Offshore Account Related Plea After Quiet Disclosure (4/4/2020)

On April 3, 2020, DOJ Tax issued this press release:  Lake Worth Businessman Pleads Guilty to Evading Taxes on Millions in Income, Stashing Funds in Secret Accounts Around the World, here.

The key excerpts are (with bold face supplied by JAT to highlight the taxpayer’s attempt to hide the ball through a false quiet disclosure):

A Lake Worth, Florida, businessman pleaded guilty today to tax evasion and willful failure to file a Report of Foreign Bank or Financial Account * * * *. 

According to court documents and statements made in court, Dusko Bruer owned and operated a company that bought U.S.-made agricultural machinery and parts and sold them throughout the world. Beginning in 2003, the company did not pay Bruer a salary. Instead, Bruer used millions of dollars from the company’s bank accounts to pay his personal expenses, make investments abroad, and make transfers to an employee and his family. From 2007 through 2011, Bruer transferred over $5.8 million of the company’s profits to foreign financial accounts. Bruer used the company’s profits to buy a yacht, purchase a waterfront home for his girlfriend and himself, purchase a home for an employee, and buy real property in Serbia. Between 2007 and 2014, Bruer failed to report more than $7.7 million in income and did not pay taxes of more than $2.7 million that were due to the United States. 

Although Bruer’s company had a number of employees and reaped millions of dollars in profits, Bruer never filed a corporate tax return for the company nor did the company ever pay taxes on its income. Bruer also never filed employment tax returns during those years reporting wages that the company paid to its employees nor did the company withhold and pay over payroll taxes. 

From 2007 through 2015, Bruer maintained financial accounts in Croatia, Germany, Serbia, and Switzerland. He did not report his ownership of the accounts to the Financial Crime Enforcement Network (FinCEN) by filing a Report of Foreign Bank or Financial Account (FBAR), despite knowing he had an obligation to do so. In 2010, an account he held at a subsidiary of Credit Suisse AG in Zurich, Switzerland reached a year-end high value of $6,177,586. Bruer used the assets in his foreign accounts for personal use, including the purchase of a yacht for $1,350,000 and a 3,200 square foot home in Lake Worth, Florida, with 100 feet of waterfront frontage for approximately $1,650,000. 

From 1999 to 2014, Bruer never filed a personal tax return nor did he pay tax on his income. In 2015, Credit Suisse closed his account in Switzerland and advised him to enter the IRS’s Offshore Voluntary Disclosure Program (OVDP), by which taxpayers could avoid criminal prosecution by making a voluntary disclosure directly to IRS-Criminal Investigation, filing six years of delinquent or amended income tax returns, as well as delinquent or amended FBARs, paying back taxes, interest, and certain penalties on the six tax years in the disclosure period, and paying a penalty on the highest aggregate account balance of their noncompliant offshore assets. Bruer did not enter into the OVDP because he determined that the cost would be too high. Instead, Bruer made a “quiet” disclosure that involved filing several delinquent tax returns with the IRS, not flagging the returns in anyway or paying the taxes, penalties and interest that would be paid in OVDP. 

The returns Bruer filed as part of his “quiet” disclosure were false because they disclosed only the funds he held in the Credit Suisse account and not the funds he held in the accounts in Croatia, Germany, Serbia, nor did they report the income he earned from his company.

I offer the following:

• The information, here.
• The Plea Agreement, here.
• The Factual Agreement, here.
• The CourtListener Docket Entries, here.

JAT Comments:

Another Plea Related to Offshore Accounts (3/9/20)

DOJ Tax issued this press release:  Alabama Salesman Pleads Guilty to Tax Evasion: Defendant Used Offshore Insurance Wrapper Accounts to Conceal Assets, here.  The criminal information and plea agreement are here and here.

Key excerpts are:

According to court documents and statements made in court, Ivan Scott “Scott” Butler was an automobile industry consultant and sold automobile warranties as an independent salesman. In 1993, Butler stopped filing tax returns and attended tax defier meetings and purchased tax defier materials. Starting in 1998, Butler used several Nevada nominee corporations to receive his income. In around 1999, Butler moved hundreds of thousands of dollars, some in precious metals, to bank accounts in Switzerland and concealed his assets in offshore insurance policies held in the name of non-U.S. insurance providers, disguising his ownership of the funds. Such accounts, which generally are used as investment vehicles, are commonly known as “insurance wrappers.”
In 2014, Butler converted some of his insurance annuities into precious metals, which were shipped to Butler and another individual in the United States. Some of those precious metals were given to friends and family for safekeeping. In total, Butler caused a tax loss to the Internal Revenue Service (IRS) of $1,093,400.
* * * *
At sentencing, Butler faces a maximum sentence of five years. Butler also faces a period of supervised release, restitution, and monetary penalties.

JAT Comments:

1.  The statement of facts is just a variation on a theme of the pattern of offshore account evasion.  The big twist here is that Butler coupled the offshore evasion failure to file tax returns.

2.  Obviously, this pattern of conduct involved a lot more potential crimes than Butler pled to.  Pleading permits a conviction on fewer counts.  But, the Sentencing Guidelines permits consideration of relevant conduct but assuming that the object of the crimes (pled and relevant conduct) is tax evasion, then the tax loss for all of them will be the critical component in the Guidelines calculation.  It is unlikely that the failure to get a plea to more counts will affect the sentence Butler receives.

Yet Another Offshore Account Plea (11/19/18)

DOJ Tax announced, here, another plea deal today.  The defendant is Teymour Khoubian.  Key excerpts:

According to the plea agreement and related court documents, Teymour Khoubian pleaded guilty to filing false tax returns for tax years 2009 and 2010 that failed to report foreign financial accounts in Germany and Israel, and failed to report income earned on those accounts. Between 2005 and 2012, Khoubian jointly owned multiple accounts at Bank Leumi in Israel with his mother that held between $15 million and $20 million. Additionally, since at least 2005, Khoubian also owned a foreign account at Commerzbank AG in Germany. Despite his ownership interest in these accounts and a legal requirement to declare all offshore accounts containing $10,000 or more, Khoubian prepared false tax returns for tax years 2005 through 2011 that did not fully disclose his foreign accounts, nor report all the interest income earned on those accounts. For instance, Khoubian’s Bank Leumi accounts generated interest income in excess of $4 million between 2005 and 2010, none of which was reported to the Internal Revenue Service (IRS).  The total tax loss associated with the Bank Leumi accounts is approximately $ 1.2 million.  

