Saturday, April 21, 2012
Father-Son Convictions Affirmed (4/21/12)
I have written earlier about the father and son duo who were convicted for traditional tax crimes (Klein conspiracy and Tax Obstruction), although they had foreign accounts. See First Sentencing in Offshore Case that Went to Trial (2/5/11), here; and More Offshore Account Charges -- Of HSBC (Reputedly) and Recorded Conversations (4/21/10), here. Their convictions and sentences were upheld in a cryptic per curiam affirmance. United States v. Cohen Assor, 2012 U.S. App. LEXIS 7990 (11th Cir. 2012), here. The offshore accounts involved were with HSBC.
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Pointing out that this was a case of both undeclared foreign accounts, as well as foreign entities like corporations in Panama and the Bahamas to avoid U.S. taxation. Use of entities to obscure beneficial ownership of the foreign accounts seems to draw more aggressive prosecutions.
ReplyDeleteIn addition, and equally significant, is the fact that while most of the earlier offshore tax fraud prosecutions resulted in plea bargains for more lenient punishment such as probation and home detention, the Cohens’ did not plea. These jail sentences resulted from the first court trial of the recent offshore account prosecutions.
Asher
DeleteI presume the fact that entities were used make it far easier to prove criminal willfulness, so that is the main factor driving aggressive prosecutions. These two were pretty obnoxious characters too.
I think Jack's spreadsheet indicated that entities were used in almost all UBS/HSBC foreign account prosecution cases (in one case, the person filed a fake FBAR AFTER being contacted by CI).
One interesting case from last year is Ahuja, an Indian doctor in Wisconsin who used no entities and apparently transferred post tax funds. He hasn't pled yet, so the case may go to trial after all. The government actually charged him with multiple FBAR violations, each for 50% per account. If a plea isn't reached, we may see whether the Eighth Amendment applies to prevent penalties > 100% (admittedly for multiple years).
To Anonymous Apr 23, 2012 12:27 PM
DeleteExcellent comment. Thank you.
Jack Townsend
Side Comment: I doubt all the whale OVDI/OVDP disclosures (especially of those people whose account data was being handed over) were complete and full. But so far I have not heard of any prosecutions of people who did not make full disclosures.
ReplyDeleteEither they got away with it (maybe because the funds involved did not go through UBS), or even if the government detected these accounts, it decided not to prosecute (unlikely). Or maybe the whales weren't audited as thoroughly as they might have been.
I think most whales were represented by very competent counsel (they could pay for the best) and the best would insist that the amended returns filed in the process be fair and complete. So, I think the IRS gets some assurance of fairness and completeness by the presence of competent counsel orchestrating the process.
DeleteHaving said that, however, I would bet that there are whales (as a percentage a very small number) who have not been totally honest with their lawyers and thus could have defective disclosures. The IRS's ability to detect the errors, however, may not be great, because it just does not have the resources to fully investigate all of the amended returns in the hope of finding the very few who did not do fair and complete amended returns.
So, I think that is why you do not hear of prosecutions. I have no doubt that, if a whale is caught cheating in a material amount on the amended returns, he or she is at very, very high risk of criminal prosecution.
Jack Townsend