14,700 Offshore Tax Evaders Settle with IRS
Filed under: IRS, tax evasion, unreported income, voluntary disclosure
Previous estimates by the IRS project in excess of 700,000 unreported Foreign Bank Accounts (held by U.S. Taxpayers). Under the 2009 voluntary disclosure “last chance” compliance initiative 14,700 U.S Taxpayers came forward (approximately 2% of the undisclosed accounts).
Approximately 98% of U.S. Taxpayers’ foreign bank accounts still remain unreported.
Slew of offshore tax evaders settle with IRS
From MSNBC.com (11/17/09)
MIAMI – More than 14,700 U.S. taxpayers came forward to disclose billions in offshore bank accounts in 70 countries under a voluntary Internal Revenue Service program allowing most to avoid criminal prosecution as long as they pay what they owe, IRS officials said Tuesday…
“It shows we are serious about piercing the veil of bank secrecy,” he said. “The whole game has changed.”
Also Tuesday, the IRS and Swiss unveiled the criteria being used to determine which American UBS accounts will be disclosed under the August agreement.
Accounts being targeted include those that contained 1 million or more Swiss francs at any time between 2001 and 2008; instances in which there was clear fraudulent actions, such as false documents; and accounts that earned an average of 100,000 francs a year for at least three years.
The equivalent amounts in U.S. dollars vary widely depending on the year, as the dollar lost over a third of its value against the Swiss franc during that period. One million francs was worth about $600,000 in 2001, compared with about $900,000 seven years later.
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In related news, from the Wall St Journal (11/18/09),
Swiss to Turn Over U.S. Tax Names
Sixth UBS Client Pleads Guilty to Tax Charges
By WebCPA.com Staff
A retired Boeing sales manager is the latest UBS client to plead guilty to filing a false tax return after the Swiss bank agreed to disclose the identities of some of its U.S. clients.
Robert Cittadini of Bellevue, Wash., accepted responsibility for hiding up to $1.86 million in accounts at the Swiss bank and failing to report the income he earned from the accounts on his 2001 to 2003 tax returns. Cittadini also did not file a Report of Foreign Bank and Financial Accounts, or F-BAR form, for each of those years.
Cittadini initially opened an account with UBS in the early 1990s in his own name, but around 2001, Swiss banker Hansruedi Schumaker, who was indicted in August 2009 on conspiracy charges, helped him transfer assets from his UBS account to an account named for Mataropa Finance Limited, a nominee Hong Kong corporation that helped him hide the assets. Swiss lawyer Matthias Rickenbach, also indicted in August, was a director of the Hong Kong entity.
Sentencing in Cittadini’s case is scheduled for Jan. 8, 2010. He faces up to three years in prison and a $250,000 fine. He also has agreed to pay a civil F-BAR penalty based on 50 percent of the highest account balance from 2001 to 2007.
“This is a time of reckoning for those who thought they had found a safe haven for cheating,” said U.S. Attorney Jenny A. Durkan in a statement. “People who avoid paying their fair share hurt all of us who follow the law and conscientiously pay our taxes.”
In February 2009, UBS entered into a deferred prosecution agreement in which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of the agreement, UBS provided the U.S. government with the identities and account information of some U.S. customers of the bank’s cross-border business. Cittadini’s case is the sixth guilty plea arising from that information.
In June 2009, Steven Michael Rubinstein, a Boca Raton, Fla., accountant, pleaded guilty to filing a false tax return. In April 2009, another UBS client, Robert Moran, a Ft. Lauderdale, Fla., yacht broker, pleaded guilty to filing a false tax return. In July 2009, Jeffrey Chernick, of Stanfordville, N.Y., pleaded guilty to filing a false tax return. In August 2009, John McCarthy, a resident of Malibu, Calif., pleaded guilty to failing to report his ownership of and interest in a foreign financial account. In September 2009, Juergenn Homann of Saddle River, N.J., pleaded guilty to failure to file an F-BAR form.
Over the summer, UBS agreed to hand over information on an additional 4,450 U.S. clients under an agreement brokered by the Swiss and U.S. governments.
IRS Corporate Audit Division Will Examine UBS Tax Evasion Cases
By Ryan J. Donmoyer, Bloomberg.com
The U.S. Internal Revenue Service is shifting audits of wealthy Americans suspected of offshore tax evasion to an elite division that usually examines businesses as it prepares to receive data on 4,450 UBS AG Swiss bank accounts.
The tax agency posted internal job listings yesterday seeking auditors to work for a newly created office within its Large and Mid-Size Business division that will be tasked with monitoring what it called the “global high-wealth industry.”
The move centralizes responsibility for auditing wealthy individuals suspected of offshore tax evasion in a unit with the most experience navigating international tax treaties and untangling complex cross-border business structures.
