Evade Taxes 

Used Secret Foreign Accounts to Hide over $7 Million in Funds and Evade Taxes
A New York City man pleaded guilty today to a criminal information charging him with tax evasion for tax years 2003 through 2005 and 2007 through 2010, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, and U.S. Attorney Robert L. Capers of the Eastern District of New York. 

“Mr. Hager concealed over $7.3 million in undeclared foreign accounts in Switzerland and Israel and used a sham British Virgin Island entity in order to evade over $650,000 in U.S. taxes,” said Principal Deputy Assistant Attorney General Ciraolo. “As this case demonstrates, the Department and the Internal Revenue Service (IRS), together with our global partners, are successfully working on a daily basis to locate such undeclared accounts, identify those responsible and hold them accountable.” 

According to information presented in court, between 1987 through 2011, Markus Hager, 68, utilized a series of undeclared foreign financial accounts to evade his individual income taxes by concealing assets and income from the IRS in those accounts.  Between 1987 and 2008, Hager maintained several undeclared accounts at UBS, including two numbered accounts and an account held in the name of Contactus Partnership Associated S.A. (Contactus), a sham British Virgin Islands entity.  By the close of 2004, the value of Hager’s undeclared accounts at UBS exceeded $7.3 million.  

Hager closed the UBS accounts in 2008 and transferred the assets to a newly opened account at Clariden Leu, which he controlled and held in the name of Contactus.  Shortly thereafter, Hager closed the Contactus account at Clariden Leu and transferred the assets to a newly opened account held in the name of the same sham entity at a different Swiss bank.  Hager caused that Swiss bank to falsely record Hager’s Belgian cousin as the owner of the assets in the Contactus account.  Approximately six months later, Hager closed the Contactus account at the Swiss bank and transferred the assets to an account at a bank in Israel that Hager caused to be opened in the name of a different Belgian cousin.
From 2005 to 2011, Hager also controlled an undeclared account at Bank Leumi in Israel, which he falsely held under the name of a relative who was not a U.S. person and who resided outside the United States.  In February 2010, after obtaining an Israeli Identity Card, Hager opened an account in his own name at Bank Leumi in Israel but falsely reported that he lived in the United Kingdom and signed a document, under the penalties of perjury, on which he falsely claimed that he was not a U.S. citizen.
According to the information filed, Hager repatriated funds from his undeclared foreign financial accounts by having an attorney draft a sham loan agreement between himself and Contactus and wiring funds from some of his undeclared foreign financial accounts into his attorney’s escrow account. 

According to the information filed, Hager filed false federal and New York State income tax returns on which he failed to report the income from his foreign financial accounts and failed to pay tax on that income.  According to the information, Hager evaded approximately $652,580 in federal taxes for tax years 2003 through 2005 and 2007 through 2010.  Hager also failed to report his ownership and control of his foreign financial accounts to the Department of the Treasury on a Report of Foreign Bank and Financial Account even though an accounting firm had informed Hager of his obligation to do so and advised him of the civil and criminal penalties he could suffer for the failure to do so. 

* * * * 

Sentencing has been set for ­Jan. 4, 2017.  Hager faces a statutory maximum sentence of five years in prison, as well as a term of supervised release and monetary penalties.  According to the plea agreement, Hager agreed to pay restitution to the IRS.

JAT Comments (as amended 9/29/15 12:00pm):

1.  The information to which Hager pled, here, shows a single count.  After reciting the facts, the single charge is

TAX EVASION 

15. The allegations contained in paragraphs one through 14 are realleged and incorporated as if fully set forth in this paragraph. 

16. On or about and between January 1, 2003, and April 20, 2012, both dates being approximate and inclusive, within the Eastern District of New York and elsewhere, the defendant MARKUS HAGER did knowingly and willfully attempt to evade and defeat substantial income tax due and owing by him to the United States of America for the tax years 2003 through 2005 and 2007 through 2010, to wit: approximately $652,580, by various means, including, among others, concealing assets and income in foreign financial accounts, concealing assets and income in the names of nominees and sham corporations, filing and causing to be filed U.S. Individual Income Tax Returns, Forms 1040, for himself and his spouse with the IRS for the calendar years 2003 through 2005 and 2007 through 2010, that falsely and fraudulently omitted income generated by assets concealed in foreign financial accounts, and causing false statements to be made to an Internal Revenue Service Revenue Agent.