At least since 2009, Khoubian was aware of the IRS’s Offshore Voluntary Disclosure Program (the OVDP).  The OVDP allowed U.S. taxpayers to voluntarily disclose their previously unreported foreign accounts and pay a reduced penalty to resolve their civil liability for not declaring foreign accounts to U.S. authorities. During 2011 and 2012, Bank Leumi requested that Khoubian sign a Form W-9 for U.S. tax reporting purposes. In an August 13, 2012, recorded telephone conversation with a banker at Bank Leumi, Khoubian stated that the reason he did not want to sign a Form W-9, was "because you have to pay half of it." 

In 2012 and 2014, Khoubian knowingly made multiple false statements to IRS special agents investigating his foreign accounts, including falsely stating that the Bank Leumi accounts were not in his name, that he did not own a bank account in Germany from 2005 to 2010, that he closed his German bank account and moved all of that money to the United States, and that none of the money in his German bank account was moved to Israel.     

As part of the plea agreement, Khoubian agreed to the entry of a civil judgment against him for an FBAR penalty in the amount of $7,686,004.  Khoubian further agreed to pay an additional $612,310 in restitution to the IRS.   

Documents related to the plea are:

1.  The plea agreement, here.
2.  The docket entries as of today, here.

JAT Comments:

California Plastic Surgeon Sentenced to One Year and One Day for FBAR Violation (9/14/18)

DOJ announced here another sentence related to offshore accounts.  Marc Edward Mani, a prominent Beverly Hills plastic surgeon, was sentenced for one plea count of FBAR violation.  I previously reported his plea:  Another Plea Agreement for Offshore Account (7/29/17; 7/30/17), here.  I also offer the following documents:

• The Government's Sentencing Memo, here.
• The Defendant's Sentencing Memo, here.
• The Government's Supplemental Memo re Restitution, here.
• The Judgment, here.

Excerpts from the sentencing press release:

Mani pleaded guilty In July 2017 to one count of failing to file a foreign bank and financial account report (FBAR) for the 2013 tax year. When he pleaded guilty, Mani admitted failing to file FBARs with the Treasury Department for both the 2012 and 2013 tax years. He also admitted that he failed to report on his federal income tax returns the vast majority of the approximately $1.28 million in foreign income he earned in Dubai for the years 2012, 2013 and 2014. 

          Mani began to travel to Dubai in 2011 to perform plastic surgery for a foreign medical center. Mani’s accountant, who was aware that Mani was earning foreign income, informed him that he would be required to report to U.S. authorities any foreign bank accounts under his control. In 2012, Mani opened an account with a Dubai-based bank and began depositing income he earned from abroad into this account. He liquidated the account in 2013, when it held more than $400,000 in foreign currency.

JAT Comments:

1.  The Governments Sentencing Recommendation.

Based on a tax loss based on the tax sentencing guidelines of 13 after a 2-level reduction for 5K1.1 substantial assistance.  The indicated range for the sentence at the 13 level is 12-18 months.  The Government recommended a sentence of 14 months.  The Government summarizes its key support for the recommended sentence as follows:

Another Offshore Account Guilty Plea (8/20/18)

DOJ Tax announced here that Ben Zion Birman of Los Angeles pled guilty to willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR).  Here are the relevant excerpts:

According to court documents, Ben Zion Birman, of Los Angeles, California held offshore accounts in Israel at Bank Leumi Le-Israel B.M. from 2006 to 2011. Birman willfully failed to file with the Department of Treasury an FBAR for calendar year 2010, despite having over $1 million in Bank Leumi accounts.  In an effort to further hide his money, Birman instructed Bank Leumi to hold bank mail from delivery to the United States, and obtained access to his offshore funds through the use of “back-to-back” loans, which were designed to enable borrowers to tap their concealed accounts.  These lending arrangements permitted Birman to have funds issued by Leumi’s U.S. branch that were secretly secured by funds in his undeclared accounts in Israel. 

In December 2014, Bank Leumi entered into a deferred prosecution agreementafter the bank admitted to conspiring from at least 2000 until early 2011 to aid and assist U.S. taxpayers to prepare and present false tax returns by hiding income and assets in offshore bank accounts in Israel and other locations around the world.  Under the terms of the deferred prosecution agreement, Bank Leumi paid the United States a total of $270 million and continues to cooperate with respect to civil and criminal tax investigations.

* * * * 

Birman faces a maximum sentence of five years in prison, as well as a period of supervised release, restitution and monetary penalties. Birman's sentencing is scheduled for December 10, 2018.  

Another Offshore Account Guilty Plea (5/15/2018)

I recently reported on the district court resolution of pretrial motions in an offshore account case charging tax obstruction (§ 7212(a)), tax perjury (§ 7206(1)), and conspiracy (18 USC § 371).  See Pretrial Order Excluding Government Evidence in Criminal Tax Case for Offshore Accounts (Federal Tax Crimes Blog 4/22/18), here, discussing  United States v. Doyle, 2018 U.S. Dist. LEXIS 66980 (S.D. N.Y. 2018), here.  Shortly after that disposition, the defendant in the case, Lacy Doyle, pled guilty to one count of tax perjury, § 7206(1), a three year felony.  See SDNY USAO press release, here.  (Note the USAO press release does not mention the count for the plea, but I have confirmed from other sources that it was tax perjury; I could not find any plea documents on Pacer as of today.)

Key excerpts from the USAO press release:

As alleged in the Indictment and other documents filed in the case, DOYLE, assisted by others – including Beda Singenberger, a Swiss citizen who ran a financial advisory firm – established and maintained undeclared bank accounts in Switzerland and hid those accounts from the IRS.  DOYLE used a sham entity to conceal from the IRS her ownership of some of the undeclared accounts and deliberately failed to report to the IRS the accounts and the income generated in the accounts. 

In 2003, DOYLE’s father died, and DOYLE was appointed the executor of her father’s estate.  At that time, DOYLE and her father jointly held an account at Credit Suisse with a value of approximately $3,700,000.  DOYLE then made court filings falsely stating under penalty of perjury that the total value of her father’s estate was under $1 million when, in truth and fact, it was more than four times that amount.  Doyle initially held the secret inheritance from her father in an account at Credit Suisse under her own name.
Thereafter, in 2006, DOYLE, with Singenberger’s assistance, opened an undeclared Swiss bank account for the purpose of depositing the secret inheritance from her father.  The account was opened in the name of a sham foundation formed under the laws of Lichtenstein to conceal DOYLE’s ownership.  As of May 15, 2007, the account held assets valued at approximately $5,056,548. 