“That’s where the most sophistication is at IRS,” said Michael Murphy, a former deputy IRS commissioner who is now a consultant for the law firm Sutherland Asbill & Brennan LLP in Washington.
Responsibility for auditing wealthy individuals is currently split among IRS divisions devoted to small businesses and self-employed wage earners and investors, which don’t have as much experience in cross-border transactions, Murphy said.
The IRS says it anticipates handling up to 10,000 new cases related to UBS, including thousands of people who come forward voluntarily in exchange for reduced penalties before Sept. 23.
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UBS whistle-blower gets 40-month sentence
By Martha Brannigan, MiamiHerald.com
In a surprisingly heavy judgment, Bradley Birkenfeld, the former UBS private banker who blew the whistle on a wide-ranging scheme in which the Swiss bank helped wealthy Americans dodge income taxes through secret accounts, was sentenced to 40 months in prison Friday morning.
The sentence was 10 months longer than the prosecution had asked for. The defense had sought probation, pointing to the major impact of Birkenfeld’s unprecedented cooperation. The prosecutors said Birkenfeld is still helping the government and will remain free until Jan. 8, 2010.
In federal court in Fort Lauderdale, U.S. District Judge William J. Zloch ordered Birkenfeld to pay a $30,000 fine. After prison, he has three years of probation.
Birkenfeld, a tall and athletic man of 44, laid the foundation for the federal government’s most devastating assault ever on Swiss banking secrecy and offshore tax cheats. He wore a gray pinstripe suit, blue shirt, red tie and the beginnings of a goatee.
Drawing heavily on details Birkenfeld provided about UBS’ illegal practices in helping U.S. tax cheats, the Internal Revenue Service filed a civil suit seeking to force the bank to turn over information on thousands of unidentified UBS account-holders with secret offshore accounts.
As a result, the U.S. and Swiss government on Wednesday unveiled details of an agreement under which the IRS will end up getting details on 4,450 secret accounts through diplomatic channels in exchange for abandoning its aggressive court tactics.
Assistant U.S. attorney Jeffrey A. Neiman recommended that Birkenfeld get 30 months in prison for his conviction on one count of conspiracy to defraud the government — down from the 60-month maximum sentence he is exposed to — because of his extensive cooperation.
Zloch had delayed Birkenfeld’s sentencing four times at the request of prosecutors who are continuing to debrief him, but last week turned down a fifth request.
Birkenfeld was one of about 50 UBS private bankers catering to U.S. clients. His special services to rich Americans who wanted to hide money in secret offshore accounts once included slipping through U.S. Customs carrying diamonds stuffed inside a toothpaste tube.
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Swiss Banking Executive and Swiss Lawyer Charged With Conspiring to Defraud the United States
Defendants Aided Wealthy Americans Conceal Assets in Secret Swiss Bank Accounts
From PRNewswire.com
Hansruedi Schumacher and Matthias Rickenbach, both of Switzerland, were indicted today for conspiring to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced. According to the indictment, Schumacher worked as an executive manager at Neue Zuercher Bank (NZB), a Swiss private bank located in Zurich, Switzerland. Rickenbach worked as a Swiss attorney who provided legal advice and services to U.S. clients. Both are alleged to have aided wealthy Americans conceal assets and income in Switzerland from United States authorities.
According to the indictment, Schumacher and Rickenbach helped wealthy American clients conceal their assets by establishing sham and nominee offshore entities to hide their U.S. clients’ assets and income while allowing these clients to still control the assets and make investment decisions.
The indictment further alleges that Schumacher and Rickenbach regularly traveled to the United States to conduct banking and investment activities with their U.S. clients and that when they traveled they concealed their business activities in the United States by falsely representing to American authorities that they were traveling to the U.S. for personal reasons. While in the United States, the defendants would sometimes bring cash for their clients..
According to court documents, Schumacher and Rickenbach aided their wealthy American clients repatriate money back to the United States using several deceptive means. Schumacher and Rickenbach helped their clients obtain offshore credit cards and created sham loan documents. Additionally, Schumacher and Rickenbach falsified bank documents to generate the appearance that assets of their U.S. clients belonged to Swiss citizens, and they falsified documents to disguise their United States clients’ repatriation of offshore funds as inheritances from foreign citizens.
According to court documents, Schumacher and Rickenbach discouraged their U.S. clients from voluntarily coming into compliance in the United States. Instead, the defendants encouraged their clients to transfer their assets from UBS, a large Swiss bank, to NZB, a smaller bank in Switzerland. The defendants told their clients that their assets and identification would be safer at NZB because they had no presence in the United States and was therefore less likely to be pressured by the American authorities to disclose the identities of their United States clients.
