Houston Attorney Charged With Tax Crimes Related to Offshore Accounts (9/21/18)

DOJ Tax has announced here that an attorney, Jack Stephen Pursley, from Houston has been indicted as an enabler in an offshore account matter.  The indictment is here.

The press release summary key excerpts are:

According to the indictment, Jack Stephen Pursley, also known as Steve Pursley, conspired with another individual to repatriate more than $18 million in untaxed earnings from the co-conspirator’s business bank account located in the Isle of Man.  Knowing that his co-conspirator had never paid taxes on these funds, Pursley allegedly designed and implemented a scheme whereby the untaxed funds were made to appear to be stock purchases in United States corporations owned and controlled by Pursley and his co-conspirator. 

The indictment alleges that Pursley received more than $4.8 million and an ownership interest in the co-conspirator’s ongoing business for his role in the fraudulent scheme.  The indictment further alleges that for tax years 2009 and 2010 Pursley evaded the assessment of and failed to pay the incomes taxes due on this money by, amongst other means, withdrawing the funds as purported non-taxable loans or returns of capital.  Pursley allegedly used the money he received to purchase personal assets, including a vacation home in Vail, Colorado and property in Houston.  

The counts charged are:

1. Defraud / Klein Conspiracy - Count One

2. Tax Evasion - Counts Two-Four (Two related to Pursley's taxes and one related to the taxpayer's taxes.)

JAT Comments: 

1.  This is a variation on a fact pattern of a U.S. person assisting an offshore account holder to bring untaxed funds into the U.S. in a way, they allegedly hoped, would be off the IRS radar screen.

2.  The numbers are note-worthy.

3.  I was particularly interested in Count Four, the tax evasion count with respect to the taxpayer's taxes.  The only Code section cited is § 7201, the tax evasion provision.  In the past, I have seen and written about charging enablers with tax evasion under the aiding and abetting statute, 18 USC § 2, and under Pinkerton liability for conspiracy (18 USC § 371).  I have noted that enablers  of a taxpayer's tax evasion can be directly charged under § 7201 for the taxpayer's evaded taxes (even if the taxpayer himself is not alleged to have evaded taxes), so that charging under aiding and abetting or conspiracy is redundant and potentially confusing for a jury.  See John A. Townsend, Theories of Criminal Liability for Tax Evasion (SSRN May 15, 2012), here.  The prosecutors could still, I suppose, request jury instructions on those derivative types of liability, but in my mind should just go for the direct liability under § 7201.