In 2010, the sham foundation controlled by DOYLE was re-domiciled from Lichtenstein to Panama.  As of December 31, 2016, the sham foundation maintained assets of at least approximately $3,028,562.

JAT Comments:

Another FBAR Plea And Notice of Government Change of Position on Applicable Guidelines (10/27/17)

DOJ Tax announced here another FBAR plea.  The defendant is Hyung Kwon Kim, identified as a "Greenwich, Connecticut man" (which I presume means a Greenwich Connecticut resident), and the plea was entered in the ED VA.  I link also the following:

• The criminal information, here, to which the plea was entered
• The Plea Agreement, here.
• The Statement of Facts, here.
• The Docket Entries as of about 1:30 pm 10/27/17, here.

The key excerpts from the press release are:

According to court documents and information provided in court, Hyung Kwon Kim, a citizen of South Korea and, since 1998, a legal permanent resident of the United States, resided in Massachusetts and later in Connecticut.  Around 1998, Kim traveled to Switzerland to identify financial institutions at which to open accounts for the purpose of receiving transfers of funds from another individual in Hong Kong.  Over the next few years, Kim opened accounts at several banks, including Credit Suisse, UBS, Bank Leu, Clariden Leu, and Bank Hofmann.  In 2004, the value of the funds in Kim’s accounts exceeded $28 million. 

* * * * 

Kim conspired with several bankers, including Dr. Edgar H. Paltzer, to conceal the funds from U.S. authorities.  Paltzer, who was convicted in 2013 in the Southern District of New York for conspiring to defraud the United States, and the other bankers assisted Kim in opening accounts in the names of sham entities organized in Lichtenstein, Panama and the British Virgin Islands.  Paltzer and the other bankers facilitated financial transactions for Kim, so that Kim could use the funds in the United States.  For example, between 2003 and 2004, Kim directed Paltzer and another banker to issue nearly $3 million in checks payable to third parties in the United States for the purchase of a residence in Greenwich, Connecticut.  In 2005, Kim created a nominee entity to hold title for the purchase of another home on Stage Harbor in Chatham, Massachusetts, for nearly $5 million.  Kim and Paltzer communicated about the purchase in a manner that created the appearance that Kim was renting the property from a fictitious owner. 

Between 2000 and 2008, Kim took multiple trips to Zurich, Switzerland and withdrew more than $600,000 in cash during these visits.  He also brought his offshore assets back to the United States by purchasing millions of dollars’ worth of jewelry and loose gems.  For example, in 2008, Kim purchased an 8.6 carat ruby ring from a jeweler in Greenwich, Connecticut, which he financed by causing Bank Leu to issue three checks totaling $2.2 million to the jeweler. 

In 2008, during a trip to Zurich, Kim’s banker at Clariden Leu informed Kim that due to ongoing investigations in the United States, Kim could either disclose the accounts to the U.S. government, spend the funds, or move the funds to another institution.  Kim moved the funds into nominee accounts at another bank. In 2011, Kim liquidated the accounts by, among other things, withdrawing tens of thousands of dollars in cash and purchasing three loose diamonds for about $1.7 million from the Greenwich jeweler. 

Kim also admitted that from 2000 through 2011, he filed false income tax returns for 1999 through 2010, on which he failed to report income from the assets held in the foreign financial accounts that he owned and controlled in Switzerland.
As part of his plea agreement, Kim will pay a civil penalty of over $14 million dollars to the United States Treasury for failing to file, and filing false, FBARs, which is separate from any restitution the Court may order.

Now, just a few comments on the documents linked above.

Another Plea Agreement for Offshore Account (7/29/17; 7/30/17)

USAO CD CA announced here the plea by a plastic surgeon to one FBAR criminal count.  The relevant excerpts from the announcement are:

          According to the plea agreement filed in this case, while working as a plastic surgeon in Beverly Hills, Mani began to travel to Dubai in 2011 to perform plastic surgery for a foreign medical center. Mani’s accountant, who was aware that Mani was earning foreign income, informed him that he would be required to report any foreign bank accounts under his ownership or control to the IRS. 

          In 2012, Mani opened a bank account with a financial institution based in Dubai and began depositing income he earned from abroad into this account. By February 2013, Mani’s foreign bank account held more than $400,000. However, Mani willfully failed to file a FBAR to disclose his foreign bank account for the calendar years 2012 and 2013. 

          In addition to failing to disclose his interest in his foreign bank account, Mani also failed to report on his federal income tax returns the vast majority of the approximately $1.28 million in foreign income he earned in Dubai for the years 2012, 2013 and 2014.

The plea agreement is here.

JAT comments:

1.  The gravamen of the offenses outlined in the plea agreement and statement of facts is really tax crimes with the FBAR crime facilitating the tax crime.  For this reason, I am surprised that DOJ Tax would approve the FBAR plea.

2.  The plea agreement requires two FBAR penalties of $100,000 (pars. 5(f) and 5(g)).  (Note: I had initially missed one of the penalties and revised this comment accordingly because a reader named Kneave Riggall brought the extra FBAR penalty to my attention; thanks to Mr. Riggall.)

Credit Suisse Banker Pleads Guilty to Conspiracy (7/20/17)

DOJ Tax announced here the guilty plea by Susanne D. Rüegg Meier, a former Credit Suisse AG banker, for conspiracy.  I link the Plea Agreement here, the Statement of Facts here and the docket entries as of today here.  I previously reported on the indictment here:  Criminal Charges for More Swiss Bank Enablers (Federal Tax Crimes Blog 7/21/11), here.  It is unclear where she has been in the meantime, but my spreadsheet indicates (accurately or not) that she was a fugitive, presumably because a Swiss citizen and resident who chose to stay away from the U.S. after the indictment.  There is no indication as to why she returned now

The key parts of the announcement are:

According to the statement of facts and the plea agreement, Susanne D. Rüegg Meier, admitted that from 2002 through 2011, while working as the team head of the Zurich Team of Credit Suisse’s North American desk in Switzerland, she participated in a wide-ranging conspiracy to aid and assist U.S. taxpayers in evading their income taxes by concealing assets and income in secret Swiss bank accounts. Rüegg Meier was responsible for supervising the servicing of accounts involving over 1,000 to 1,500 client relationships. She was also personally responsible for handling the accounts of approximately 140 to 150 clients, about 95 percent of whom were U.S. persons residing primarily in New York, Chicago and Florida, which held assets under management totaling approximately $400 million. Rüegg Meier admitted that the tax loss associated with her criminal conduct was between $3.5 and $9.5 million. 

