Bank Hapoalim Enters Guilty Plea to Conspiracy for Assisting U.S. Taxpayer Hide Accounts and Taxable Income (4/30/20)

DOJ Tax has this announcement: Israel’s Largest Bank, Bank Hapoalim, Admits to Conspiring with U.S. Taxpayers to Hide Assets and Income in Offshore Accounts: Bank Hapoalim (Switzerland) Pleads Guilty and Bank Hapoalim B.M. Enters into Deferred Prosecution Agreement for Criminal Misconduct; Agree to Pay Nearly $875 Million, here.  The charges thus pled are: “conspiring with U.S. taxpayers and others to hide more than $7.6 billion in more than 5,500 secret.Swiss and Israeli bank accounts and the income generated in these accounts from the Internal Revenue Service (the IRS).”

Key excerpts are:

As part of today’s resolutions, along with resolutions entered into with state and federal partners, Bank Hapoalim B.M. (BHBM), Israel’s largest bank, and Bank Hapoalim (Switzerland) Ltd. (BHS), its Swiss subsidiary, agreed to pay approximately $874.27 million to the U.S. Treasury, the Federal Reserve, and the New York State Department of Financial Services. Today’s resolution is the second-largest recovery by the Department of Justice in connection with its investigations since 2008 into facilitation of offshore U.S. tax evasion by foreign banks. 

* * * * 

Today’s resolutions include agreements with BHBM and BHS (collectively, the “Bank”) under which the Bank agreed to accept responsibility for its conduct by stipulating to the accuracy of extensive Statements of Facts. BHBM further agreed to refrain from all future criminal conduct, implement remedial measures, and cooperate fully with further investigations into hidden bank accounts. Assuming BHBM’s continued compliance with its agreement, the Government has agreed to defer prosecution of BHBM for a period of three years, after which time the Government will seek to dismiss the charge against BHBM.  

According to documents filed today in Manhattan federal court:

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.  

* * * * 

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.  \ 

* * * * 

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.

Israeli Banks Advised to Prepare for FATCA Before Negotiations Finalized (3/19/14)

Although the U.S. and Israel are in negotiations, it appears the endgame is in sight.  See Banks told to prepare for new reporting rules on U.S. clients (Haaretz 3/19/14), here.  Key initial except::

The Bank of Israel Sunday advised Israeli banks to begin gearing up to provide information about their U.S. clients to U.S. tax authorities, as provided in the U.S. Foreign Tax Compliance Act. 

The statement was issued by the central bank in an effort to ensure that Israeli banking institutions will be ready to comply with FATCA when it goes into effect, in July. The purpose of the act is to help U.S. authorities collect any taxes owed by U.S. citizens, wherever they may live, with accounts at banking institutions outside the United States. 

Israeli banks are subject to laws in Israel, and not to U.S. laws such as FATCA. Until now, Israeli banks were obliged to protect their customers’ privacy and were forbidden from providing information on account holders to any parties unless Israeli regulators explicitly stated otherwise. 

The banks had expected Israel’s central bank to push them to comply with the U.S. crackdown, though. Doing otherwise could expose the banks to U.S. sanctions, including limits on their branches within the United States. 

Sunday’s order brought Israel’s banking system in line with many others that have given in to American demands, including Switzerland’s banks, which had been well-known for their privacy. 

As far as is known, the step was taken following advanced negotiations between Israeli government officials and their U.S. counterparts. The bilateral deal would include an Israeli commitment to provide the required information about the American customers of Israeli banks. In return, the United States is expected to commit to provide the Israeli government with comparable data on U.S. banks’ Israeli customers. 

Most Israeli banks have been preparing for two years for the introduction of FATCA in Israel, informing their U.S. customers about the anticipated requirement and its implications. 

It is assumed that any U.S. citizen seeking to evade the reporting requirements has already withdrawn their funds from Israeli banks and turned to other investment channels, such as Israeli real estate, which is not subject to regulation under FATCA. Others have voluntarily disclosed their assets to the U.S. Internal Revenue Service.

Dave Wolf, an Isreali lawyer, advises here that (emphasis supplied by JAT):

This development is quite surprising as usually countries sign the FATCA agreement first before starting the implementation of FATCA rules. 

The negotiations with the USA have been ongoing a very long time and this may be partly the result of the U.S. Department of Justice criminal investigation into the behavior of three Israeli banks in Switzerland: Bank Leumi, Bank Hapoalim and Bank Mizrahi.

