Enablers and Taxpayer Related to Panama Papers Disclosures Indicted (12/4/18)

USAO SDNY announced charges against enablers related to the law firm involved in the Panama Papers Investigation:  Four Defendants Charged In Panama Papers Investigation: Indictment Unsealed Today Charges Four Defendants for Their Roles Global Law Firm’s Decades-Long Scheme to Defraud the United States in Panamanian-Based (OSAO SDNY 12/4/18), here.  The indictment is here.  The defendants are:

• Dirk Brauer, an investment manager for Mossfon Asset Management, S.A., an asset management company closely affiliated with Mossack Fonseca, who was arrested in Paris, France, on November 15, 2018;
• Ramses Owens (aka Ramses Owens Saad), a Panamanian attorney who worked for Mossack Fonseca and who remains at large.
• Richard Gaffey, a U.S.-based accountant, who was arrested in Massachusetts, this morning.
• Harald Joachim von der Goltz (also identified as Client-2 in the indictment), a former U.S. resident and taxpayer, who was arrested in London, United Kingdom, on December 3, 2018

Key excerpts from the press release:

[The Government] announced today the unsealing of an indictment charging RAMSES OWENS, DIRK BRAUER, RICHARD GAFFEY, and HARALD JOACHIM VON DER GOLTZ, with wire fraud, tax fraud, money laundering, and other offenses in connection with their roles in a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (“Mossack Fonseca”), a Panamanian-based global law firm, and related entities. 

* * * * 

According to the Indictment, which was unsealed today in Manhattan federal court:
From 2000 through 2017, OWENS and BRAUER conspired with others to help U.S. taxpayer clients of Mossack Fonseca conceal assets and investments, and the income generated by those assets and investments, from the IRS through fraudulent, deceitful, and dishonest means.  To conceal their clients’ assets and income from the IRS, OWENS and BRAUER worked to establish and manage opaque offshore trusts and undeclared bank accounts on behalf of U.S. taxpayers who were clients of Mossack Fonseca.  OWENS and BRAUER marketed, created, and serviced sham foundations and shell companies formed under the laws of countries such as Panama, Hong Kong, and the British Virgin Islands, to conceal from the IRS and others the ownership by U.S. taxpayers of accounts established at overseas banks, as well as the income generated in those accounts.  As structured by Mossack Fonseca, the sham foundations typically “owned” the shell companies that nominally held the undeclared assets on behalf of the U.S. taxpayer clients of Mossack Fonseca.  The names of Mossack Fonseca’s clients generally did not appear anywhere on the incorporation paperwork for the sham foundations or related shell companies, although the clients in fact beneficially owned, and had complete access to, the assets of those sham entities and accounts. 

In furtherance of the scheme, and in exchange for additional fees, OWENS and BRAUER provided support to clients who had purchased the sham foundations and related shell companies by providing corporate meeting minutes, resolutions, mail forwarding, and signature services.  Moreover, OWENS and BRAUER purposefully established the bank accounts in locations with strict bank secrecy laws, which impeded the ability of the United States to obtain bank records for the accounts.  OWENS and BRAUER also instructed U.S. taxpayer clients of Mossack Fonseca about how to repatriate funds to the United States from their offshore bank accounts in a manner designed to keep the undeclared bank accounts concealed.  Among other things, OWENS and BRAUER instructed clients to use debit cards and fictitious sales to repatriate their funds covertly. 

VON DER GOLTZ was one of Mossack Fonseca’s U.S. taxpayer clients.  At all relevant times, VON DER GOLTZ was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts.  VON DER GOLTZ evaded his tax reporting obligations by setting up a series of shell companies and bank accounts, and hiding his beneficial ownership of the shell companies and bank accounts from the IRS.  These shell companies and bank accounts made investments totaling tens of millions of dollars.  VON DER GOLTZ was assisted in this scheme by OWENS and by GAFFEY, a partner at a U.S.-based accounting firm.  In furtherance of VON DER GOLTZ’s fraudulent scheme, VON DER GOLTZ, GAFFEY, and OWENS falsely claimed that VON DER GOLTZ’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and – unlike VON DER GOLTZ – was not a U.S. taxpayer.  