Rüegg Meier assisted many U.S. clients in utilizing their Credit Suisse accounts to evade their U.S. income taxes and to facilitate concealment of their undeclared financial accounts from the U.S. Department of the Treasury and the Internal Revenue Service (IRS). She took the following steps to assist clients in hiding their Swiss accounts: retaining in Switzerland all mail related to the account; structuring withdrawals in the forms of multiple checks each payable in amounts less than $10,000 that were sent by courier to clients in the United States and arranging for U.S. customers to withdraw cash from their Credit Suisse accounts at Credit Suisse locations outside Switzerland, such as the Bahamas. Moreover, Rüegg Meier admitted that approximately 20 to 30 of her U.S. clients concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities or other structures that were frequently created in the form of foreign partnerships, trusts, corporations or foundations. 

Between 2002 and 2008, Rüegg Meier traveled approximately twice per year to the United States to meet with clients. Among other places, Rüegg Meier met clients in the Credit Suisse New York representative office. To prepare for the trips, Rüegg Meier would obtain “travel” account statements that contained no Credit Suisse logos or customer information, as well as business cards that bore no Credit Suisse logos and had an alternative street address for her office, in order to assist her in concealing the nature and purpose of her business. 

After Credit Suisse began closing U.S. customers’ accounts in 2008, Rüegg Meier assisted the clients in keeping their assets concealed. For example, when one U.S. customer was informed that the bank planned to close his account, Rüegg Meier assisted the customer in closing the account by withdrawing approximately $1 million in cash. Rüegg Meier advised the client to find another bank simply by walking along the street in Zurich and locating a bank that would be willing to open an account for the client. The customer placed the cash into a paper bag and exited the bank. Rüegg Meier also recommended that a few U.S. clients open new accounts at other specific banks, such as Bank Frey and Wegelin & Co., and transfer their assets from their Credit Suisse accounts to the new accounts. 

Credit Suisse pleaded guilty in May 2014 for conspiring to aid and assist taxpayers in filing false returns, and was sentenced in November 2014 to pay more than $2 billion in fines and restitution.

JAT comments:

Yet Another Offshore Account Conviction But With DOJ Agreement of No Sophisticated Means (5/29/17; 5/31/17)

DOJ Tax announced Friday here the guilty plea of Joyce Meads of College Station, TX.  Meads was charged in SD FL.  Meads pled to one count of the Klein / defraud conspiracy, a five-year felony.  I link the following document:  docket entries as of today here; the guilty plea here. and the Stipulated Facts here. Notice from the docket sheet that she was charged by information and that she waived indictment, which use indicate a plea agreement in the making.

The key items in the plea agreement are

1. Tax Loss:  Between $250,000 and $550,000.

2.  Sophisticated Means:  "[T]he defendant's efforts to defraud the United States did not involve sophisticated means' within the meaning of the Sentencing Guidelines."  (See my comment below.)

3.  No other factors that would increase the offense level.  Of course, she will get the acceptance of responsibility adjustment (2 or 3 level downward adjustment).

On the basis of the foregoing, my rough and ready calculation of the offense level is 15 with an indicated sentencing range of 18-24 months.  Based on the same calculation, if the sophisticated means adjustment were to apply, the offense level would be 15 with an indicated sentencing range of 24-30 months.

Key items in the stipulated facts, which are pretty much bare bones, are:

1. From 1997 to 2010, Meads "conspired with co-conspirators Marc Harris, Boyce Richard Griffin, and others to defraud the United States."  I will provide some additional information Harris and Griffin at the end of this blog.  One of the others is a person identified as "C.M." with Harris' entity, The Harris Organization in Panama City, Panama.

2. Meads sought to avoid tax on her income from U.S. oil royalties she had recently received from her parents as a gift and would receive as a gift.

3. Harris and the Harris Organization set up entities to implement the offshore structure.  The entities included a Delaware corporation and a Panama corporation.  Meads transferred her royalty interest to the Delaware corporation and he parents transferred to remaining interest to the Delaware corporation.  The royalty income apparently flowed through the Delaware corporation and then out to the Panama corporation.  In 1998, she caused the Panama corporation to distribute $25,000 to her disguised as a scholarship.

4.  In 1999, Meads shifted the operation from the Harris Organization to Griffin's Offshore Management Alliance Ltd., which, like the Harris Organization, assisted U.S. persons seeking to avoid U.S. tax.  Apparently, incident to that shift, Meads caused the royalty payor (Chesapeake Energy) to forward royalty checks to a private post box in Miami.  The royalty checks were forwarded by to Panama where Griffin deposited them in a Panamanian bank account for Meads' benefit.

5.  Meads failed to report the income on her 1997-2009 1040s and, as a result, filed false tax returns.

JAT Comments:

Another Offshore Account Guilty Plea Coupled with Bank Fraud Conspiracy (3/25/17)

DOJ Tax announced here a guilty plea to commit tax and bank fraud by a U.S. taxpayer, Casey Padula, with offshore accounts assisted by two offshore account enablers, Joshua VanDyk and Eric St-Cyr at Clover Asset Management.  I link at the end of this blog the prior blogs involving those enablers who previously pled and were sentenced.  The key excerpts listing Padula's skullduggery are:

According to documents filed with the court, Casey Padula, 48, of Port Charlotte, was the sole shareholder of Demandblox Inc. (Demandblox), a marketing and information technology business. Padula conspired with others to move funds from Demandblox to offshore accounts in Belize and disguised them as business expenses in Demandblox’s corporate records. Padula created two offshore companies in Belize: Intellectual Property Partners Inc. (IPPI) and Latin American Labor Outsourcing Inc. (LALO). He opened and controlled bank accounts in the names of these entities at Heritage International Bank & Trust Limited (Heritage Bank), a financial institution located in Belize. From 2012 through 2013, Padula caused periodic payments to be sent from Demandblox to his accounts at Heritage Bank and deposited approximately $2,490,688. Padula used the funds to pay for personal expenses and purchase significant personal assets. However, he falsely recorded these payments in Demandblox’s corporate books as intellectual property rights or royalty fees and deducted them as business expenses on Demandblox’s 2012 and 2013 corporate tax returns causing a tax loss of more than $728,000. 

