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.
Click link above for complete article.
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.”
Click link above for complete article.
IRS says set to pursue “other banks” on tax evasion
By Tom Brown, Reuters.com
The U.S. Internal Revenue Service (IRS) is preparing to pursue other foreign banks for allegedly facilitating tax evasion by wealthy Americans following its high-profile case against Switzerland’s UBS AG, an IRS official said on Monday.
UBS, Switzerland’s largest bank, in February acknowledged that it helped U.S. clients conceal assets from the U.S. government. It agreed to pay a $780 million fine and identify some of its American clients.
But U.S. authorities are still going after the Swiss bank, seeking to access the data of another 52,000 Americans they say are hiding about $14.8 billion in Swiss bank accounts.
“We are developing John Doe summonses on other banks,” Daniel Reeves, an agent with the IRS’ Offshore Compliance division, told Reuters on the sidelines of a conference in Miami on offshore finance.
He was referring to the kind of subpoena filed by the IRS against UBS seeking to force the bank to turn over the names of clients suspected of evading U.S. taxes.
Reeves declined to say which, or how many, other banks could face cases filed by the IRS, but he confirmed the entities being investigated were foreign-based like UBS.
“We have identified other offshore banks that are engaged in similar activities,” he earlier told the conference.
On April 2, U.S. authorities arrested and charged an accountant in Florida in the first of what they said could be a series of tax evasion prosecutions of American clients of UBS.
Almost two weeks later, a wealthy Florida yacht broker pleaded guilty to using an account with UBS to hide more than $3 million in assets from the U.S. government.
Click link above for complete article.
First Client From U.S. Is Arrested in UBS Case
By LYNNLEY BROWNING, The New York Times
Federal authorities have arrested a wealthy American client of the Swiss bank UBS on charges of tax evasion.
The client, Steven Michael Rubinstein, an accountant, was arrested in Boca Raton, Fla., and charged with one criminal count of filing a false and fraudulent tax return, according to court papers unsealed on Thursday.
The arrest is the first of an American client of UBS, which has been under criminal investigation for helping scores of wealthy Americans evade taxes through secret offshore accounts that went unreported to the Internal Revenue Service. It signals that federal authorities are making good on a promise to pursue American clients suspected of tax evasion, and in some cases to make indictments.
Click link above for complete article.
United States of America v. UBS AG (Declaration of Daniel Reeves)
Filed under: IRS, UBS, int tax compliance, offshore trusts, tax evasion, tax haven, unreported income
The following 305 page IRS affidavit is the Declaration of Daniel Reeves, a duly commissioned Internal Revenue Agent and Offshore Compliance Technical Advisor employed in the Small Business/Self Employed Division of the Internal Revenue Service. He is assigned to the Internal Revenue Service’s Offshore Compliance Initiative. The Offshore Compliance Initiative develops projects, methodologies, and techniques for identifying US taxpayers who are involved in abusive offshore transactions and financial arrangements for tax avoidance purposes.
UBS Clients Prepare For The Worst
by Vidya Ram, Forbes.com
LONDON - UBS has pledged to fight against the Internal Revenue Service’s demand that it spill details of 52,000 clients suspected of having secret Swiss bank accounts. But its clients are preparing for the worst.
Some clients are already beginning to approach the IRS under its voluntary disclosure program. “We have been going to the IRS without giving names and explaining we represent the clients, to get assurances from the IRS that if they come forward and declare those assets they will not be prosecuted criminally,” says lawyer Ken Rubinstein, of New York-based Rubinstein & Rubinstein. “Unless they already have the client’s name, the IRS is agreeing to treat it as a civil matter.” Several other clients are converting their foreign accounts that aren’t compliant with U.S. law.
Click link above for complete article.
U.S. Sues UBS Seeking Swiss Account Customer Names
Filed under: IRS, UBS, tax evasion, tax haven, unreported income
By David Voreacos and Carlyn Kolker, Bloomberg.com
The U.S. government sued UBS AG, Switzerland’s largest bank, to try to force disclosure of the identities of as many as 52,000 U.S. customers with secret Swiss accounts.
The lawsuit, filed today in federal court in Miami, alleges that 32,000 secret accounts contained cash and 20,000 held securities, according to the statement. U.S. customers failed to report and pay U.S. income taxes on income earned in those accounts, which held about $14.8 billion in assets in the mid- 2000s, according to a statement from the Justice Department.
The case is U.S. v. UBS AG, 09-20423, U.S. District Court, Southern District of Florida (Miami).
Click link above for complete article.
U.S. panel ups pressure on UBS, Swiss tax havens
By Kevin Drawbaugh, Reuters.com
Congressional investigators ratcheted up the pressure on UBS AG Thursday in a probe of its links to Americans who use Swiss bank accounts to avoid paying federal taxes.
The Senate Permanent Subcommittee on Investigations said it would hold a hearing Feb. 24 on government efforts to get the names of thousands of UBS’ American clients.
The hearing — the latest step in a long-running probe — will focus on the tax-collecting Internal Revenue Service’s request to UBS for more information about Americans’ accounts.
UBS pledged in July, at an earlier hearing, to cooperate with investigators in the matter, the committee said in a statement obtained by Reuters.
“But to date, virtually none of the requested information has been provided to either the IRS or the U.S. Department of Justice, which is also examining the matter,” it said.
Click link above for complete article
I.R.S. Is Said to Broaden UBS Inquiry
By LYNNLEY BROWNING, The New York Times
The Internal Revenue Service, which is participating in a broad federal investigation into UBS and its offshore private banking services, is widening its scrutiny to include ordinary accounts owned by Americans who work overseas, according to a person briefed on the issue.
The expanded scrutiny, which is being conducted by the agency’s civil division, parallels a narrower investigation by the Justice Department’s criminal division into scores of wealthy American clients with hidden offshore accounts run by UBS.
The so-called expatriate accounts are maintained in the same division, global wealth management and business banking, that oversaw the offshore accounts business now under criminal investigation. Prosecutors are investigating whether UBS, the world’s largest private bank, helped up to 19,000 wealthy American clients improperly deposit $20 billion overseas, evading an estimated $300 million a year in taxes.
Click link above for complete article.
-
Subscribe via RSS
Translator
-
BlogRoll