Note that Hager is subject to a single 5 year penalty that the multi-year charge of tax evasion was packed into a single count.  Most often, when evasion charges are made for multiple years, each year is charged as a separate count.  I have seen multi-year single counts of evasion, but there is usually a story behind that type of charge.  One thing that strikes me is the statute of limitations.  Are statute issues avoided by packing all years into a single count where some of the years might be outside the statute?  More likely, his actions, such as false statements to a revenue agent, after the years that appear to be outside the 6-year statute of limitations (e.g., 2003) may have refreshed the statute of limitations so that all years would be within the statute of limitations.  See United States v. Beacon Brass Co., Inc., 344 U.S. 43 (1952).  Of course, the single five-year count will likely permit the judge sufficient leeway under the Sentencing Guidelines to impose an appropriate Guidelines sentence, whether or not a Booker variance is made.

2. There is no indication that the FBAR penalty has been resolved by the plea.  (Caveat, I don't have the plea agreement; that plea agreement apparently is not available through Pacer, so I have made a request to the prosecutor for it; whether I will get it is another thing.)  However, the press release does state one high amount of over $7.3 million, which would mean that the usual plea requirement of a 50% penalty would require a $3.65 penalty and that would be the penalty normally required for the willful FBAR penalty in audits pursuant to the recent guidance now contained in the IRM.  But, that is the penalty normally applied and the IRS can go higher.  His conduct is pretty egregious, but I think his lawyers would have pressed as a condition of the plea agreement that the penalty not exceed 50% of the high amount.  I will also update this comment based on subsequent information.

Another UBS Customer Pleads (2/21/15)

A DOJ Press Release, here, announces another plea for a UBS and Clariden Leu depositor.  The plea is for tax obstruction, Section 7212(a), here.  Key excerpts from the press release:

According to court documents and statements, Georges Briguet, a naturalized U.S. citizen, had Swiss financial accounts at UBS AG and at Clariden Leu Ltd., which was a wholly owned subsidiary of Credit Suisse AG.  He opened the UBS account in Switzerland in or around 1992, with approximately 7 million Swiss francs.  In 2008, he transferred the UBS funds to a numbered account at Clariden Leu in Switzerland, which he maintained until at least 2011.  For tax years 2001 through 2010, Briguet filed false federal income tax returns on which he failed to report his foreign financial accounts, failed to report any income earned thereon and failed to pay any taxes on such foreign income.  

In addition, Briguet was interviewed by an IRS revenue agent who was conducting a civil audit.  During the interview, Briguet falsely stated that he had no foreign income and no foreign financial accounts.  He then later repeated those false statements to an IRS special agent who interviewed Briguet as part of a criminal investigation.  

At sentencing, Briguet faces a statutory maximum sentence of three years in prison and a $250,000 fine.  As part of his plea agreement, Briguet has agreed to pay the IRS restitution in the amount of $169,935.

JAT Comments:

1. The restitution would be for the tax involved.  There is no restitution for the related FBAR violation (not charged but apparently admitted) because there is no financial loss related to the FBAR crime.  The restitution seems low for the number of years involved.  Note, in this regard, that the restitution is contractual in the plea agreement.  Hence, it can be awarded even though, absent plea or some other benefit in sentencing, it is not generally available for Title 26 crimes.  Also, note that contractual restitution can include amounts beyond the count(s) of conviction. As to the amount, the defendant may have already paid some of the amount involved, but the Government might want it to still be included in the restitution number to assure the benefit of the provisions assuring that the Defendant can't contest the amount.
2. This case is unusual because, apparently not counseled below or during the two IRS interviews, he lied about the accounts.  The press release does not state whether he was represented at those interviews.
3. Because of the false statements, the Government could have charged him with 18 USC 1001, here, false statements, a 5-year felony, or 7212(a), here, tax obstruction, also a 3-year felony.   As generally with plea agreements charges are not made or, if made, dropped for the guilty plea.  In this regard, the court is unlikely to impose sentence in excess of 3-years -- the statutory maximum for the count of conviction.  So, even if there had been more charges to which the defendant pled, the sentencing likely would not be affected..(For this reason, the PSR often notifies the court of other possible charges that the pattern of conduct involved but states that, based on the pattern, the sentence would not be greater than allowed for the plea to the lesser number of charges.)
4. Note that the lie during the IRS interviews, in addition to being a separate crime that could have been charged as noted in paragraph 3, could have refreshed the statute on the original evasion years -- even years for which the statute had otherwise expired.  United States v. Beacon Brass Co., Inc., 344 U.S. 43 (1952), here.  That would depend upon the false answers given.
5. In these cases, in announcing the plea, the Government often announces a penalty number that is the FBAR civil penalty imposed.  This announcement does not do that.

