Tax Return Preparers Convicted of Conspiracy and Failure to File FBARs (12/23/14)

DOJ Tax announced in a press release, here, that David Kalai and Nadav Kalai, tax return preparers, were convicted by a jury of one count of conspiracy to defraud the Internal Revenue Service (IRS) and two counts  of willfully failing to file FBARs.  Key excerpts are:

According to the second superseding indictment and evidence introduced at trial, David Kalai and Nadav Kalai were principals of United Revenue Service Inc. (URS), a tax preparation business with 12 offices located throughout the United States.  David Kalai worked primarily at URS’s former headquarters in Newport Beach, California, and later at URS’s location in Costa Mesa, California.  Nadav Kalai, who is David Kalai’s son, worked out of URS’s headquarters in Bethesda, Maryland, as well as the URS locations in Newport Beach and Costa Mesa.  David Almog was the branch manager of the New York office of URS and supervised tax return preparers for URS’s East Coast locations.  

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The second superseding indictment and the evidence introduced at trial established that the co-conspirators prepared false individual income tax returns that did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts.  In order to conceal the clients’ ownership and control of assets and to conceal the clients’ income from the IRS, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, Bank A and Bank B.  Bank A is a large financial institution headquartered in Tel -Aviv, Israel, with branches worldwide.  Bank B is a mid-size financial institution, also headquartered in Tel Aviv, with a presence on four continents.  

As further proven at trial, the co-conspirators incorporated offshore companies in Belize and elsewhere to act as named account holders on the secret accounts at the Israeli banks.  The co-conspirators then facilitated the transfer of client funds to the secret accounts and prepared and filed tax returns that falsely reported the money sent offshore as a false investment loss or a false business expense.  The co-conspirators also failed to disclose the existence of, and the clients’ financial interest in and authority over, the secret accounts and caused the clients to fail to file FBARs with the U.S. Treasury.  \ 

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The evidence at trial established that David Kalai and Nadav Kalai each failed to file FBARs for calendar years 2008 and 2009 concerning a foreign account held at Bank A in Luxembourg.  The bank account was held in the name of a nominee corporation in Belize and held over $300,000. 

I think the banks are Bank Leumi and Bank Hapoalim, both Israeli banks.