URS operated in several states under variations of the name URS. The individuals include David Kalai and Nadav Kalai, who are Israeli citizens who subsequently became naturalized U.S. citizens. Another defendant is Advid Almog, also an Israeli citizen who was a U.S. permanent resident alien. A tax return preparer identified as "R.S." is named as an unindicted co-conspirator. Various clients are identified with initials in the indictment.
The charge is the ubiqitous Klein conspiracy, 18 USC 371, to impair or impede the lawful functions of the IRS. (See par. 20.)
Interesting allegations are:
12. Bank A was a large financial institution headquartered in Tel-Aviv, Israel. Bank A currently describes itself as maintaining a "premier position in the world of international private banking11 with private bankers who will be a customer's "loyal and discreet consultant." Bank A currently advertises that it has "more than 336 branches and representations across 18 countries worldwide, including banking operations in Luxembourg (hereinafter "Bank A Luxembourg").
13. Bank B was a mid-size financial institution headquartered in Tel-Aviv, Israel. Bank B offered private banking services it currently describes as being tailored to a customer's "preferred communications channels and information" while "maintaining total discretion." Bank B advertises a "worldwide presence on four continents through subsidiaries, branches, and representative offices," including a branch of its Swiss ba,nking operations located in Luxembourg (hereinafter "Bank B Swit.zerland-Luxembourg Branch") .
* * * *
21. The object of the conspiracy was carried out, and was to be carried out, in substance, as follows:
a. In order to conceal the Clients' assets and income from the IRS, defendants ALMOG, D. KALAI, and N. KALAI, along with unindicted co-conspirator R.S., would aid, assist, advise, and facilitate the establishment of undeclared bank accounts at Bank A Luxembourg and Bank B Switzerland-Luxembourg Branch.
b. In order to hide the Clients' ownership and control of assets and conceal the Clients' income from the IRS, defendants ALMOG, D. KALAI, and N. KALAI, along with unindicted co-conspirator R.S., would incorporate and cause to be incorporated offshore companies in Belize and elsewhere to act as named account holders on the undeclared bank accounts at Bank A Luxembourg and Bank B Switzerland-Luxembourg Branch.
c. In order to conceal assets and income from the IRS, defendants ALMOG, D. KALAI, and N. KALAI, along with unindicted co-conspirator R.S., would aid, assist, advise, and facilitate the transfer of the Clients' funds to the undeclared bank accounts at Bank A Luxembourg and Bank B Switzerland a Luxembourg Branch from, among other places, bank accounts held at a Wells Fargo branch located within the Central District of California.
d. In order to conceal the true nature of the transfers of money to the Bank A Luxembourg bank accounts and fraudulently reduce the amount of income reported on income tax returns, defendants ALMOG, D. KALAI, and N. KALAI, along with unindicted co-conspirator R.S., would prepare and aid, assist, and advise the preparation of false corporate and partnership tax returns on behalf of clients A.F., M.A., J.C. and K.C., and M.W., which falsely reported the money sent offshore as a (1) false investment loss; and/or (2) false business expense.
e. In order to reduce fraudulently the amount of income tax reported due, defendants ALMOG, D. KALAI, and N. KALAI, along with unindicted co-conspirator R.S., would prepare ~nd aid, assist, advise, and cause the preparation of false individual income tax returns for the Clients that (1) under-reported the Clients' true income; and (2) failed to disclose the existence of, and the Clients' financial interest in, and authority over, the Clients' undeclared bank accounts at Bank A Luxembourg and Bank B Switzerland-Luxembourg Branch.
f. In order to further conceal income from the IRS, defendants ALMOG, D. KALAI, and N. KALAI, along with unindicted co-conspirator R.S., would file and cause to be filed false individual, corporate, and partnership tax returns with the IRS.
g. In order to further conceal the Clients' ownership and control over the assets in the undeclared bank accounts, defendants ALMOG, D. KALAI, and N. KALAI, along with unindicted co-conspirator R.S., would cause the Clients to fail to prepare and file FBARs with the Department of the Treasury concerning the Clients' foreign financial accounts at Bank A Luxembourg and Bank B Switzerland-Luxembourg Branch.Various overt acts are alleged, as one might expect. I may get back to these later.
I do note that a Google search of the quoted description of the bank -- "loyal and discreet consultant" -- turned up two web sites -- one for Bank Leumi in Israel, here, and the other for Bank Leumi in Switzerland, here (although I was unable to get the link to work).