Investigative Journalists Report on the Maze of Offshore Accounts as Global Problem (4/4/13)

Earlier today, a reader pointed me to a report that had gained currently overseas but apparently not in the U.S.  The link is an investigative journalism report by the International Consortium of Investigative Journalists titled Secrecy for Sale: Inside the Global Offshore Money Maze, here.  I just noticed that the New York Times and, presumably, other news organizations will pick up the story.  The New York Times story is Rick Gladstone, Vast Hidden Wealth Revealed in Leaked Records (NYT 4/4/13), here.

Excerpts from the NYT Article :

An enormous leak of confidential financial records has revealed the identities of thousands of wealthy depositors — including European officials and corporate executives, Asian dictators and their children, and even American doctors and dentists — who have stashed immense amounts of money in offshore tax havens. 

The leak of records, mainly from the British Virgin Islands, the Cook Islands and Singapore, covers 2.5 million files that disclose proprietary information about more than 120,000 offshore companies and trusts and nearly 130,000 individuals and agents, including the wealthiest people in more than 170 countries. 

* * * * 

The International Consortium of Investigative Journalists, a network of reporters that obtained the secret records, collaborated with The Guardian, Asahi Shimbun, Le Monde, The Washington Post and more than 40 other news organizations to untangle and report their contents. 

The project, titled “Secrecy for Sale,” appeared to have the potential to create political shock waves, particularly in Europe, where an economic malaise caused by the euro zone debt crisis has created enormous popular resentment toward austerity policies and widened the gap between rich and poor. The project said some of the world’s top banks in Europe, including UBS and Deutsche Bank, had “aggressively worked to provide their customers with secrecy-cloaked companies in the British Virgin Islands and other offshore hideaways.”

Credit Suisse Sends U.S. Customers Notice of Compliance with Refined U.S. John Doe Treaty Request (8/9/12; revised 8/11/12)

I previously noted in this blog that the IRS had made a double tax treaty request to Switzerland for Credit Suisse data regarding U.S. taxpayers.  The treaty request was denied for alleged over breadth, but the IRS came back with a more refined request.  The treaty request was refined.  See IRS Submits Reformulated Treaty Request for Credit Suisse U.S. Clients (8/4/12), here.  (See also all blogs on Credit Suisse here.)

I have received a copy of a notice to Credit Suisse depositors that their information is being turned over to the Swiss Federal Tax Administration (the "SFTA") for turnover to the IRS unless the taxpayer invokes Swiss processes to prevent the turnover.  I quote immediately below certain portions of the request.  I then make some comments (I do not include my copy as a pdf because it is too hard to read):

NOTICE TO UNITED STATES BENEFICIAL OWNERS OF ACCOUNTS WITH CREDIT SUISSE 

Dear Mr. ______: 

We have been informed that the United States Internal Revenue Service ("IRS") submitted a new request for administrative assistance to the Swiss Federal Tax Administration (the "SFTA") pursuant to Article 26 of the Convention of October 2, 1966 between the Swiss Confederation and the United States of America with respect to Tax on Income ("the 1996 convention").  The IRS is seeking information with regard to accounts of certain U.S. persons owned through a domiciliary company (as Beneficial Owners) that have been maintained with CREDIT SUISSE AG ("CREDIT SUISSE") in Switzerland (as applicable in a given case in the "IRS Treaty Request") at any time during the years January 1, 2002 through and ending on December 31, 2010. 

