OC billionaire sues UBS in tax case

SANTA ANA, Calif.—An Orange County billionaire who pleaded guilty to filing a false tax return involving foreign banking accounts filed a lawsuit alleging Swiss bank UBS AG duped him into skirting U.S. tax laws.

Real estate developer Igor Olenicoff filed the lawsuit Tuesday in U.S. District Court in Santa Ana, accusing the bank of telling him his fortune would be invested in accordance with U.S. tax laws then hiding it in offshore entities.

The lawsuit carries similar accusations against financial entities in Liechtenstein, where UBS allegedly moved Olenicoff’s $200 million in investments.

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September 18, 2008 | Filed Under UBS, tax evasion | Share your thoughts...

IRS Plans New Taxpayer Warning Letters

Washington, D.C. (Aug. 22, 2008)
By WebCPA staff, WebCPA.com

The Internal Revenue Service is planning to increase its enforcement efforts by sending out warning letters to a larger group of taxpayers who may be underreporting their income.

The new warning letter, the CP2057, will differ from the CP2000 letter that the IRS has been sending out for years, according to The Wall Street Journal. The earlier type of letter included suggestions for proposed changes to areas such as income, credits and deductions, while the CP2057 will mainly ask taxpayers to double-check parts of the return and file an amended return if they have made a mistake. Unlike the CP2000, it will not include the exact amount owed.

The IRS will begin testing the new automated notices later this year and expand their use if they succeed in collecting extra revenue.

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August 27, 2008 | Filed Under irs, unreported income | Share your thoughts...

Attorney Gets 10-Year Sentence for $20M Tax Fraud

Salt Lake City (Aug. 19, 2008)
By WebCPA staff , WebCPA.com

A Utah attorney was sentenced to 120 months in prison and 36 months of supervised release after he was convicted of participating in a $20 million offshore tax fraud conspiracy.

In addition to jail time, Dennis B. Evanson of Sandy, Utah, was ordered by U.S. District Judge Tena Campbell of Salt Lake City to forfeit four pieces of real property, a Hummer and a Toyota Tundra, and to pay a money judgment of $2.77 million.

A federal jury convicted Evanson in February of conspiracy to commit mail and wire fraud, tax evasion, and assisting in the filing of false tax returns. According to prosecutors, Evanson and his co-defendants conspired between 1996 and April 2005 to conceal portions of his clients’ income from the IRS and to create false tax deductions for them. Evanson and another defendant received a fee for their services typically equal to 30 percent of the tax evaded by clients.

The scheme included offshore companies and bank accounts in the Cayman Islands and Nevis, offshore nominees and opinion letters that purported to give legal authority to the fraudulent transactions.

Four co-defendants have also pleaded guilty. Accountant Brent Metcalf of Cottonwood, Utah, pleaded guilty to conspiracy and aiding in the filing of a false tax return on Jan. 25, 2008. Attorney Graham R. Taylor of Tiburon, Calif., pleaded guilty on Jan. 24, 2008. CPAs Stephen F. Petersen of Coalville, Utah, and Reed H. Barker of Littleton, Colo., pleaded guilty to tax fraud on Jan. 18, 2008. Petersen also pled guilty to aiding in the preparation of a false tax return on behalf of a client. All four co-defendants are awaiting sentencing.

August 21, 2008 | Filed Under tax evasion, tax haven, tax preparer, unreported income | Share your thoughts...

Tax Haven Bank Secrecy Tricks

Senator Carl Levin (D-MI) revealed a list of “secrecy tricks” he said the UBS
bankers used to carry out their tax haven schemes. They include:
• Code Names for Clients
• Pay Phones, not Business Phones
• Foreign Area Codes
• Undeclared Accounts
• Encrypted Computers
• Transfer Companies to Cover Tracks
• Foreign Shell Companies
• Fake Charitable Trusts
• Straw Man Settlors
• Captive Trustees
• Anonymous Wire Transfers
• Disguised Business Trips
• Counter-Surveillance Training
• Foreign Credit Cards
• Hold Mail
• Shred Files
Prepared by the U.S. Senate Permanent Subcommittee on Investigations, July 2008.

July 31, 2008 | Filed Under UBS, tax evasion, tax haven, unreported income | Share your thoughts...

Cayman Islands, Business and Tax Advantages Attract U.S. Persons and Enforcement Challenges Exist

The U.S. Government Accountability Office (GAO) has recently published, “Cayman Islands, Business and Tax Advantages Attract U.S. Persons and Enforcement Challenges Exist.”

The 57 page pdf can be found here.

July 28, 2008 | Filed Under offshore trusts, tax evasion, tax haven | Share your thoughts...

