Articles Posted in Tax Fraud

The Department of Justice (DOJ) and Internal Revenue Service (IRS) announced last week the indictment of an HSBC India client on four counts of filing false tax returns and four counts of failure to file a Foreign Bank Account Report, form TD F 90-22.1 (FBAR). According to the press release each false tax return charge can result in a penalty of three years in prison and a $250,000 fine, and each failure to file an FBAR can result in 10 years in prison and a $500,000 fine. The press release is further evidence of the hardline positions that the IRS continues to take in FBAR cases. The maximum criminal penalty for willful failure to file an FBAR is “only” $250,000 and a five year jail term, under 31 USC 5322(a). However, under 31 USC 5322(b) if the willful failure to file an FBAR occurs “while violating another law of the United States or as part of a pattern of any illegal activity involving more than $ 100,000 in a 12-month period” that ups the ante to 10 years and $500,0000. By referencing the 10 year jail term the IRS is sending a message that it will seek maximum prison time.

The indictment alleges Dr. Arvind Ahuja, a US citizen living in Wisconsin, transferred and maintained millions of dollars in accounts in India and the Bailiwick of Jersey (Jersey) through HSBC. Jersey is considered to be a tax haven jurisdiction, meaning its laws are intended to conceal financial information from authorities in other countries. The indictment further alleges the balances of Dr. Ahuja’s accounts ranged from $5 to $9 million and generated interest income that was unreported on his US tax returns.

The FBAR reporting requirement applies to individuals with a financial interest in or signature authority over foreign bank accounts if the aggregate value of those accounts exceeded $10,000 on any one day. The failure to file an FBAR is a charge independent of the failure to report taxable income. Foreign account holders with past unreported taxable income or undisclosed foreign accounts may make a voluntary disclosure under the IRS’s Offshore Voluntary Disclosure Initiative (OVDI) and avoid or decrease penalties. The OVDI is open until August 31, 2011 and certain individuals may be entitled to an extension.
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As we reported recently on our Tax Problem Attorney Blog, the IRS crackdown on offshore bank accounts has led to more criminal tax charges against tax preparers and bankers.

The U.S. Department of Justice recently accused Renzo Gadola, a former UBS banker, of encouraging a client not to report an offshore bank account. The government continues to crackdown on those who fail to file FBARs (Foreign Bank Account Reports) since instituting its tax amnesty program, a/k/a Offshore Voluntary Disclosure Program (OVDP), and Offshore Voluntary Disclosure Initiative (OVDI) which permits taxpayers to voluntarily disclose offshore bank accounts without the threat of criminal prosecution. Large civil penalties and interest still apply.

The government captured Gadola on videotape, telling a client at a Miami hotel not to report an overseas bank account at Basler Kantonalbank, a regional bank in Basel, Switzerland. He faces a maximum of 5 years in prison. But of interest to his clients is the fact that such guilty pleas frequently require defendants to cooperate with the Internal Revenue Service. In fact, while Gadola was advising his clients the chances of getting caught with a Swiss bank account were practically “zero percent,” and that there was no paper trail, one of the most reliable ways the IRS finds and tracks such foreign bank accounts is through the cooperation of bankers and tax preparers who are in trouble with the law.
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A 45-year-old Ohio man has pleaded guilty to filing false personal income tax returns after admitting to having nearly $1 million in an undeclared offshore bank account, the U.S. Department of Justice reported.

Tax attorneys are being called to handle such cases with increasing frequency. As we report frequently on our Tax Problem Attorney Blog, the Offshore Voluntary Disclosure Initiative gives taxpayers a chance to avoid criminal prosecution for failing to file FBARs (Foreign Bank Account Reports) by self-reporting and paying interest and penalties.

Over the last several years, the government has significantly ramped up enforcement against U.S. taxpayers who use Swiss bank accounts or other overseas accounts.

In this case, Edward Gurary pleaded guilty before U.S. District Judge Dan Polster in Cleveland to charges of filing false personal income tax returns from 2004 to 2008. Court documents indicate Gurary has lived in Switzerland since 2010 but was residing in Orange Village, Ohio during the years relevant to the prosecution. Gurary admitted to owning a UBS AG account in the name of a Bahamian entity, named Demko Ltd., which carried a balance ranging from $490,000 to $947,000.

The Internal Revenue Service alleged unpaid taxes ranged from $3,400 to more than $21,000 per year. This is generally below the threshold that many tax attorneys believed would trigger a criminal tax prosecution.

As part of the plea, Gurary also admitted that he falsely indicated on his Schedule B that he did not have authority over any foreign financial accounts. In addition to the UBS account in Switzerland, the defendant also had significant assets at Credit Suisse AG.

An FBAR form is required to be filed with the IRS each June on any financial accounts that have exceeded $10,000 in the reporting year, and over which the reporter has signature control or ownership.

Gurary agreed to pay a 50 percent penalty of the highest aggregate amount in the two accounts between 2002 and 2007. He tendered a check to the government for $300,000 at the sentencing hearing and has agreed to surrender a $200,000 cash bond at sentencing.

He will face a sentence of up to three years in prison and a $250,000 fine at his June 1 sentencing.
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A father and son team of Miami hotel developers have been sentenced to 10 years in prison after being convicted of conspiracy and filing false tax returns; the government alleges they tried to conceal more than $150 million in assets in offshore bank accounts, according to the U.S. Department of Justice.

Most of the allegations in this case stem from the sale of a New York hotel in 2000, which generated $33 million. They probably didn’t need a tax attorney to tell them that putting unreported income in an offshore bank account was illegal.

Mauricio Cohen Assor, 77, and son, Leon Cohen-Levy, 46, of Miami Beach, FL, were arrested on Tax Day, April 15, 2010. Cohen Assor has been ordered to pay $9.3 million in restitution, while Cohen-Levy has been ordered to pay more than $7.7 million.

The Internal Revenue Service accused them of concealing more than $150 million in assets, including mansions, yachts, luxury cars and bank accounts. Together, they failed to report more than $49 million in income to the IRS.

“American taxpayers who seek anonymity and shelter behind foreign bank accounts in tax haven jurisdictions are simply running out of places to hide,” said U.S. Attorney for the District of South Florida Wifredo A. Ferrer. “Those who evade their income tax obligations will be found and will be held accountable for their actions.”

The case is another illustration of why taxpayers may want to take advantage of the Internal Revenue Service’s Offshore Voluntary Disclosure Initiative, which permits citizens to avoid criminal prosecution by voluntarily reporting offshore bank accounts and paying interest and penalties. The IRS requires Foreign Bank Account Reports (FBARs) be filed each year, which disclose bank accounts that have a value of more than $10,000 at any point during the reporting year.

The two men were convicted of using shell companies and offshore tax havens in multiple jurisdictions, including the Bahamas, the British Virgin Islands, Panama, Liechtenstein and Switzerland. They are also accused of using shell companies to hide ownership of luxury homes and vehicles, file false tax returns, failing to file tax returns, and inducing witnesses to testify falsely under oath.

Cohen Assor and Cohen-Levy were the developers and owners of several hotels under the trade name Flatotel International, which had locations in France, Spain, Brussels and New York. About $33 million in proceeds from the sale of a New York hotel was transferred to HSBC in Switzerland and the income on the sale was never reported to U.S. authorities.
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