In connection with the IRS Treaty Request, the SFTA has issued an order directing CREDIT SUISSE to submit responsive account information to the SFTA.  This order is immediately executable and CREDIT SUISSE as an information holder has no right to appeal. 

[*2] 

This letter provides notice to you that the CREDIT SUISSE account of which you have or had the beneficial ownership appears to be within the abovementioned scope of the IRS Treaty Request. 

This letter also provides certain information on the Treaty Process opened by the SFTA and the steps available to you in connection with that process which are the following: 

- Consent to the SFTA's sending the account information directly to the IRS, see #1 below.
- Appoint within 20 days an agent or lawyer in Switzerland to receive all official notifications by the SFTA as described under #2 below. 

Should you have any questions, please consult the CREDIT SUISSE website at www.credit-suisse.com or call our dedicated team at CREDIT SUISSE AT 40 44 335 60 00. 

* * * * 

[*3] 

If, after comprehensive examination of your account information, the SFTA comes to the conclusion that information related to your CREDIT SUISSE account is required to be provided to the IRS pursuant to the 1996 Convention, the SFTA will render an appropriate final decision and notify your agent or lawyer in Switzerland.  The authority will then advise your agent or lawyer of your fight under Swiss law to appeal such a decision by the SFTA to the Swiss Federal Administrative Court. 

The SFTA has asked us to point out that if you choose to appeal such a decision, you should be aware that (I) Title 18 United States Code Section 3506 provides in Section (a) that "any national or resident of the United States who submits, or causes to be submitted, a pleading or other document to a court or other authority in opposition to an official request for evidence of an offense shall serve such pleading or other document on the Attorney General [of the United States] at the time such pleading or other document is submitted" and (ii) you should consult with a qualified lawyer concerning whether to appeal any such decision of the SFTA and concerning any obligations you may have under Section 3506 of Title 18 of the Unites States Code. 

[*4] 

Please be advised that CREDIT SUISSE is not able to provide any information on whether or not information with respect to a specific account will be provided to the IRS.  Because CREDIT SUISSE will not be made aware of this decision, this information can be obtained only from SFTA. 

Sincerely yours, 

CREDIT SUISSE AG

Clariden Leu, Credit Suisse Affiliate Bank, Rolls Over (11/12/11)

Clariden Leu, a banking affiliate of Credit Suisse, is participating in the disclosure, presumably just because it is a CS affiliate. The general Clariden Leu web site is here. The Clariden Leu public announcement on its web site, here, is:

US Request for administrative assistance 

The US Internal Revenue Service (IRS) recently submitted a request for administrative assistance to the Swiss Federal Tax Administration (SFTA) pursuant to the 1996 double tax treaty between Switzerland and the USA, seeking information with regards to accounts of domiciliary companies belonging to certain US persons as beneficial owners (the Treaty Request). In connection with the IRS Treaty Request, the SFTA has issued an order directing Clariden Leu AG to submit responsive account information to the SFTA.

Presumably the parameters for the treaty request are the same as for  Credit Suisse, previously discussed in my blog The Swiss Government Begins Disclosing Credit Suisse Accounts to IRS (11/8/11), here.

See also Lynnley Browning's Reuters' Blog, Oldest Swiss private bank to offer US client names (11/9/11), here. [For your continuing information, I am adding Lynnley Browning's Reuters' Blog as a link in the right hand column under the category LINKS FOR OFFSHORE MATTERS -- FBARS, PROSECUTIONS AND VOLUNTARY DISCLOSURE.]

Just a reminder: The Credit Suisse and Clairiden Leu announcements are just the beginning phases of post-UBS disclosures that the IRS will obtain. Long ago on this blog, I sounded the theme of "Get in Line Brother," from a famous bluegrass song which I used to encourage U.S. persons with offshore accounts, particularly Swiss accounts, should get right with the IRS. The advice is still good, although the precise method for getting in line might, depending upon the circumstances, not require a voluntary disclosure under the post-OVDI 2011. Talk to your attorney.