Permanent Subcommittee on Investigations Issues Report On Tax Haven Banks Hiding Billions from the IRS

7/17/08 Press Release from Michigan Senator Carl Levin’s office-

WASHINGTON – At a Thursday hearing entitled, Tax Haven Banks and U.S. Tax Compliance, the latest in a series of hearings with insider information about the workings of the offshore industry, the Senate Permanent Subcommittee on Investigations will examine how tax haven banks facilitate tax evasion by U.S. clients, hide client and bank misconduct behind the cloak of bank secrecy laws, and add to the offshore abuses that cost U.S. taxpayers an estimated $100 billion dollars each year. A six month-long bipartisan Subcommittee investigation examined LGT Bank in Liechtenstein and UBS in Switzerland to expose how tax haven banks are assisting U.S. taxpayers to evade taxes, in particular by urging U.S. clients to open accounts in their offshore jurisdictions, assisting them in structuring those accounts to avoid disclosure to U.S. authorities, and providing financial services in ways that do not alert U.S. authorities to the existence of the foreign accounts. Subcommittee Chairman Sen. Carl Levin (D-Mich.) and Ranking Minority Member Norm Coleman (R-Minn.) will release a 115-page joint staff report [PDF] detailing the findings of the investigation in conjunction with the hearing. “Tax havens are engaged in economic warfare against the United States, and the honest, hardworking American taxpayer is losing,” said Levin. “The iron ring of secrecy around tax haven banks and their deceptive banking practices enable and encourage tax cheats to hide assets from the United States. Congress needs to enact strong penalties on tax haven banks that help U.S. taxpayers avoid paying taxes to Uncle Sam.” Senator Coleman said, “It is simply unacceptable that some individuals are using offshore tax havens and secrecy jurisdictions to shelter trillions of dollars from taxation, forcing working families to shoulder the tax burden. By exploiting gaping loopholes, these foreign banks are enabling felony tax evasion. Simply put, foreign banks should not be Al Capone safe-houses for evading taxes. Closing these loopholes means we must strengthen reporting requirements, broaden the scope of the audit program, and extend the amount of time the IRS has to investigate cases involving an offshore tax haven.” Exposing a trove of internal bank documents and interviews with bank insiders, the Subcommittee report shines a spotlight into the murky operations of two high-profile tax haven banks. Eight case studies expose bank practices that could facilitate, and have resulted in, tax evasion by U.S. clients:

Marsh. The Marshes of Ft. Lauderdale, Florida, hid $49 million in four Liechtenstein foundations over 20 years.
Wu. LGT helped William Wu hide ownership of assets, including his house in Forest Hills, New York, using an elaborate offshore structure.
Lowy. LGT used transfer companies and a foundation with a Delaware corporation to help the Lowys hide their beneficial interest in a foundation with $68 million in assets.
Greenfield. LGT private bankers, including Prince Philipp of Liechtenstein, met with Mr. Greenfield and his father to pitch the transfer of $30 million from Bank of Bermuda to LGT.
Gonzalez. LGT helped a Gonzalez car dealership inflate invoices, move funds offshore and, after getting sued for their pricing practices, hide assets in case of a court judgment.
Chong. LGT helped Richard Chong use hidden accounts to move millions of dollars related to his business ventures, routing them through an offshore corporation to avoid scrutiny.
Miskin. LGT helped Michael Miskin hide assets from courts, tax authorities, and his wife.
Olenicoff. Bradley Birkenfeld, a private banker employed by UBS AG, pleaded guilty last month to conspiring with a U.S. citizen, Igor Olenicoff, to defraud the IRS of $7.2 million in taxes owed on $200 million of assets hidden in Switzerland and Liechtenstein.

In reviewing these case histories, the investigation found: (1) bank secrecy laws and practices are serving as a cloak, not only for client misconduct, but also for misconduct by banks colluding with clients to evade taxes, dodge creditors, and defy court orders; (2) from at least 2000 to 2007, LGT and UBS employed banking practices that could facilitate, and have resulted in, tax evasion by their U.S. clients, including assisting clients to open accounts in the names of offshore entities; advising clients on complex offshore structures to hide ownership of assets; using client code names; and disguising asset transfers into and from accounts; (3) since 2001, LGT and UBS have collectively maintained thousands of U.S. client accounts with billions of dollars in assets that have not been disclosed to the IRS; UBS alone has an estimated 19,000 accounts in Switzerland for U.S. clients with assets valued at $18 billion, and the IRS has identified at least 100 U.S. taxpayers with accounts at LGT; and (4) LGT and UBS have assisted their U.S. clients in structuring their foreign accounts to avoid QI reporting to the IRS, including by allowing U.S. clients who sold their U.S. securities to continue to hold undisclosed accounts, and by opening accounts in the name of non-U.S. entities beneficially owned by U.S. clients; while these banking practices did not technically violate the banks’ Qualified Intermediaryagreements with the IRS, the result is that the banks helped keep accounts secret from the IRS and thereby facilitated tax evasion by their U.S. clients. Reforms recommended by the Levin-Coleman report to reign in tax haven abuses include the following:

