Another UBS Depositor Pleads Guilty (12/19/14)

USAO NDGA announced here the guilty plea for Gregg A. Kaminsky.  The following are the key excerpts from the press release:

Kaminsky is an Internet entrepreneur who serves as the Chief Executive Officer of Circlenet LLC, based in Atlanta, Ga.  From 2000 through 2008, Kaminsky owned and controlled a foreign bank account with Union Bank of Switzerland AG (“UBS”), one of the biggest banks in Switzerland and largest wealth managers in the world.  By 2006, Kaminsky’s UBS account held approximately $1.1 million.  From time to time between 2002 and 2009, Kaminsky caused funds to be wire-transferred from his UBS account in Switzerland to other foreign bank accounts controlled by him in Thailand and Hong Kong.  Also during that time, Kaminsky caused his income from at least two different U.S. companies to be direct-deposited into his UBS account in Switzerland.
Yet, over this period, Kaminsky did not disclose his UBS account or other foreign financial accounts to the U. S. Treasury Department as required, and thereby concealed several hundred thousand dollars in taxable income, interest, and dividends from the U.S. Internal Revenue Service (IRS). 

In addition, in 2007 and 2008, Kaminsky omitted his UBS account and associated income from Free Applications for Federal Student Aid (FASFA) that he electronically filed with the U.S. Department of Education in order to qualify for need-based federal financial aid assistance to fund his tuition for an Executive MBA program at Emory University.  At the time of the FASFA applications, Kaminsky controlled over a half million dollars in his UBS account, which would have made him ineligible for federal student loan assistance. 

On June 30, 2008, the U.S. Department of Justice sought court approval to compel UBS to disclose the identities of U.S. accountholders who may be using UBS accounts to hide assets overseas and thereby evade U.S. taxes.  The request and the order authorizing it were widely reported by the media throughout the United States, which coverage continued throughout 2008 and 2009 as the U.S., UBS, and Switzerland negotiated a resolution and UBS began disclosing U.S. account holders to the IRS. 

Following this news, Kaminsky closed his UBS account and transferred the balance of his UBS account to an account that he controlled at HSBC Bank in Hong Kong.  Further, in spring 2010, Kaminsky filed FBARs for his Swiss and Hong Kong accounts for the very first time, also filing amended individual income tax returns for 2007 and 2008 that disclosed the previously unreported income in his UBS account.  However, in his amended 2007 and 2008 returns, and in his subsequently filed returns for 2009 through 2011, Kaminsky still failed to report nearly $150,000 in taxable income earned from his business activities in the virtual world, “Second Life.”

Participants in Second Life, referred to as “residents,” can engage in a wide variety of business activities, including buying, renting, and sub-leasing virtual land and buying and selling other virtual goods, services, and experiences for their “avatars.”  Transactions are conducted using a virtual currency, “Linden Dollars.”  Linden Dollars can be bought and traded on the “Linden Exchange,” and are redeemable for cash.
Including his virtual world income, Kaminsky failed to report over $400,000 in income to the IRS between 2000 and 2012, resulting in a loss to the IRS of over $100,000.

JAT Comments:

1. At a time when Kaminsky was aware of the UBS specific problems and Swiss bank accounts generally, he scurried his money out of the UBS account into other foreign accounts.  Not a good fact for him.

2.  He apparently then did attempt a quiet disclosure by delinquent FBARs and amended income tax returns. However, his amended income tax returns for 2009-2011 left off  nearly $150,000 in income.  Hence, he busted whatever benefit he might have hoped to achieve from a quiet disclosure.  Even worse fact.