Enabler Guilty Pleas from Sting Operation (7/12/14)

DOJ Tax has announced here the pleas of three enablers.  For the initial blog entry on the indictments, see IRS Sting Investigation Nabs Offshore Bank Account Enablers (Federal Tax Crimes Blog 3/24/14), here.  The enablers pleading are:  Joshua Vandyk, a U.S. citizen, and Eric St-Cyr and Patrick Poulin, Canadian citizens,  Here are key excerpts from the press release (bold face added by JAT):

According to the plea agreements and statements of facts, Vandyk, St-Cyr and Poulin conspired to conceal and disguise the nature, location, source, ownership and control of property believed to be the proceeds of bank fraud, specifically $2 million. Vandyk, St-Cyr and Poulin assisted undercover law enforcement agents posing as U.S. clients in laundering purported criminal proceeds through an offshore structure designed to conceal the true identity of the proceeds' owners. Vandyk and St-Cyr invested the laundered funds on the clients' behalf and represented that the funds would not be reported to the U.S. government. 

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According to court documents, Vandyk and St-Cyr lived in the Cayman Islands and worked for an investment firm based in the Cayman Islands. St-Cyr was the founder and head of the investment firm, whose clientele included numerous U.S. citizens. Poulin, an attorney at a law firm based in Turks and Caicos, worked and resided in Canada as well as the Turks and Caicos. His clientele also included numerous U.S. citizens. Vandyk, St-Cyr and Poulin solicited U.S. citizens to use their services to hide assets from the U.S. government, including the IRS. Vandyk and St-Cyr directed the undercover agents posing as U.S. clients to create an offshore corporation with the assistance of Poulin and others because they and the investment firm did not want to appear to deal with U.S. clients. Vandyk, St-Cyr and Poulin used the offshore entity to move money into the Cayman Islands and used Poulin as a nominee intermediary for the transactions. 

According to court documents, Poulin established an offshore corporation called Zero Exposure Inc. for the undercover agents posing as U.S. clients and served as a nominal board member in lieu of the clients. Poulin transferred approximately $200,000 that Poulin, St-Cyr and Vandyk believed to be the proceeds of bank fraud from the offshore corporation to the Cayman Islands, where Vandyk and St-Cyr invested those funds outside of the United States in the name of the offshore corporation. The investment firm represented that it would neither disclose the investments or any investment gains to the U.S. government, nor would it provide monthly statements or other investment statements to the clients. Clients were able to monitor their investments online through the use of anonymous, numeric passcodes. Upon request from the U.S. client, Vandyk and St-Cyr liquidated investments and transfer money, through Poulin, back to the United States. According to Vandyk and St-Cyr, the investment firm would charge clients higher fees to launder criminal proceeds than to assist them in tax evasion.

Most enablers that I am aware of just played the tax evasion game and did not deliberately engage in money laundering.  That is why most enablers only draw an indictment for a tax conspiracy (5 years maximum), rather than for money laundering or money laundering conspiracy (20 years maximum).  Of course,at least in some cases, it may not be likely that the actual sentence for money laundering will exceed 5 years, but one can expect that, even then, the sentencing would  be greater for the money laundering violation than for the tax conspiracy violation.  And, some will likely get more than 5 years (which would be the maximum for a tax conspiracy violation).