Swiss Settlement May Be Near (5/28/13)

Lynnley Browning, Switzerland Weighs Deal in Tax Cases (NYT DealBook 5/28/13), here, reports that a deal between the U.S. and Swiss may be near that might cover most of the outstanding issues.  Excerpts are:

The Swiss government is considering a proposal to disclose bank client names and pay a multibillion-dollar fine to the United States to help resolve a long-running dispute between the two countries over the handling of tax-evasion cases, American and Swiss sources briefed on the matter said on Tuesday. 

The fine, which could reach at least $7 billion to $10 billion according to these people, could be paid in part by the Swiss government, which would then seek reimbursement from the banks. 

* * * * 

The Swiss banks that have been the targets of investigations include Credit Suisse, which disclosed in July 2011 that it had received a letter saying it was under a grand jury investigation; the Zurich-based Julius Bär; two cantonal, or regional, banks; the Swiss operations of HSBC Holdings; and three Israeli banks, Hapoalim, Mizrahi-Tefahot Bank and Bank Leumi. 

* * * * 

Members of the top echelon of the Swiss government known as the Federal Council are expected to discuss the matter as early as Wednesday, according to people briefed on the talks. These people asked to be unidentified because the discussions were continuing.
Hans Kaufmann, a Swiss parliamentarian and member of the conservative Swiss People’s Party, said that various levels of Parliament would be informed of the Federal Council’s decision in stages over the next 10 days or so.

Bank Leumi Signals Cooperation with U.S. on Offshore Accounts (1/11/13)

Reuters reports on developments with Bank Leumi, an Israeli bank.  Lynnley Browning, Bank Leumi sends letter to U.S. customers about IRS program (Reuters 1/10/13), here.

Excerpts:

Bank Leumi, the largest commercial bank in Israel, has urged U.S. clients to disclose information about their accounts to U.S. authorities, who are investigating Leumi and many other foreign banks over possible tax avoidance by Americans. 

In a Dec. 16 letter obtained by Reuters, Bank Leumi le-Israel BM urged U.S. clients to enter the Internal Revenue Service's voluntary disclosure program, part of a wide-ranging U.S. crackdown on offshore tax dodging. 

* * * * 

As previously reported by Reuters, Leumi and two other Israeli banks, Bank Hapoalim and Mizrahi-Tefahot , are under investigation by the U.S. Justice Department in connection with offshore private banking services that may have enabled wealthy Americans to evade taxes. 

* * * * 

Bryan Skarlatos, a New York tax lawyer with Leumi clients who got the letter, said it "is the result of ratcheted up pressure on Bank Leumi." He said U.S. officials "are asking clients questions about Leumi accounts: who the bankers were, what they said, did they come to the U.S., whose idea was it." 

* * * * 

Jeffrey Neiman, a criminal defense lawyer and former federal prosecutor who was involved in the UBS case, said U.S. officials are eager to expand their push beyond Switzerland, "and the Israeli banks have whetted their appetite."

 Also, some quotes from Shamik Trivedi, Israeli Bank's Letter Seen as Step Toward Turning Over Account Data, 2013 TNT 9-5 (1/14/13) (emphasis supplied):

Leumi is one of three Israeli banks under investigation by the Justice Department. In September the DOJ announced it was looking into allegations of tax evasion conspiracy by the Swiss branches of Leumi and two other Israeli banks, Bank Hapoalim and Bank Mizrahi-Tefahot. * * * *

Robert S. Fink of Kostelanetz & Fink LLP said it is his understanding that Leumi is negotiating with the Justice Department and that it has a tentative agreement to hand over the account information of U.S. persons, but is attempting to extract some promises from the government regarding the bank's liability and the liability of bank employees. 

* * * * 

Unlike Wegelin, which had only a correspondent account with UBS in Stamford, Conn., Leumi has offices in New York, California, Florida, and Illinois. 

* * * * 

* * * * Under FAQ 21 of the OVDP's frequently asked questions , the IRS maintains the right to exclude from the voluntary disclosure program taxpayers who have or had accounts at specific banks. The IRS has not yet announced which taxpayers, if any, fall into that category. 

* * * * 

Fink said that for taxpayers, the situation is now essentially "a race to the courthouse" with the IRS, meaning that a taxpayer has to submit his or her package under the OVDP before the IRS receives that information from the bank. * * * *

"Those who know what's happening realize that this is a precursor," and that the next letter sent by the bank might say that the names have been given or are about to be given, he [Fink] said.

Of course, once the bank gives up information on a U.S. taxpayer, it is too late to get assurance of the benefits of OVDP 2012, particularly no criminal prosecution.