“The Justice Department will continue to investigate leads provided by U.S. taxpayers who have come forward to disclose foreign bank accounts and will prosecute those foreign bankers and banks who illegally helped U.S. clients evade taxes,” said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. “We encourage foreign banks to come forward and disclose their conduct immediately, before we learn about their criminal conduct from U.S. taxpayers.”
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UBS to Give 4,450 Names to U.S.
The Wall Street Journal is reporting (8/20/09)…
The U.S. could within months begin criminally prosecuting hundreds of wealthy Americans — from the obscure to the “rich and famous” — for using foreign bank accounts to evade income taxes.
In a settlement with the Swiss government detailed Wednesday, the Internal Revenue Service said Swiss bank UBS AG will ultimately turn over the identities behind 4,450 secret accounts.
At least $10 billion had been stashed to avoid payment of U.S. taxes or the disclosure of foreign accounts, according to a person familiar with the matter. The U.S. government investigation and settlement ultimately could produce some 10,000 account identities.
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UBS Tax Crackdown Widens to Hong Kong
By Carrick Mollenkamp, The Wall Street Journal
The U.S. crackdown on clients of UBS AG is widening into a global hunt, with the government detailing in court documents how the Swiss bank and outside advisers helped Americans hide money using enterprises set up in Hong Kong.
For the first time in the government’s long-running bid to ferret out the names of U.S. tax-evaders from the Swiss bank’s client list, plea agreements entered in the case are providing a clearer picture of UBS’s sophisticated efforts to help Americans hide income or the existence of foreign bank accounts.
On Friday, John McCarthy, a UBS client in California, agreed to plead guilty to one count of failing to file an annual report to the Treasury Department. A document filed with the plea shows the tax scheme relied in part on channeling funds to a Swiss UBS account held in the name of a Hong Kong entity, the second time accounts in the Asian financial hub have figured in these cases.
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Prominent attorney John Karoly pleads guilty to tax evasion
By Matt Birkbeck, themorningcall.com
For more than a quarter-century, attorney John P. Karoly Jr. led a charmed life, winning millions in jury awards for his clients and earning the distinction of being perhaps the Lehigh Valley’s best-known lawyer.
But Karoly’s successful and at times controversial career might have come to an end Monday, when he pleaded guilty to three counts of willfully filing false tax returns for failing to pay taxes on $5.2 million in income during 2002, 2004 and 2005.
As part of the deal, Karoly also agreed to renounce any interest in his late brother’s estate, and prosecutors will drop charges that he and two others submitted phony wills. He still faces a nonjury trial on money laundering and wire fraud charges in September.
Karoly, 59, of South Whitehall Township could serve up to nine years in prison and pay a $750,000 fine. He agreed to pay $1.9 million in back taxes to the Internal Revenue Service.
The plea means Karoly cannot appeal and probably will go to prison and face disciplinary action, including suspension of his law license or even disbarment.
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President Obama Outlines Plan to Close Tax Loopholes, Raise U.S. Revenue
From pbs.org
President Barack Obama outlined a series of steps Monday aimed at overhauling U.S. tax policies that he says reward companies for shifting American jobs overseas and allow wealthy people to avoid paying taxes by using offshore accounts.
The president expressed his wishes to raise taxes on the overseas profits of U.S. companies and to go after evaders who abuse offshore tax shelters.
Mr. Obama said the existing laws make it possible to “pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, N.Y. ”
The White House estimated the plan would inject $21 billion a year into U.S. coffers over the next decade, but that would amount to only about 2 percent of next year’s projected deficit of $1.2 trillion, however.
Under existing laws, companies with operations overseas pay U.S. taxes only if they bring the profits back to the United States. As long as those earnings are plowed back into the foreign subsidiaries, they can defer paying taxes indefinitely. The president’s plan, which would take effect in 2011, would change that.
The White House said that in 2004, multinational corporations enjoyed an effective tax rate of 2.3 percent in the United States because of such allowances. Aides said that was the most recent year available for analysis, according to media reports.
Critics say those rules encourage businesses to bolster foreign operations instead of creating jobs in the U.S. During his campaign last year, Mr. Obama promised to change those provisions.
Drew Lyon, a tax expert at PriceWaterhouse Coopers, told Reuters the changes to the “deferral” provision would be sweeping, since half of multinationals firms’ income is earned abroad.
“It’s really hitting most Fortune 100 companies that depend to a great deal on growth of foreign markets for growing their total earnings,” Lyon said.
The president also said he would close loopholes and bolster enforcement to prevent tax avoidance by companies and individuals.
“The steps I am announcing today will help us deal with some of the more egregious examples of what is wrong with our tax code,” he said at a joint announcement with Treasury Secretary Timothy Geithner.