Padula also conspired with investment advisors Joshua VanDyk and Eric St-Cyr at Clover Asset Management (CAM), a Cayman Islands investment firm, to open and fund an investment account that he would control, but that would not be in his name. Heritage Bank had an account at CAM in its name and its clients could get a subaccount through Heritage Bank at CAM, which would not be in the client’s name but rather would be a numbered account. Padula transferred $1,000,080 from the IPPI bank account at Heritage Bank in Belize to CAM to fund a numbered account. 

In addition to the tax fraud, Padula also conspired with others to commit bank fraud. Padula had a mortgage on his Port Charlotte, Florida home of approximately $1.5 million with Bank of America (BoA). In 2012, he sent a letter to the bank stating that he could no longer repay his loan. At the same time, Padula provided Robert Robinson, III, 43, who acted as a nominee buyer, with more than $625,000 from his IPPI bank account in Belize to fund a short sale of Padula’s home. Padula and Robinson signed a contract, which falsely represented that the property was sold through an “arms-length transaction,” and agreed that Padula would not be permitted to remain in the property after the sale. Padula in fact never moved from his home and less than two months after the closing, Robinson conveyed it back to Padula by transferring ownership to one of Padula’s Belizean entities for $1. Robinson also pleaded guilty today to signing a false Form HUD-1 in connection with his role in the scheme. 

* * * * 

Padula faces a statutory maximum sentence of five years in prison, a term of supervised release and monetary penalties. As part of his plea agreement, Padula agreed to pay restitution in the amount of $728,609 to the IRS and to BoA in the amount of $728,609. Robinson faces a statutory maximum sentence of one year in prison, a term of supervised release, restitution and monetary penalties.

The related documents are:

• The Information, here.
• The Plea agreement, here.

JAT Comments:

Additional Pleas to Offshore Account Tax Crimes (1/18/17)

DOJ Tax announces, here, the plea to three U.S. offshore account holders.  The banks are the usual suspects -- UBS, Credit Suisse, Bank Leumi and others -- in Switzerland and Israel.  Each of the three related persons -- Dan Farhad Kalili, David Ramin Kalili and David Shahrokh Azarian -- pled to one count of failure to file FBARs, a five year felony.  Sentencing is later.

The key excerpts are:

Beginning in May 1996, and continuing through at least 2009, Dan Kalili opened and maintained several undeclared offshore bank accounts at Credit Suisse Group (Credit Suisse) in Switzerland. He also opened and maintained several undeclared offshore bank accounts from at least 1998 through 2008 at UBS AG (UBS) in Switzerland. Similarly, David Kalili opened and maintained several undeclared accounts at Credit Suisse in Switzerland, from February 1999 through at least 2009, and at UBS in Switzerland, from October 1993 through at least 2008. Dan and David Kalili also maintained joint undeclared Swiss bank accounts at both UBS and Credit Suisse beginning in 2003 and 2004, respectively. Meanwhile, Azarian opened and maintained several of his own undeclared accounts at Credit Suisse in Switzerland from May 1994 through at least 2009, and at UBS in Switzerland from April 1997 through at least 2008. 

In July 2006, Dan Kalili, with the assistance of Beda Singenberger (Singenberger), a Swiss citizen who owned and operated a financial advisory firm called Sinco Truehand AG, opened an undeclared account at UBS in the name of the Colsa Foundation, an entity established under the laws of Liechtenstein. Singenberger was indicted in the Southern District of New York on July 21, 2011, for conspiring to defraud the United States, evade U.S. income taxes, and file false U.S. tax returns. Singenberger remains a fugitive. As of May 2008, the Colsa Foundation account at UBS held approximately $4,927,500 in assets. 

Each of the defendants took affirmative steps to prevent their assets in UBS and Credit Suisse from being discovered. Dan Kalili opened an undeclared account at Swiss Bank A in the name of the Colsa Foundation and in May 2008, transferred his assets from the UBS Colsa Foundation account to Swiss Bank A. He later made partial disclosure of the Swiss Bank A Colsa account on his individual income tax returns. In 2009, Dan Kalili opened undeclared accounts at Israeli Bank A and at Bank Leumi, both in Israel. In June 2009, he closed the joint undeclared account at Credit Suisse he held with David Kalili, as well as his own undeclared account, and transferred the funds. Shortly before its closure, the undeclared joint account of Dan and David Kalili at Credit Suisse held approximately $2,561,508 in assets. As of December 2009, Dan Kalili’s undeclared account at Israeli Bank A held assets valued at approximately $1,569,973, and his undeclared account at Bank Leumi held assets valued at approximately $2,497,931.

Similarly, in August 2008, David Kalili opened an undeclared account at Israeli Bank A in Israel, into which he transferred funds from his UBS accounts. He later partially declared the Israeli Bank A account on his individual income tax returns. As of August 2009, David Kalili’s undeclared account at Israeli Bank A held assets valued at approximately $1,369,489. 

In August 2008, Azarian, also opened an undeclared account at Israeli Bank A in Israel, and in May 2009, he closed his undeclared account held at Credit Suisse and transferred the funds to Israeli Bank A. Azarian later partially declared this Israeli Bank A account on his individual income tax returns. At the time of its closure, Azarian’s undeclared account at Credit Suisse held assets valued at approximately $1,903,214. 

For each year from 2006 through 2009, Dan Kalili, David Kalili, and Azarian, as U.S. citizens, were required, but willfully failed, to report their ownership and control over foreign bank accounts through the timely filing of FBARs with the IRS disclosing their signatory or other authority over the various undeclared accounts held at UBS, Credit Suisse, Israeli Bank A, and Bank Leumi, each having an aggregate value of more than $10,000 during each of these years. 

* * * *  

* * * In addition [to the criminal exposure], each defendant agreed to pay a civil penalty for willfully failing to file FBARs. Dan Kalili agreed to pay a civil penalty of $2,674,329, David Kalili agreed to pay a civil penalty of $1,325,121 and Azarian agreed to pay a civil penalty of $951,607.

The civil penalty is the willful FBAR penalty, which is 50% of the high amount in the accounts.

The plea agreements and docket entries for each defendant are here:

• Dan Kalili docket entries, here.
• Dan Kalili plea agreement, here.
• David Kalili docket entries, here.
• David Kalili plea agreement, here.
• Azarian docket entries, here.
• Azaraian plea agreement, here.

