Tuesday, June 28, 2011

HSBC Client Indicted (6/28/11)

According to a DOJ press release today, another HSBC depositor has been indicted. The key information is as follows:

Taxpayer: Dr. Arvind Ahuja of Greendale, Wis.
Banks: HSBC in India and the Bailiwick of Jersey
Entities: ?
Charges: Tax Perjury (4 counts); Failure to File FBARs (4 counts) - years 2006 - 2009
Account Balance: $8,733,785 (2009).
Omitted Income Charged: $1.2 Million in Interest..
Court:  ED WI
Judge: ?

I  will update the spreadsheet sometime this week.

Addendum on 7/15/11:  For a report of the hearing in which he pleaded not guilty, see David Voreacos and Marie Rohde, HSBC Client Pleads Not Guilty to Filing False Returns to Tax Authorities (Bloomberg 7/14/11).


  1. jack

    I wonder if this sudden burst of indictments and guilty pleas is to induce people to submit FBARs in time since the deadline is around the corner ?

    This guy also seems to have been hit with a lot of charges. Maybe he didn't co-operate ?

  2. Good questions. Here are my cuts on the answers:

    1. All criminal charges (whether by indictment or information) are designed, at least in part, to incentivize U.S. persons to get into whatever voluntary disclosure program is open or in vogue at the time. These indictments surely fit that pattern with respect to the OVDI and, of course, the Government will continue to bring charges after OVDI 2011 closes (in which case, barring another special initiative, U.S. persons could still come under the general voluntary disclosure program, probably with a higher civil penalty).

    2. The pattern from my observation is to offer the U.S. person the opportunity to plead to a single count (perhaps two in the most egregious of cases). If that happens very early, the criminal charge will be by "information" coupled with a plea either contemporaneously or shortly thereafter. If, however, the plea is not agreed to by the time the prosecutor wants to bring the charge(s), the charges will be made by indictment which will have a number of charges (referred to as counts) and the U.S. taxpayer will enter the standard not guilty plea. The parties will then negotiate and usually reach a plea agreement to a much slimmed down charge(s) -- most of the cases in the offshore arena have slimmed down to one count of conviction for either tax perjury or FBAR violation. But, note that in the Heller case just recently where the defendant was indicted for multiple charges in multiple counts and then pled guilty to multiple counts rather than the usual single count. That has not been the pattern and such a plea to that many counts usually suggests some special circumstances. In the Heller case, the defendant seems to have been an egregious offender, but I understand that the plea agreement may have been gerrymandered to give him probation (provided the Judge goes along, which he is not bound to do). At any rate, the whole story about how the Government makes charges against the defendant who does not have a pre-wired plea is fascinating and beyond the scope of the answer I could give here.

    I hope this helps.

    Jack Townsend

  3. There will probably be a steady stream of these announcements with maybe a couple of major announcements about a new bank or a new country that is under fire. The end of June 2011 is a blink away and you have to wonder how many folks will slip into noncompliance for another year come tomorrow. Its an ugly situation until you clean it up because until you do clean it up its self perpetuating. It will probably be more costly to become compliant once OVDI ends.


  4. Very helpful Jack. If I were this guy, I would hire an experienced criminal tax attorney, post haste, in fact perhaps you Jack. If this guy waits he may find himself in deep water since he is in the vanguard of the new set of prosecutions, IMHO.

  5. Here is another report on this


    "Ahuja's lawyer Dan Webb said his client was innocent. "The federal government has made a colossal mistake by taking this action and we will aggressively fight these outrageous and erroneous allegations," Webb said in a statement.

    Webb said Ahuja had interest-bearing accounts and said the bank failed to issue Ahuja documents that stated his interest income. He said once Ahuja became aware of the interest income that was not reported to him by the bank he paid all taxes owed plus interest and late payment penalties."

    Is Ahuja really going to argue with a straight face that he forgot $1.6 M of interest ? And that he held accounts in tax havens such as Jersey innocently ?

    Or is Ahuja's lawyer just protesting for form.

  6. it seems to me he made QD when he was either under investigation or after the fact he was caught. also it seems to me (according what his lawyer said) his QD was clean/complete.

  7. dr A saved my wife's life, he is the one of the kindest people i have ever known. i cannot believe that is any more than a mistake

  8. the law is only applied to what he did not who is. he can still be a wonderful person and excellent doctor.

    if there is no entity to cover his offshore accounts, it is more a mistake than a wiful act.

  9. ij- you are right. However, this is also a fact that FBAR implemetation is far from just. To claim that everyone knew about FBAR requirement is a pure baloney. What surprises me is that so far no one/ no lobby has actually taken IRS to a court. Surveys after survey prove that people simply do not know about this fine print. In the commercial world, most of the transactions are on trust. IRS has almost killed that basic premise here.

  10. To Anon of "July 1, 2011 9:52 AM",

    If it is pure FBAR problem, IRS imposes no penalty. Dr. A has problem of under report (just like myself), that is well deserved penalty.

    However, I don't support the prosecution if he did not wilfully cover/hide his offshore accounts (with entities), and I think he should be treated like all other OVDI -- 25%.

    It serves no good purpose for the society to make people who have made mistakes to criminals.

    A civil society needs more civil settlements..

  11. This man is a wondeful doctor. Yikes Bad this happened to him.

  12. One can be a very good doctor, a decent and kind person, and still not believe in rendering unto Caesar ...

    With accounts in a tax haven such as Jersey, $8M in maximum balance, and $1.2 M of interest, its pretty hard to claim nonwillfulness. Its not just the FBAR form, its the unreported interest and (likely) the unchecked Schedule B question. Also, the $8M may not be post tax either.

  13. It will be very interesting to see what happens if this goes to trial. This doctor is not as unpleasant as the father/son HSBC hotel owners who went to trial, and might possibly be able to convince a jury to let him off. Civil penalties could still be crippling though (with a lower standard of proof).

  14. The doctor does indeed not appear to be unpleasant and indeed appears to be a nice guy who has helped many patients. These factors are probably positively correlated to him being a reasonable person at the end of the day. And that often means a plea agreement to mitigate the damage.

    There may be some factors of which we are not aware that has prevented the Government from offering a sweet enough deal to encourage him to plead from the inception of the criminal case. But, if this case fits the pattern of past cases, even in some at least somewhat egregious cases, the Government offered one felony count (tax perjury or FBAR, the taxpayer's choice), 50% highest amount for FBAR, and a good shot a no incarceration. Most of the charged taxpayers to date have found that type of inducement sufficient to forego the risk of the father / son HSBC hotel owners. We'll see.

    Jack Townsend


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