Tuesday, September 20, 2011

DOJ Tax Web Site Touts DOJ Tax and IRS Juggernaut on Foreign Financial Accounts (9/20/11)

DOJ Tax has a new web page titled "Offshore Compliance Initiative," here.  The page touts DOJ Tax's efforts and the strategic timing of efforts with IRS's offshore compliance initiatives (OVDP 2009 and OVDI 2011).    However, the claim of the eclipse of the tax efficient secret Swiss bank account may be exaggerated.

DOJ Tax touts the statistics as follows:
The prosecution results so far have been encouraging: To date, approximately 150 grand jury investigations of offshore-banking clients have been initiated, of which 30 cases have been charged, with 24 guilty pleas having been entered, 2 convicted after trial, and 4 awaiting trial. A number of facilitators who helped clients hide assets offshore at UBS and other banks have been indicted, resulting in ten bankers and two attorneys being charged and awaiting trial, and one advisor being charged and convicted. In addition, grand jury investigations have been opened into eight additional offshore banks across the world.
Statistics are always dicey things. The 150 grand jury investigations is new public information, but it is unclear what exactly the number means. Does the 150 refer to the number of "targets" or to the number of investigations with some of them having more than one target? And, the statistics I show for the prosecutions (see my spreadsheet available from the page in the right column) do not match DOJ Tax's number of prosecutions (30 cases, but that may be because a case can have more than one defendant and some involving offshore account and/or FBAR prosecutions that I count may did not arise out of the initiative). In any event, the numbers are impressive.


  1. Impressive yes, but in a broader sense, not so much.

    2 lawyers and 10 bankers? The key to stopping offshore banking fraud is picking off the enablers, and, frankly, the only way to do this is heavy, heavy enforcement against lawyers and accountants who structure these things.

    The real money is in highly structured transactions (preferably deductible transactions, management fees and insurance premiums being favorites) that take money from US personal holding companies (beneficially owned by HNW individuals) and corporations and stash the money offshore in nominee entities. This is what your dividend/wages case in your previous post is all about.

    Without taking out the enablers and facilitators (and HSBC and CS prosecutions would help enormously with the latter), as well as putting a healthy amount of fear in the "consumers," this enforcement action is more show than substance, in my humble opinion, even granting that the numbers are impressive looked at narrowly.


  2. Patrick and Jack,

    You both are so right with your analysis of what the numbers mean.

    "Impressive yes, but in a broader sense, not so much" and "Numbers are impressive looked at narrowly" "Narrowly" is the key word here.

    and Jack, I really appreciate you are drawing attention to the fact that.. "Statistics are always dicey things."

    We should all know, a number, by itself, without other numbers for context or background, leaves one pretty bereft of valuable information.

    This type of selective Stat release is probably designed for consumer fear more than good understanding of what is happening. I am glad you are pointing out what I assume the press will over look when they take it (150) verbatim with out exercising a skeptical question about what it really means.

    Keep up the excellent work and posts.

  3. I think the DoJ brings about 150 criminal tax cases a year overall so 150 grand jury investigations certainly seems like a huge amount. Especially since some (like those involving banks) are likely to be quite exhaustive.

  4. To Anonymous @ September 22, 2011 6:08 AM

    DOJ Tax brings a lot more than 150 cases per year. I have not checked the latest statistics, but my recollection is that it is in the range of 1,800 to approaching 2,500. Again this is a statistic and depends on how the counting is done, but one thing is for sure -- it is a whole lot more than 150 cases per year.

    You might take a look at the following TIGTA report http://www.treasury.gov/tigta/auditreports/2011reports/201130068fr.pdf

    That TIGTA report at Figure 13 on page 27 reports convictions for the years 2007 to 2010 with a low of 1,957 and a high of 2,229. Since DOJ Tax gets a high level of convictions (I have heard the claim by DOJ Tax to be 95%, but I think it is less than that), then the actual number of indictments over those years would be a bit higher.


    Jack Townsend


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