New Indictment of U.S. Tax Return Preparers & Enablers re Offshore Bank & Related Activity (6/14/12)

In a First Superseding Indictment, here, filed June 14, 2012 in CD CA, three principals of a tax return preparation service, United Revenue Service ("URS") were indicted.  The DOJ Tax Press Release is here.

URS operated in several states under variations of the name URS.  The individuals include David Kalai and Nadav Kalai, who are Israeli citizens who subsequently became naturalized U.S. citizens.  Another defendant is Advid Almog, also an Israeli citizen who was a U.S. permanent resident alien.  A tax return preparer identified as "R.S." is named as an unindicted co-conspirator.  Various clients are identified with initials in the indictment.

The charge is the ubiqitous Klein conspiracy, 18 USC 371, to impair or impede the lawful functions of the IRS.  (See par. 20.)

Interesting allegations are:

12.  Bank A was a large financial institution headquartered in Tel-Aviv, Israel. Bank A currently describes itself as maintaining a "premier position in the world of international private banking11 with private bankers who will be a customer's "loyal and discreet consultant." Bank A currently advertises that it has "more than 336 branches and representations across 18 countries worldwide, including banking operations in Luxembourg (hereinafter "Bank A Luxembourg"). 

13. Bank B was a mid-size financial institution headquartered in Tel-Aviv, Israel. Bank B offered private banking services it currently describes as being tailored to a customer's "preferred communications channels and information"  while "maintaining total discretion." Bank B advertises a "worldwide presence on four continents through subsidiaries, branches, and representative offices," including a branch of its Swiss ba,nking operations located in Luxembourg (hereinafter "Bank B Swit.zerland-Luxembourg Branch") .

Article on Israeli Banks as Targets in Tax Probe (6/8/12)

Asher Rubinstein, bio here, and a Julie Otten, an associate in Asher's firm, have written an article on the Government targeting Israeli banks, Asher Rubinstein, Esq. and Julie Otton, The Next Wave of IRS Offshore Account Enforcement: Israeli Banks Under Scrutiny (Ribinstein & Rubinstein LLP web site), here.  Here are a few items I cut and paste to whet readers' interest:

[T]he criminal tax division of the U.S. Department of Justice (DOJ) have now focused attention on three of Israel's biggest banks: Bank Leumi Le-Israel, Bank Hapoalim and Mizrahi-Tefahot Bank, to see if they helped U.S. citizens to evade taxes. 

* * * * 

The IRS is now scrutinizing banks outside of Switzerland, including Liechtenstein, India and other countries. In the case of Israeli banks, American authorities are concerned with the flow of non-compliant money from Switzerland to Israel in recent years. As Swiss banking secrecy faded over the past few years, and the U.S. extracted once-"secret" Swiss account details, many taxpayers transferred assets from Switzerland to Israel to avoid detection by the I.R.S. Now, the IRS has caught up with them.  

* * * * 

Whereas until recently, Swiss bank secrecy laws presented a formidable challenge to the IRS, pursuing undisclosed accounts in Israel will not require nearly as much effort. The tax treaty between the U.S. and Israel enables both countries to "exchange such information as is pertinent to . . . fraud or fiscal evasion in relation to the taxes which are the subject of this Convention." Cooperation between the U.S. and Israel is routine in many matters, tax and otherwise. In addition, the U.S. and Israel currently grant legal assistance to each other in criminal matters via a Mutual Legal Assistance Treaty (MLAT). The MLAT states that the U.S. and Israel "express their understanding that this treaty applies to . . . criminal tax offenses . . . ." It is noteworthy that the treaty provides for the exchange of bank records.

IRS Ratchets Up Its Focus on the Enablers (6/2/11)

Observers of the IRS offshore financial account initiative have known for a long time that the IRS had its sights on enablers (persons who promoted and enabled taxpayers into offshore accounts for U.S. tax evasion purposes). In the template letter required in the two programs, participants were required to identify enablers. Then IRS then took that information and built databases of names and relationships that could identify the signficiant enablers. At least anecdotally, practitioners observed that the IRS seemed to be particularly interested in enablers who had some U.S. presence -- particularly, as in the case of the UBS enablers, those who moved into and out of the country in stealth mode to sell their evasion services. This is probably not new to most of the professional readers of this blog.

In a very good article, a Bloomberg Business Week reporter discusses some of the IRS's efforts. The article is David Voreacos,The IRS Grills Taxpayers on Offshore Accounts, Bloomberg Businessweek (6/2/11). It is not a long article and is well-written, so I just link to it for you.