Strengthen QI Reporting of Foreign Accounts Held by U.S. Persons. In addition to prosecuting misconduct under existing law, the Administration should strengthen the Qualified Intermediary Agreements by requiring QI participants to file 1099 forms for: (1) all U.S. persons who are clients (whether or not the client has U.S. securities or receives U.S. source income); and (2) accounts beneficially owned by U.S. persons, even if the accounts are held in the name of a foreign corporation, trust, foundation, or other entity. The IRS should also close the “QI-KYC Gap” by expressly requiring QI participants to apply to their QI reporting obligations all information obtained through their Know-Your-Customer procedures to identify the beneficial owners of accounts.
Strengthen 1099 Reporting. Congress should strengthen the statutory 1099 reporting requirements by requiring any domestic or foreign financial institution that obtains information that the beneficial owner of a foreign-owned financial account is a U.S. taxpayer to file a 1099 form reporting that account to the IRS.
Strengthen QI Audits. The IRS should broaden QI audits to require bank auditors to report evidence of fraudulent or illegal activity.
Penalize Tax Haven Banks that Impede U.S. Tax Enforcement. Treasury should penalize tax haven banks that impede U.S. tax enforcement or fail to disclose accounts held directly or indirectly by U.S. clients by terminating their QI status, and Congress should amend Section 311 of the Patriot Act to allow Treasury to bar such banks from doing business with U.S. financial institutions.

This hearing and report follow other investigations into offshore abuses by the Subcommittee. Hearings held by the Subcommittee in 2001 examined the historic and ongoing lack of cooperation by some offshore tax havens with international tax enforcement efforts and their resistance to divulging information needed to detect, stop and prosecute U.S. tax evasion. A hearing held in December 2002 and report issued in January 2003 provided an in-depth examination of an abusive tax shelter used by Enron. Two days of hearings in November 2003, and a bipartisan report issued in 2005, provided an inside look at how some respected accounting firms, banks, investment advisors, and lawyers had become engines pushing the design, sale, and implementation of abusive tax shelters to corporations and individuals across the country. In August 2006, a hearing and report examined six case studies illustrating the operation of the offshore tax industry, its service providers and clients, and how tax haven abuses are undermining, circumventing, or violating U.S. tax, securities, and anti-money laundering laws.

July 21, 2008 | Filed Under UBS, irs, tax evasion, tax haven, unreported income | Share your thoughts...

UBS, LGT Helped Hide Assets, Evade Taxes, Senate Says

UBS, LGT Helped Hide Assets, Evade Taxes, Senate Says (Update2)

By David Voreacos and Carlyn Kolker, Bloomberg.com

UBS AG and Liechtenstein bank LGT Group aided rich U.S. clients who wanted to disguise ownership of accounts and evade taxes on hidden assets, a Senate subcommittee said.

UBS, the world’s largest wealth manager, hid as much as $17.9 billion for 19,000 Americans who didn’t declare assets to the Internal Revenue Service, the Senate Permanent Subcommittee on Investigations said in a report released in Washington late yesterday. LGT, owned by Liechtenstein’s ruling family, fostered a “culture of secrecy and deception” while assigning code names to U.S. clients, the panel said.

“UBS has opened thousands of accounts in Switzerland that are beneficially owned by U.S. clients, hold billions of dollars in assets, and have not been reported to U.S. tax authorities,” according to the 114-page report by the subcommittee, which is scheduled to begin hearings today on tax-haven banks. U.S. prosecutors and regulators are investigating Zurich- based UBS, which is cooperating. A former UBS banker pleaded guilty last month to helping a billionaire evade taxes. LGT is at the heart of a tax scandal involving investigations by about a dozen countries. The probes began after a former LGT employee allegedly sold stolen information on the secret accounts to German authorities.

UBS shares rose 7 percent to 20.16 Swiss francs at 12:20 p.m. in Zurich trading today. The stock has dropped 69 percent over the past 12 months.