GAFFEY, in addition to assisting VON DER GOLTZ evade U.S. income taxes and reporting requirements, also worked closely with OWENS to help another U.S. taxpayer client (“Client-1”) of Mossack Fonseca defraud the IRS.  Client-1 maintained a series of offshore bank accounts, which Mossack Fonseca helped Client-1 conceal from the IRS for years.  The indictment further alleges that upon the advice of OWENS and GAFFEY, Client-1 covertly repatriated approximately $3 million of Client-1’s offshore money to the United States by falsely stating on Client-1’s federal tax return that the money represented proceeds from the sale of a company.  After Client-1 repatriated approximately $3 million in this manner, approximately $1 million still remained in Client-1’s offshore account, the existence of which remained hidden from the IRS.   

A chart outlining the charges against each defendant is below. * * * *

COUNT	DEFENDANT	AGE & CITIZENSHIP	MAXIMUM SENTENCE
Count One: Conspiracy to Defraud the United States 18 U.S.C. § 371	RAMSES OWENS DIRK BRAUER	50, Panamanian Citizen 54, German Citizen	Five years in prison
Count Two: Conspiracy to Commit Wire Fraud 18 U.S.C. § 1349	RAMSES OWENS DIRK BRAUER	50, Panamanian Citizen 54, German Citizen	20 years in prison
Count Three: Conspiracy to Commit Tax Evasion 18 U.S.C. § 371	RAMSES OWENS RICHARD GAFFEY HARALD JOACHIM VON DER GOLTZ	50, Panamanian Citizen 74, U.S. Citizen 81, German Citizen	Five years in prison
Count Four: Wire Fraud 18 U.S.C. § 1343	RAMSES OWENS RICHARD GAFFEY HARALD JOACHIM VON DER GOLTZ	50, Panamanian Citizen 74, U.S. Citizen 81, German Citizen	20 years in prison
Count Five: Money Laundering Conspiracy 18 U.S.C. § 1956	RAMSES OWENS RICHARD GAFFEY HARALD JOACHIM VON DER GOLTZ	50, Panamanian Citizen 74, U.S. Citizen 81, German Citizen	20 years in prison
Counts Six-Nine: Willful Failure to File an FBAR 31 U.S.C. §§ 5314 & 5322(a)	RICHARD GAFFEY HARALD JOACHIM VON DER GOLTZ	74, U.S. Citizen 81, German Citizen	10 years in prison for each count
Counts Ten-Eleven: False Statements 18 U.S.C. § 1001	HARALD JOACHIM VON DER GOLTZ	81, German Citizen	Five years in prison for each count

Key points and comments from the indictment:

1.  One M-F client, identified as Client-1, indicated to Owens a desire to join OVDP.  Owens told Client-1 that that would not be necessary and instead referred him to Richard Gaffey, a U.S. tax accountant, who could assist in repatriating the funds without having to disclose.  (See indictment ¶¶ 24-27.)  However, the allegation is that the meeting occurred in or around the fall of 2008.  My memory and quick check indicated that the first current iteration of the Offshore Voluntary Disclosure Initiative/Program started late March 2009 at the earliest.  See the following blog entries:

• Get in Line Brother #6 - New IRS FAQs on Details of Voluntary Disclosure re Offshore (Federal Tax Crimes Blog 5/7/09), here.
• Some Thoughts on the IRS Voluntary Disclosure Program for Offshore Accounts (Federal Tax Crimes Blog 3/31/09), here.
• IRS Offshore Bank Account Initiative -- Key Points (Federal Tax Crimes Blog 3/27/09), here.
• IRS Expected to Announce Inducements for Offshore Account Holders (Federal Tax Crimes Blog 3/26/09), here; 

2.  Client-1 finally entered OVDP in 2013 (which was before the Panama Papers disclosures). (Indictment ¶ 32.)  

3.  Client-2, von der Glotz, was advised by a Swiss bank incident to FATCA diligence that he could have reporting requirements and encouraged him to join OVDP.  (Indictment ¶ 57.) Although he consulted a law firm about joining OVDP, he just filed amended FBARs which were materially false.  (Indictment ¶ 58 & 59.)

4.  Client-2 was then exposed in the Panama Papers disclosures, with his law firm them contacting DOJ and providing a narrative that was false.  (Indictment ¶ 63 & 64.)

5.  Client-5 joined OVDP in 2014 (Indictment ¶ 100.)

JAT Comments:  I have not had time to fully read the indictment.  If and when I have time or receive other relevant information, I may offer more comments.