March 2011 Archives

When a Swiss Banker or Tax Advisor Runs Afoul of the Internal Revenue Service, Tax Problems For His Clients Are Likely to Follow

March 31, 2011,

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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UBS Cooperation with IRS leads to Criminal Charges Involving Offshore Bank Accounts

March 28, 2011,

Tax attorneys continue to deal with the fallout from increased offshore enforcement by the IRS.

The U.S. Justice Department announced this month that a San Diego resident was sentenced to three years probation after he was found to have filed false tax returns from 2000 to 2008. The case involved overseas bank accounts the defendant had with UBS and Credit Suisse in the Bahamas and Switzerland.


The Offshore Voluntary Disclosure Initiative allows taxpayers the chance to avoid criminal prosecution by voluntarily disclosing offshore bank accounts to the Internal Revenue Service. Civil penalties and interest still apply. The government requires taxpayers to file a Foreign Bank Accounts Report (FBAR) for offshore accounts valued at more than $10,000.

Jeffrey Chatfield was convicted of hiding assets in the offshore accounts. In addition to three years of probation, Chatfield was ordered to pay $96,000 to the IRS to resolve his civil liability for not filing FBARs. The government claimed he opened an account at UBS Bahamas LTD in 2000, depositing $900,000 in cash and untaxed securities that he received from consulting work.

Our tax attorneys have reported previously here on our Tax Problem Attorney Blog that such accounts frequently come to light as a result of bankers and tax advisers who are in trouble with the law, or banks that cooperate with tax authorities. That was the case here.

By 2008, the defendant's account was with Credit Suisse, which notified him that it was closing all accounts held by U.S. taxpayers. In February 2009, UBS entered into a deferred prosecution agreement, in which it admitted to helping U.S. taxpayers hide accounts from the IRS. As a part of that agreement, it agreed to provide U.S. authorities with the identifies and account information of some U.S. customers.

Those who are dealing with tax problems involving offshore bank accounts, or those who are trying to best determine how to resolve voluntary disclosure issues, should consult an experienced tax attorney capable of explaining their options and fighting for their rights.

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Tax Attorney Blames OCD for Failure to File Business Income Taxes

March 25, 2011,

Tax lawyers representing a man accused of failing to file business income tax returns told the judge that obsessive-compulsive disorder was responsible for their client's tax problems, the Calgary Herald reported.

Business tax debt can sink a business; frequent issues tax attorneys are called to deal with include payroll tax problems and tax audits.
That's not to say OCD is involved in the majority of the cases. But in this case, the man blames the condition for his inability to file business income tax returns. He faces 60 days in jail and a $10,000 fine if convicted of disobeying a court-issued compliance letter. The company, Harvest Brewing, is accused of not filing returns in 2004 and 2005. His attorney said Ronald Thomsen's personal taxes are up to date because they are easy to file and the taxes are deducted right from his pay.

But when it comes to the business taxes, his client's medical condition prevents him from dealing with the paperwork. The business taxes were about $45,000 a year in the five years prior to the years in question. However, Canada Revenue Agency does not know how much is now owed because they haven't received any documentation in years. The business's accountant has told Thomsen she would have the outstanding taxes filed by May but he has refused to turn over the paperwork.

That refusal is part of the medical condition, according to his tax attorneys.

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"Little Fockers" Star has Tax Liens for $433K in Back Taxes to IRS, State of California Franchise Tax Board

March 23, 2011,

The Detroit News is reporting that Hollywood actress Teri Polo, perhaps best known for playing alongside Robert De Niro and Ben Stiller in "Meet the Parents," has a tax lien for $433,736.


The former Playboy pinup landed the role after a string of TV show appearances, including "The West Wing." She is also appearing in "Little Fockers," which is in theaters this year.

-The Internal Revenue Service filed a tax lien against Polo in August in Kent County Delaware in August 2009, claiming she owes $114,843.95 in income taxes from 2007.

California claims she owes $91,748 for taxes in 2005 and 2006, according to a tax lien filed in Los Angeles County in 2008.

-A second IRS tax lien in Delaware also claims she owes $227,144.48 in back taxes for 2005 and 2006.

Polo blames her tax problems on a costly divorce and being unable to work while raising two young children. She reportedly has reached a deal with the IRS to repay the tax debt.

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Failure to File FBARs for Swiss Bank Account Costs Defendant $500,000, possible 3 Years in Prison

March 21, 2011,

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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Wesley Snipes to Serve 3 Years for Failure to File Tax Returns

March 15, 2011,

CNN reports Hollywood actor Wesley Snipes is off to serve a three-year prison sentence for failing to file tax returns.

While simple non-filing of tax returns doesn't often result in criminal tax fraud charges being brought, in some cases, it may require being proactive, and consulting an experienced tax lawyer to prevent a tax problem from getting worse.
Prosecutors alleged Snipes has earned $40 million since 1999 but filed no returns because of his involvement with a tax resisters group. Snipes denied membership in such a group and blamed his tax problems on an adviser. Jurors believed his contention that advisers were at fault when they acquitted him of more serious felony tax fraud and conspiracy charges. Still three years in jail can hardly be considered a vindication.

