Monday, March 9, 2020

Another Plea Related to Offshore Accounts (3/9/20)

DOJ Tax issued this press release:  Alabama Salesman Pleads Guilty to Tax Evasion: Defendant Used Offshore Insurance Wrapper Accounts to Conceal Assets, here.  The criminal information and plea agreement are here and here.

Key excerpts are:
According to court documents and statements made in court, Ivan Scott “Scott” Butler was an automobile industry consultant and sold automobile warranties as an independent salesman. In 1993, Butler stopped filing tax returns and attended tax defier meetings and purchased tax defier materials. Starting in 1998, Butler used several Nevada nominee corporations to receive his income. In around 1999, Butler moved hundreds of thousands of dollars, some in precious metals, to bank accounts in Switzerland and concealed his assets in offshore insurance policies held in the name of non-U.S. insurance providers, disguising his ownership of the funds. Such accounts, which generally are used as investment vehicles, are commonly known as “insurance wrappers.”
In 2014, Butler converted some of his insurance annuities into precious metals, which were shipped to Butler and another individual in the United States. Some of those precious metals were given to friends and family for safekeeping. In total, Butler caused a tax loss to the Internal Revenue Service (IRS) of $1,093,400.
* * * *
At sentencing, Butler faces a maximum sentence of five years. Butler also faces a period of supervised release, restitution, and monetary penalties.
JAT Comments:

1.  The statement of facts is just a variation on a theme of the pattern of offshore account evasion.  The big twist here is that Butler coupled the offshore evasion failure to file tax returns.

2.  Obviously, this pattern of conduct involved a lot more potential crimes than Butler pled to.  Pleading permits a conviction on fewer counts.  But, the Sentencing Guidelines permits consideration of relevant conduct but assuming that the object of the crimes (pled and relevant conduct) is tax evasion, then the tax loss for all of them will be the critical component in the Guidelines calculation.  It is unlikely that the failure to get a plea to more counts will affect the sentence Butler receives.

3.  The relevant conduct from his failure to file tax returns (the method by which he evaded tax, along with concealing income and assets) since about 1993 could include the tax loss since that time.  Nevertheless, the tax loss calculation only includes 2010 and later years.  Not sure why that is, but likely won’t make much real difference in his sentencing.

4.  The sentencing calculation is based on the tax loss (Level 20 based on tax loss between $550,000 and $1,500,000), sophisticated means (+2), acceptance of responsibility (-3), for a Guidelines offense level of 19 with no criminal history, with resulting sentencing range of 30 to 37 months.  (See Plea Agreement par. III, pp. 7-10.)  The Government recommends a sentence within the Guidelines range. (Id.)

5.  The restitution is agreed restitution.  Butler agrees to pay Title 26 interest on the restitution amount, running from the last date prescribed for payment of the tax.  (Plea Agreement, par. XII, pp. 14-16.) Butler agrees that the amount of restitution will result in a tax assessment under § 6201(a)(4), but the tax assessment will be credited for any restitution paid when it is received by the IRS. (Id.)  Butler agrees that the plea agreement “does not resolve the Defendant’s civil tax liabilities.

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