Addendum 6/16/12: Also, a reader did a search for Bank B and turned up Bank Hapoalim. See his comment below.
"I do note that a Google search of the quoted description of the bank --
ReplyDelete"loyal and discreet consultant" -- turned up two web sites -- one for
Bank Leumi in Israel, here, and the other for Bank Leumi in Switzerland, here (although I was unable to get the link to work)."
... and a search for Bank B's "preferred communications channels and information" while "maintaining total discretion", brings up Bank Hapoalim (http://www.bhibank.com/wps/portal/bhi/en/article?WCM_GLOBAL_CONTEXT=bhi_en/bhi/home/prvbanking/prvbanking&proceed=1), which indeed has a Luxemburg branch (http://www.bhibank.com/wps/portal/bhi/en/article?WCM_GLOBAL_CONTEXT=/wps/wcm/connect/bhi_en/bhi/home/locations/luxembourg&proceed=1)....
... and a search for "MWE International Inc." and "Client M. W." brings up this: http://www.corporationwiki.com/California/Oak-Park/mwe-international-inc/42677459.aspx
Which brings up for me the basic question (and excuse my ignorance): what is the point of using code names in these indictments? Regardless of whether or not it's easy to figure out the various codes - is the prosecution trying to avoid disclosing some information or to protect the innocent or what?
I really can't figure it out.
Now this is the type of case that OVDP/OVDI and the penalties were designed for. According to newspaper reports, the money sent abroad was falsely claimed as either a business loss or deductible business expense. In this type of scenario, 20/25/27.5% of principal is a good deal for these individuals.
ReplyDeleteHowever it's in cases where the principal is tax compliant and there is only a small amount of unreported interest that a penalty based on highest balance is excessive.
Furthermore, this is the type of activity that a routine audit should uncover. US bank records would show money wired abroad, and any claims that it was for imported merchandise, consulting services etc. can be easily disproven if false. Furthermore, even before the Swiss started honoring blanket requests (aka fishing expeditions) a request for assistance could have been gotten since the IRS would have had all the necessary data (name, account number, indications of fraud.)
I question whether targeting audit resources at minnows with minor amounts of unreported interest is more efficient than allocating resources to auditing high-income taxpayers.
Just a few quick comments:
ReplyDelete1. Enablers do not qualify for OVDP/OVDI. The underlying taxpayers could qualify and perhaps that is how these enablers were identified.
2. Relatively minimal tax noncompliance should, on audit (whether by opt out or otherwise) not draw draconian penalties. Hence, the excessive fines issue will not be reached.
3. The sophisticated offshore bank tax cheat have less visible ways to get money into the foreign accounts, but even when it is wire-transferred from a U.S. bank, he or she may have created a false paper trail purports to explain the wire transfer. Often the IRS agent is ill prepared to dig out the truth. Many times the person of the type does not get caught and when he or she does it is through some fluke that a good agent happens to flush out.
4. I don't think the IRS is throwing a lot of audit resources at minnows. In the OVDP / OVDI programs, the taxpayer and his or her tax professionals do all the audit work. Most of the time, the IRS just reviews off the radar screen and sends out the Form 906 for either execution or opt out. Then, if there is an opt out audit, the same phenomenon is present -- all or at least the bulk of the audit work has been done by the taxpayer and his professional plus such additional work as the program agent did. So, while time is required, most cases will not take a lot of audit work unless the auditing agent smells a rat.
Jack Townsend
So, as I look at this case, and the DOJ announcement, right ahead of the June 30th FBAR date, I do wonder, does this cause more FBARS to be generated?
ReplyDeleteHas any FBAR filing ever turned up evidence that the DOJ has used to pursue these cases, or has the information come from other sources either tipsters or VD data mining.Two, will the extremely expensive to administer global FATCA prevent any of this in the future?Or do we just have two really good penalty vehicles for assuring that fines go into Treasury to offset prison expense?
The IRS and DOJ Tax imagine that press releases of dastardly deeds and consequences encourage compliance. I would think that they have some empirical studies that support that notion, but don't really know whether there is anything to support the notion. However, anecdotally, I do know that mass publicity about the offshore account initiatives has encouraged a lot of go-forward compliance, and sometimes at least some go-backward correction of noncompliance.
ReplyDeleteI don't know whether FBAR compliance alone has turned up information that DOJ Tax has used for prosecution of enablers. I do know that the required disclosures in the OVDP/OVDI have turned up information about enablers that has been used for prosecutions.
Jack Townsend