Former Business Professor Pleads Guilty to Tax Related Crimes; In Addition, Will Pay $100 Million FBAR Penalty (11/4/16; 11/9/16)

DOJ Tax issued the following press release:  "Emeritus Professor Pleads Guilty to Conspiring to Defraud the United States and to Submitting False Expatriation Statement; Hid Account Containing $200 Million Also Paying $100 Million Civil FBAR Penalty" (11/4/16), here.

Key Excerpts:

According to documents filed with the court and statements made during the plea hearing, Dan Horsky, 71, is a citizen of the United States, the United Kingdom and Israel and was employed for more than 30 years as a professor of business administration at a university located in New York.  Beginning in approximately 1995, Horsky began investing in numerous start-up businesses through financial accounts at various offshore banks, including one bank in Zurich, Switzerland.  Horsky created “Horsky Holdings,” a nominee entity, to hold some of the investments and he used the Horsky Holdings account, and later, other accounts at the Zurich-based bank, to conceal his financial transactions and financial accounts from the IRS and the U.S. Treasury Department.  

Horsky made investments in Company A through the Horsky Holdings account using his own money, money provided by his father and sister, and margin loans from the Zurich-based bank.  Eventually, Horsky amassed a four percent interest in Company A’s stock. In 2008, Company A was purchased by Company B for $1.8 billion in an all cash transaction.  Horsky received approximately $80 million in net proceeds from the sale of Company A’s stock, but disclosed to the IRS only approximately $7 million of his gain from that sale and paid taxes on just that fraction of his share of the proceeds.  In 2008, and in subsequent years, Horsky invested in Company B’s stock using funds from his accounts at the Zurich-based bank and by 2013, his investments in Company B, combined with other unreported offshore assets, reached approximately $200 million.

* * * * 

Horsky directed the activities in his Horsky Holdings and other accounts maintained at the Zurich-based bank, despite the fact that it was readily apparent, in communications with employees of the bank, that Horsky was a resident of the United States.  Bank representatives routinely sent emails to Horsky recognizing that he was residing in the United States.  Beginning in at least 2011, Horsky caused another individual to have signature authority over his Zurich-based bank accounts, and this individual assumed the responsibility of providing instructions as to the management of the accounts at Horsky’s direction.  This arrangement was intended to conceal Horsky’s interest in and control over these accounts from the IRS.  

In 2013, the individual who had nominal control over Horsky’s accounts at the Zurich-based bank conspired with Horsky to relinquish the individual’s U.S. citizenship, in part to ensure that Horsky’s control of the offshore accounts would not be reported to the IRS.  In 2014, this individual filed with the IRS a false Form 8854 (Initial Annual Expatriation Statement) that failed to disclose his net worth on the date of expatriation, failed to disclose his ownership of foreign assets, and falsely certified under penalties of perjury that he was in compliance with his tax obligations for the five preceding tax years.  

Horsky also willfully filed false 2008 through 2014 individual income tax returns which failed to disclose his income from, and beneficial interest in and control over, his Zurich-based bank accounts.  Horsky agreed that for purposes of sentencing, his criminal conduct resulted in a tax loss of at least $10 million.  In addition, Horsky failed to file Reports of Foreign Bank and Financial Accounts (FBARs) up and through 2011, and also filed false FBARs for 2012 and 2013.

JAT Comments (revised as of 11/9/16 6:15am:

The key documents are:\

• Criminal Information, here.
• Plea Agreement, here.
• Statement of Facts ("SOF"), here.

1.  The information charges as a single count -- Count 1 -- both a defraud / Klein conspiracy to conceal offshore financial accounts from the IRS and an offense conspiracy to commit tax perjury by "willfully mak[ing] and subscrib[ing] an IRS Form 8854 Initial and Annual Expatriation Statement ("Form 8854")" filed with the IRS under penalties of perjury.  As noted previously, the Form 8854 was with respect to Individual A whose role in filing the form was to help further hide Horsky's identity and relationship to offshore accounts.  Horsky agrees to plead and admits the relevant facts.  (See SOF ¶ 2; as to the role of Individual A, see SOF ¶ 12.)

2.  Individual A -- the enabler on Form 8854 -- has been given a NonProsecution Agreement ("NPA").  (Plea Agreement, ¶ 9.)  I have not seen the NPA and do not know if it will be made public.  I presume that, at some point, the identity of Individual A will be made public.  Question to readers:  Why would the Government give an NPA to Individual A?  (If any reader has anything beyond speculation, please post a comment or email me.)

Another Plea to Offshore Account Tax Crimes (10/7/16)

DOJ Tax announced here a new guilty plea, here, to tax obstruction, § 7206(1), a three year felony.  Excerpts:

Bernhard Rumbold, a resident of Clarkston, Michigan, and owner of several mining-related businesses in Michigan and Ontario, Canada, pleaded guilty to filing a false amended 2008 individual income tax return.  According to the information and the plea agreement, in approximately November 2004, Rumbold transferred more than approximately $2.6 million from his parents’ trust account, which he managed, into a bank account at Credit Suisse Bank AG in Switzerland.  Rumbold arranged for the Credit Suisse bank account to be in the name of Wisdom City Limited, a Hong Kong company whose sole purpose was to be the named account holder on foreign bank accounts.  Rumbold, who was the beneficial owner of the account, transferred control of the account to a relative in December 2008.    

On his 2006 through 2008 individual income tax returns, Rumbold falsely stated that he had no interest in a foreign financial account, and failed to report the interest, dividends and capital gains generated by the Swiss bank account as income.  In October 2010, Rumbold signed and filed an amended 2008 individual income tax return in which he again failed to report the interest, dividends and capital gains generated by the Swiss bank account as income. 

* * * * 

The plea agreement requires Rumbold to pay restitution for his unpaid tax liabilities for the years 2006 through 2008.  [There is no indication that he will be required to pay an FBAR penalty.]

I note in this regard that the DOJ Tax's advertised policies for plea deals are (DOJ Tax CTM 5.01[1] Offense of Conviction — The Major Count Policy, here):  (i) "tax evasion counts (26 U.S.C. § 7201) take priority over other substantive tax counts;" and "the count charged in the indictment or information that carries the longest prison sentence is the major count."

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 Plea to Offshore Account Tax Crimes (9/21/16)

DOJ Tax announced here another conviction related to an offshore account.  The title of the press release is:  "DOJ Tax Press Release, Connecticut Man Pleads Guilty to Concealing Income from Undeclared Panamanian Bank Account."