The New York Times reported the star of "Blade" and "White Men Can't Jump" will serve the sentence at a federal prison in Pennsylvania.

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Hotel Developers Charged with Tax Evasion Involving Swiss Bank Accounts

March 14, 2011,

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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Southern California IRS Revenue Agent Pleads Guilty to Tax Fraud

March 14, 2011,

An IRS revenue agent has pleaded guilty to filing false tax returns, according to a report in the Los Angeles Times.

The 51-year-old defendant pleaded guilty to filing false returns for himself, as well as a number of relatives. In some cases, he admitted to filing returns for relatives without their knowledge and keeping the returns he received.


In this case, the defendant, who was employed as a revenue agent for the Internal Revenue Service, filed false returns from 2003 to 2007, which claimed excessive deductions and failed to report some income. He worked as a revenue agent in Southern California until being placed on leave following his arrest in 2009.

He has agreed to pay $127,000 in restitution to the government and faces up to 9 years in federal prison at his sentencing, which is scheduled before a federal judge in Los Angeles on April 13.

He had been charged with threatening to harm agents who served a search warrant on his Santa Clarita home in 2009. However, those charges were dropped as part of the plea agreement.

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Payroll Tax Problems Cannot be Solved by Payment after Criminal Tax Charges Filed

March 9, 2011,

A Kansas woman will still face federal criminal tax charges for failure to pay payroll taxes after a federal court ruled the charges should not be dismissed simply because the taxes have since been paid.

As tax litigation attorneys we frequently hear from clients who have been contacted by the IRS criminal investigation division. Their first reaction is, "I will get the taxes paid can you get the IRS to drop the charges?" Unfortunately at that point simply paying the taxes will rarely solve the problem by itself. Payroll taxes cases usually turn criminal because the tax problem has been ignored for far too long.


In this case, the employer was charged with seven counts of failing to pay over trust fund taxes (income taxes and FICA), which had been withheld from employees' pay. The tax violations allegedly occurred between 2003 and 2005. She submitted evidence in 2010 that she had turned over to the Internal Revenue Service all unpaid taxes. She argued the charges should be dismissed since the taxes had been paid.

The government argued payment did not "cure" her of the violations or immunize her from prosecution. It was a novel legal question not addressed in case law. Section 7202 of U.S. tax law states: "Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall . . . be guilty of a felony. . . ."

The defendant noted the law makes no reference to a "due date" or other time frame. Section 7203 does make reference to a time frame when it states "at the time or times required by law or regulations."

The court ruled that the statute's wording "failure to pay over" necessarily encompasses late payments by any common sense standard. Additionally, the court ruled the defendant's interpretation of the law would make it the only area of criminal law in which a crime could be undone at any time until conviction.

The defendant was also charged with two counts of failure to pay individual income taxes, which were not addressed in the court decision.

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Swiss Bankers Face Indictment over Alleged Criminal Tax Evasion Involving Offshore Accounts

March 5, 2011,

Four Swiss bankers have been charged with conspiracy to defraud the United States of income tax revenue, according to an indictment unsealed in the United States District Court in Virginia. The bankers are accused of helping high net worth clients hide undeclared Swiss bank accounts.

U.S. citizens with $10,000 or more in foreign accounts are required to file with the Department of Treasury a Report of Foreign Bank and Financial Accounts, or FBAR. Tax litigation attorneys are frequently being called to defend clients against charges of tax evasion since the government launched its Offshore Voluntary Disclosure Program (OVDP) in 2009. The OVDP has since been replaced with the Offshore Voluntary Disclosure Initiative (OVDI). OVDI permits U.S. taxpayers to avoid criminal prosecution by declaring overseas accounts and paying tax on unreported income together with a 25 percent penalty.


The indictments alleges that International Bank operates as one of the biggest banks in Switzerland and is one of the largest managers of wealth in the world. As part of its business, it provided international bank accounts to U.S. customers. In doing so, authorities allege that the bank's managers and employees knew or should have known that they were aiding and abetting U.S. income tax evasion. All totaled, the bank maintains thousands of undeclared accounts containing about $3 billion in assets.

The indictment also alleges that the bank did not register as a broker-dealer with the Securities and Exchange Commission, as required by U.S. law. In 2001, the bank allegedly agreed to cooperate with the Internal Revenue Service in verifying the identity, citizenship and residency of clients through IRS Forms W-8BEN and W-9 forms.

Several other Swiss banks are also accused in the indictment. By failing to have clients fill out the proper paperwork, the government alleges the bankers were complicit in assisting clients to evade U.S. tax obligations.

In one case, a banker is accused of helping a Palm Beach, Florida customer make investment decisions regarding an undeclared overseas bank account during meetings at a New York hotel. The account statements were also mailed to the address of an overseas residence, rather than to the client's primary U.S. residents. Meanwhile, the client is accused of filing tax returns in 2005 that did not declare the account or its related income. When the account was closed in 2008, the banker allegedly recommended moving the funds to an Israeli bank or a bank in Hong Kong in order to continue to evade the U.S. tax obligation.

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