Democratic Montana Sen. Max Baucus, chair of the Senate Finance Committee that writes tax legislation, offered a tepid response to the president’s proposals, signaling that they could be a hard sell in Congress.
“Further study is needed to assess the impact of this plan on U.S. businesses,” he said Baucus. “I want to make certain that our tax policies are fair and support the global competitiveness of U.S. businesses.”
But several lawmakers, including House Ways and Means Chairman Charles Rangel, signaled support for Mr. Obama’s proposals.
In March, 200 companies and trade groups like the U.S. Chamber of Commerce sent congressional leaders a letter opposing changes to the “deferral” provision. The letter said the firms would not be on a level playing field with international rivals, many of which are not required to pay taxes at home on overseas entities. Pfizer, Oracle, Microsoft Corp, Johnson & Johnson and General Electric were among the firms that signed the letter.
Under President Obama’s plan, companies would not be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their operations in other countries.
The president said the government also is hiring nearly 800 new IRS agents to enforce the U.S. tax code.
In addition to the changes to the deferral provisions, separate proposals in Mr. Obama’s plan would raise $95 billion by cracking down on overseas tax havens. Such tax havens became a major topic at the April meeting in London of leaders of the Group of 20 major economies.
In one of the proposals to crack down on tax evasion, the administration would require financial institutions to share information with the IRS about customers in the U.S. Foreign institutions and sign up with the IRS to become “a qualified intermediary” or else face a presumption that they are helping individuals evade taxes.
Some consumer advocates said the changes were long overdue fixes for tax abuses.
Swiss banking giant UBS AG acknowledged in February that it helped U.S. clients conceal assets from their government. It agreed to pay a $780 million fine and has since identified about 320 of its American clients.
But the administration is not seeking to repeal all overseas tax benefits. Mr. Obama called his proposal “a down payment on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations.”
“Nobody likes paying taxes, particularly in times of economic stress,” he said. “But most Americans meet their responsibilities because they understand that it’s an obligation of citizenship, necessary to pay the costs of our common defense and our mutual well-being.”
The president said the current tax code makes it too easy for “a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all.”
He said he was willing to make permanent a research tax credit that was to expire at the end of the year and is popular with businesses. Officials estimate that making the tax credits permanent would cost taxpayers $74.5 billion over the next decade. But administration aides said 75 percent of those tax credits cover the cost of workers’ wages.
Geithner said the proposals would end “indefensible tax breaks and loopholes which allow some companies and some well-off citizens to evade the rules that the rest of America lives by.”
He called them “common-sense changes designed to restore balance to our tax code.”
Motorsports Icon Sentenced To 18 Months In Prison
By Daniel Gilbert, Reporter / Bristol Herald Courier
ABINGDON, Va. – As he was about to be sentenced Monday for federal income tax fraud, those in the courtroom stood up for Larry McClure.
Supporters of the motorsports icon filled the courtroom, which was too small to hold them. Family members, friends, giants of the stock car racing world – around 50 people– spilled into the hallway, sat on benches and stood shoulder to shoulder in solidarity with McClure and his family.
Junior Johnson, the fabled moonshiner-turned-dirt track racer and NASCAR team owner, turned out. Joy Stata, a Florida native, was there to support the man who put her hometown of Bartow on the racing map. Jeff Byrd, president of Bristol Motor Speedway, stood outside, having arrived too late to get a seat.
“How long do these things last?” Byrd wanted to know. He had never been to a federal court hearing.
Inside the courtroom of Judge James P. Jones, McClure made his last public mea culpa.
“I’d like to apologize to you, the court,” he told Jones, chief judge for the Western District of Virginia. “To the opposing counsel, to my family, my God. His will be done, whatever you decide.”
Jones’ decision ushered in a stunned silence, punctuated by sniffles: McClure will serve 18 months in prison, the low end of the sentencing range.
For McClure’s supporters, it was a crushing end to a three-year criminal investigation that has taken a toll on him personally and financially. McClure pleaded guilty in January to five counts of filing a false income tax return, obstructing the federal investigation and lying to Internal Revenue Service investigators.
In addition to the prison time, McClure was fined $40,000, ordered to reimburse the IRS $25,000 for its investigation, and to pay nearly $60,000 in restitution to Eastman-Kodak for filing a false invoice. He was also ordered to refile his personal income tax returns for 2002, 2003 and 2004.
During those years, McClure admitted to accepting $269,000 in cash payments from a friend in exchange for services provided by Morgan-McClure Motorsports, of which McClure is a part owner. He did not report the income to the corporation or on his personal tax returns, and owes the government just over $100,000.
“We all know anyone can have tax problems,” Jones said in delivering the sentence.
But McClure’s failure to pay was not based on a technicality, the judge said.
“It was an elaborate scheme to defraud. He cheated the honest taxpayer.”
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