Cover Up the Tracks

Both banks flouted agreements to help the IRS track foreign assets of U.S. clients, the subcommittee said. Bankers wooed wealthy Americans while moving their money into pass-through entities in different countries to break direct links to the true owner of assets, according to the report. LGT used such transfer corporations in tax havens including the British Virgin Islands to “cover up the tracks” of funds moving into client accounts, a bank employee told the subcommittee. The bank told employees to use public phone booths when contacting clients to make it more difficult to trace calls to Liechtenstein. One of LGT’s biggest clients was billionaire Frank Lowy, Australia’s second-richest person, the panel said. Lowy, founder of Westfield Group, the world’s biggest shopping mall owner, set up a secret Liechtenstein bank account to hide at least $68 million from tax collectors, according to the report.

Lowy, 77, issued a statement saying he “totally rejects” the committee’s assertion that he tried to evade taxes.

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July 18, 2008 | Filed Under UBS, irs, tax evasion, tax haven, unreported income | 1 Comment

Day of Reckoning? Super Rich Tax Cheats Outed by Bank Clerk

Technician in Liechtenstein Turns Over Names of Americans With Secret Bank Accounts
By BRIAN ROSS and RHONDA SCHWARTZ, ABCNEWS.GO.COM
July 15, 2008—

Hundreds of super-rich American tax cheats have, in effect, turned themselves in to the IRS after a bank computer technician in the tiny European country of Liechtenstein came forward with the names of US citizens who had set up secret accounts there, according to Washington lawyers investigating the scheme.

The bank clerk, Heinrich Kieber, has been branded a thief by the government of Liechtenstein for violating the country’s bank secrecy laws.

He is now in hiding but scheduled to testify to the Senate’s Permanent Subcommittee on Investigations Thursday via a video statement from a secret location, according to Congressional investigators.

Aides for committee chairman Carl Levin (D-MI) are scheduled to provide reporters with a background briefing later this morning in Washington on the committee’s investigation of tax haven banks in Liechtenstein and Switzerland.

Aides say the hearing will also focus on the role of the giant Swiss bank UBS and its alleged efforts to help wealthy Americans hide their money from the IRS through shell companies in Liechtenstein…

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July 15, 2008 | Filed Under unreported income | Share your thoughts...

IRS Taps Audit Firms to Probe Foreign Bank Role in Tax Cases

July 3 (Bloomberg) — The Internal Revenue Service summoned six of the biggest accounting firms to help detect foreign banks whose U.S. customers may be evading taxes through secret accounts, expanding an investigation that yielded a guilty plea by a former banker for UBS AG.

The IRS scheduled a July 8 conference call with the auditors to discuss how they can aid the agency in uncovering foreign banks that break their promise to report U.S. customers’ identities and earnings in their accounts.

The e-mail was sent to accounting firms Ernst & Young LLP, PricewaterhouseCoopers LLP, KPMG LLP, Deloitte & Touche LLP, Grant Thornton LLP and BDO Seidman LLP, the executive said.

In the UBS case, IRS agent Daniel Reeves said in court papers that the bank divided U.S. customers into two categories: those who were willing to submit proper IRS paperwork and those who chose to remain “undeclared.”

UBS spokeswoman Rohini Pragasam said July 1 that the bank “takes this matter very seriously and is working diligently with both Swiss and U.S. government authorities.”

The IRS summons would direct UBS to produce records identifying U.S. taxpayers who had accounts with the bank in Switzerland between 2002 and 2007 and who kept their accounts hidden from the IRS.

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July 3, 2008 | Filed Under UBS, tax evasion, unreported income | Share your thoughts...

International Tax Compliance - Definition of U.S. Person

“Each year, in the United States alone, offshore tax evasion produces an estimated $100 billion in unpaid taxes that could help pay for health care, education, and more. It’s time to put an end to offshore tax dodging that robs the U.S. Treasury of needed funds.” —Statement of Senators Carl Levin (D-Mich.) Norm Coleman (R-Minn.), March 6, 2008.
The threshold question is whether the taxpayer is a “U.S. Person.” A “U.S. Person” is generally defined as a U.S. citizen or resident or domestic entity (corporation, partnership, estate, trust). IRC §7701(a)(30).
There are two types of U.S. residents. The first type is the lawful permanent resident, which is a foreign person who has received a U.S. green card. The second type is the substantially present resident. This is a person who is present in the United States for 183 days either (1) during the current year, or (2) over 122 days per year, over the past three years based on the following formula: (A) number of days present during the current year, plus (B) number of days present in prior year multiplied by 1/3, plus (C) number of days present two years ago multiplied by 1/6.
For taxpayers who disclaimed their U.S. citizenship or terminated their residency, they are subject to foreign-interest reporting rules. Regardless of their status under immigration law, a taxpayer is still treated as a U.S. citizen or resident for tax purposes until proper notice is given to both the Department of State (or Homeland Security) and the IRS.