Key Excerpts from the press release:

A Weston, Connecticut man, who used a Panamanian bank account to conceal over $1.5 million in income from the sale of duty-free alcohol and tobacco products pleaded guilty today to one count of conspiring to conceal assets and income from the Internal Revenue Service (IRS) * * * * 

Saul Hyatt, 53, pleaded guilty today before U.S. District Judge Freda L. Wolfson of the District of New Jersey to an Information charging him with conspiracy to conceal assets in an undeclared bank account held in Panama for his benefit.  According to documents filed with the court, Hyatt conspired with another individual in the United States and others to conceal his assets and income derived from the sale of duty-free alcohol and tobacco products.  To execute the scheme, Hyatt used a registered Panamanian corporation, Centennial Group, to buy and sell the duty-free products.  The alcohol shipped through a customs-bonded warehouse in the Foreign Trade Zone in Fort Lauderdale, Florida.  The tobacco products, Chinese-brand cigarettes sold under the names “Chung Hwa” and “Double Happiness,” passed through a customs-bonded warehouse in North Bergen, New Jersey.  From 2006 to 2012, Hyatt directed that $1,627,832 in profits from the sale of duty-free alcohol and tobacco products be wired to his undeclared bank account in Panama.  Hyatt repatriated money from the Panamanian bank account to buy a Mercedes Benz SL 550R automobile and to pay for $19,000 in interior design goods and services.  

* * * * 

Hyatt failed to report income earned on his Panamanian account, and failed to file an FBAR for the years at issue.  Hyatt admitted that this scheme resulted in a tax loss of $521,986. 

* * * * 

Hyatt faces a statutory maximum sentence of five years in prison, as well as a term of supervised release and monetary penalties. Hyatt has agreed to file true and accurate tax returns and to pay the IRS all taxes and penalties owed, in addition to paying an $854,465.50 penalty for failure to disclose his foreign accounts.

JAT Comments:

1. The Panamanian bank is not named.
2. The bank account appears to represent untaxed income that, in the resolution, will be fully taxed.  Often in these resolutions to the extent that proceeds were deposited many years ago, they may not be taxed.  The statute would still be open if fraud were involved.  See § 6501(c)(1), here.  But developing the information to assert the tax on the original deposits may be difficult.  Hence, the resolution oft the tax in many cases relates only to later years where the income involved is the income on the earlier deposits without regard to whether the original earlier deposits were of untaxed income.

 Here are some of my compiled statistics.  I have not recently reviewed the spreadsheet in detail to make sure that all formulas work as they should.  I will try to do that soon.  But, with that caveat, here are some of them now.

	All	Taxpayers	Enablers	# Uncertain
Charges (Indictments, Information, Complaint)	171	122	49
Charges with Taxpayer Entities Involved	102	102	N/A	5
Guilty Pleas	108	91	17
Guilty Verdicts	19	17	2
Acquittals	3	1	2
Dismissals	2	1	1
Cases Sentenced (Total)	87	73	14
Cases Pending (All Prior to Sentencing, incl. Fugitives)	77	47	30
Cases Pending (without Fugitives)	53	45	8
Cases Pending (Fugitives Only)	24	2	22

Sentencing for Defendant Implicated in Early UBS Disclosures (8/21/16)

On Friday, Judge Pauley of SDNY sentenced Rowen Seibel to one month in prison after his plea to one count of tax obstruction, § 7212(a).  Jesse Drucker has a good report on the sentencing:  Restaurateur Seibel Sent to Jail, Then Kitchen, in Tax Scam (Bloomberg 8/19/16), here.

I offer the following documents related to the sentencing:

• The information (the charging document in lieu of an indictment usually after a plea agreement arrangement has been reached), here.
• The defendant's sentencing memo, here.
• The Government's Sentencing Letter , here (like a Sentencing Memo, but SDNY does a lot of filings by letter rather than a more formal pleading document).
• The defendant's supplement submission in response to the Government's Sentencing Letter,  here.

My own summary of the operative facts is:

In 2004, when Mr. Seibel was just 23 years old, he and his mother traveled to Switzerland to set up a numbered account (having a moniker of CQUE, followed by an account number).  I refer to Mr. Seibel as Seibel and to his mother as "Mother."  That action had some relationship to Brad Birkenfeld of UBS and whistleblower fame.  The account was set up in Seibel's name and he was designated beneficial owner.  It appears, however, that he was not -- at least allegedly not -- the beneficial owner of the account and that Mother was instead the beneficial owner.  Mother was given full power of attorney over the account.  It appears, however, that Seibel had the significant contacts with UBS about the account.  Seibel directed UBS not to send account statements or other correspondence to the U.S.  The account was initially seeded with $25,000, but quickly grew via other deposits to slightly above $1,000,000, all supposedly the Mother's money.  (There is perhaps some intrigue about the source of the deposits, but I don't think the documents I have read really definitively clarifies the matter.)

In 2008, after reading press reports about the IRS initiatives against UBS, Seibel traveled to UBS in Switzerland to withdraw the money, specifically mentioning to the bankers that his concerns related to the press reports.  By that time, the value of the account had increased to over $1,300,000, apparently due to interest and investments.  He then proceeded to deposit the bulk of the amount withdrawn into another bank, Bank Safra (which, by the way, joined the DOJ Swiss Bank Program as a category 2 bank).  The deposit was made in the name of Mirza International, a Panamanian company set up by Seibel owned and controlled by Seibel.  The documents gave Seibel signatory authority over Mirza's Bank Safra account.

The information recites that Seibel had filed 2008 and 2009 returns omitting interest and dividends from the UBS account and failing to report that he had an interest in or signatory authority over the account.  (There is some fuzziness here; if it were the Mother's account as the beneficial owner, Seibel would not have had to report the income from the account.)

After that shuffle to further hide the money, apparently sometime in 2009, an IRS special agent attempted to contact Mother about the account, leaving his card at her residence.  Mother quickly contacted an NYC attorney.  Mother at first misrepresented to her attorney key facts about the account (including her alleged beneficial ownership).  (In his affidavit, the attorney says that she "ultimately" did tell him about having the account which she closed in 2008; the affidavit is Exhibit A, Part One, to the Government's sentencing submission).  The attorney then presumably advised she had a serious problem.  In October 2009, the attorney advised her about the IRS voluntary disclosure program, OVDP as announced in May 2009.  He advised her, however, that she did not qualify because of the agent's attempt to contact her.  He advised, however, that Seibel might qualify, provided that he applied to the program by its then schedule end date of October 15, 2009.  So, allegedly based solely on conversations with the mother, the lawyer set about drafting a submission including some facts and omitting others (that the attorney may or may not have know about).

The handling of the drafts for Seibel's submission is interesting and relevant to this discussion.  The Mother and Seibel were in Florida at the time.  The attorney was in New York.  The attorney says that he only discussed the facts with Mother and not with Seibel.  The attorney emailed drafts of Seibel's submission to Seibel who printed and delivered them to Mother for her to discuss with the attorney.  The implication (although not a direct statement anywhere I could find) is that Seibel was just a messenger for the drafts but did not read the drafts.  (I discuss that implication below in comments.) After Mother and attorney had agreed upon the final draft, the attorney prepared the final document for submission and a Form 2848 which is a power of attorney for the attorney (and a representation that the attorney was the attorney for Seibel at least by that time) and emailed them to Seibel with the instructions to sign and mail them by October 15, 2009.  Seibel claims that he did not read the submission document he signed and submitted to the IRS.  The implication from Seibel's submissions for sentencing is that he did not know the contents of the document he signed, either by reading the drafts or from discussions with Mother (although they were together throughout the process).  The submission (i) made false statements as to Seibel's knowledge about the UBS account and (ii) claimed that the funds may have disappeared rather than disclosing the Bank Safra gambit noted above upon closing the UBS account.

Another Plea to Offshore Account Tax Crimes (8/1/16)

DOJ Tax announced here another plea to offshore tax crimes.  The criminal information is here; the plea agreement with Exhibit A Statement of Facts is here.  The plea is to one count each of conspiracy (18 USC § 371) and tax obstruction (26 USC § 7212(a)), which have 5 year and 3 year, respectively, maximum incarceration period, so 8 years or 72 months maximum.  As usual , the Sentencing Guidelines will provide a lesser likely sentence.  Here are the key quotes:

Masud Sarshar, who owned and operated Apparel Limited Inc., a business that designed, manufactured and sold clothing and other apparel, signed a plea agreement admitting that he maintained several undeclared bank accounts at Bank Leumi and two other Israeli banks, both in his name and in the names of entities that he created.  For decades, with the assistance of at least two relationship managers from Bank Leumi and a second Israeli bank (Israeli Bank A), Sarshar hid tens of millions of dollars in assets in these accounts in an effort to conceal income and obstruct the Internal Revenue Service (IRS).  As alleged in the information, between 2006 and 2009, Sarshar diverted more than $21 million in untaxed gross business income to these undeclared bank accounts.  Between 2007 and 2012, Sarshar also earned more than $2.5 million in interest income from these accounts.  Sarshar omitted all of this income from his 2006 through 2011 individual and corporate tax returns and he failed to report his authority over and ownership of these bank accounts in false Reports of Foreign Bank and Financial Accounts (FBARs) that he submitted to the U.S. Department of Treasury. 

Sarshar signed a plea agreement to the charges in the information, agreeing to plead guilty and pay more than $8.3 million in restitution to the IRS.  If the court accepts the parties’ agreement, Sarshar will be sentenced to 24 months in prison.  In addition, Sarshar stipulated to a civil penalty in the amount of 50 percent of the high balance of his undeclared accounts to resolve his civil liability for not disclosing the existence of his Israeli bank accounts. 

“Mr. Sarshar stashed millions in secret foreign financial accounts in Israel and then sought to use these accounts to evade his U.S. tax obligations, seeking to cover his tracks along the way,” said Principal Deputy Assistant Attorney General Ciraolo.  “The message of this case is clear: There are no safe havens.  If you are concealing assets and income in undeclared offshore accounts – or are a banker, an asset manager or otherwise are assisting accountholders in such criminal conduct, your only viable option is to come forward and accept responsibility for your actions.  Those who continue to violate U.S. tax laws will be held accountable and pay a heavy price.” 

According to the information and statement of facts, Sarshar’s relationship managers at Israeli Bank A (RM1) and at Bank Leumi (RM2) visited him frequently in Los Angeles.  At his request, neither bank sent him account statements by mail, but rather, RM1 and RM2 provided Sarshar with his account information in person.  For example, RM2 loaded electronic copies of Sarshar’s Bank Leumi account statements on a USB drive, which she concealed in a necklace worn during her trips to the United States.  To further maintain the secrecy of his accounts, Sarshar’s meetings with RM1 sometimes occurred in Sarshar’s car.  RM1 and RM2 also used these visits to Los Angeles to offer Sarshar other bank products, including “back-to-back” loans.  Through back-to-back loans, which Bank Leumi made to Sarshar through its branch in the United States and which Sarshar collateralized with funds from his account at Israeli Bank A, Sarshar was able to bring back to the United States approximately $19 million of his offshore assets without creating a paper trail or otherwise disclosing the existence of the offshore accounts to U.S. authorities.  At the direction of RM1 and RM2, Sarshar also obtained Israeli and Iranian passports in an effort to avoid being flagged as a U.S. citizen by the compliance departments at both banks.  After receiving both new passports and still being flagged as a U.S. citizen by their compliance departments, RM1 and RM2 advised Sarshar to transfer his remaining funds to yet another Israeli bank, which he did in late 2011.

The news release says that Sarshar will be sentenced to 24 months pursuant to the parties' agreement.  The plea agreement states that it is a FRCrP 11(c)(1)(C) which is an agreement that "a specific sentence or sentencing range is the appropriate disposition of the case."  However, and not to be too picky, I wonder whether the actual wording would lock the judge into the sentence.  The agreement provides (emphasis supplied by JAT):

24.  Defendant and the USAO agree that, taking into account the factors listed in 18 U.S.C. § 3553(a)((1) - (7), the relevant sentencing guideline factors set forth above [in pars 22 (with calcs)] and defendant's cooperation pursuant to §5K1.1 of the Sentencing Guidelines, an appropriate disposition of this case is that the Court impose a sentence of 24 months imprisonment (the low end of level 17) * * * *.  

The use of "an" rather than "the" would seem to take it out of FRCrP 11(c)(1)(C), herehttps://www.law.cornell.edu/rules/frcrmp/rule_11, as to "the" appropriate disposition.  I wonder if that may be just a scrivener's error or whether a judge would impose the sentence accordingly anyway, whether or not bound.