IRS Cracks Down on Tax Evasion by use of Foreign Banking Institutions

If you're reading this article, and you, a loved one, or someone you know has already been charged with allegations of tax evasion or other federal charges related to it by the government, it's essential that a knowledgeable defense attorney who's skilled in matters of the criminal defense of crimes related to tax fraud, as well as all cases relating to federal law be consulted.

In a situation where an individual who is using any of the below methods which will be discussed in this article decides to seek amnesty before charges can be levied against them, it's equally important to speak with a tax fraud attorney who is proficient in the IRS program of amnesty known as the Offshore Voluntary Disclosure Program.

My law offices focus on the vigorous defense of all federal matters including tax evasion and similar charges in this area of the law. I am available for a free consultation if the government has brought forth any charges or criminal complaints as well as a person that may be facing charges of this nature or seeking amnesty before pending charges are filed. Call Michael B. Cohen, Esq. at 954-928-0059 or 561-366-8200 for an immediate response and direct assistance. My law offices benefit the tri-county area of Dade, Broward and Palm Beach Counties and are centrally located in both Fort Lauderdale and West Palm Beach.  

Based on the recent rise in arrests, acceptances of plea agreements and convictions, it's become clear that the IRS intends to continue its intense roundup of individuals that are using various methods of hiding their identities while keeping liquid assets in foreign banks, in their efforts to evade paying taxes.

In a current article that was previously posted on this Website, a story of a Florida doctor who was found guilty in federal district court in Fort Myers, Florida was presented. That posting discussed her use of what's called a "nominee entity" to separate her husband's and her cash assets that were hidden in off-shore banking institutions. Click here to read that article. Another link to this related story will be listed at the conclusion of this article.

This past April, two similar cases that were adjudicated in California District Court resulted in similar guilty pleas which at that time were announced by the US Department of Justice.

In the first California case, a U.S. citizen named Guity Kashfi owned a business named Countess of California, a clothing business which had a line of credit of $2.5 million with Mizrahi Bank, which is based in Israel and has offices in Switzerland, London, Germany, Mexico, Uruguay, Panama, the Cayman Islands and Los Angeles. The line of credit was secured by the inventory of the firm. When a situation developed where the bank required the amount of collateral to be increased, an agreement between Kashfi and the bank was reached using consecutive loans to veil the circumstance that offshore certificates of deposit (CD's) were the objects used as the supplementary collateral.  At the time, the accounts were maintained in a "nominee name" (see related article) to thwart the US Internal Revenue Service from recognizing the funds which were not reported as the law requires. In an unrelated event, after a banker from Mizrahi Bank was arrested, all of the liquid assets in Kashfi's account were relocated to Luxembourg. This was specifically done to avoid the repatriation of the funds which were not stated during the back-to-back or consecutive loans. She was assured of secrecy by the bankers who then provided her with a cell phone from Germany in order to camouflage communications with them.

Nonetheless, the IRS found out about the transactions and the existence of the money although no details were provided of what methods were used in the discovery.

Upon conclusion of the IRS investigation, Kashfi pleaded guilty to a single count of conspiracy to defraud the U.S. government under 18 U.S.C. 371, normally referred to as "Klein Conspiracy", which is defined as "conspiracy to defraud the United States by frustrating the functions of the Internal Revenue Agency".  

The banks known as being co-conspirators not named in the Information are understood to be Israeli banks. Bank Leumi Le-Israel Ltd, which is Israel's largest bank, is currently undergoing investigations that are being conducted by US authorities concerning customers who are US tax payers. Similarly, the Swiss branches of Mizrahi Telfahot Bank along with several other Swiss banks are the targets of an investigation which began approximately two years ago; likewise based on suspicions of the financial institutions assisting US residents evade taxes.

Criminal prohibitions of up to five years in prison and a fine of up to $250,000 are carried by the conspiracy plea. Kashfi stated a rounded off figure of $70 thousand, on unreported interest income of approximately two-hundred, eleven thousand dollars of a civil tax loss. The plea agreement for The Foreign Bank and Financial Account Report (FBAR) penalties agreed upon in a negotiated settlement will be approximately $1,250,000, which is fifty percent of the $2,500,000 uppermost balance for one sole year during the timeframe of 2005 and concluding in 2011.  This penalty is hefty in its relation to the actual amount that was due, but is substantially lower than what the highest penalty enforced could have been. The possible judgment had the potential of being fifty-percent of the highest balance for all years that non-reporting was in effect.  An assessment of the maximum FBAR penalty is comparable to that of a complete asset seizure.

In the other case, without going into as much detail as the first example, Zvi Sperling, a naturalized US citizen who was born in Israel is a Los Angeles businessman who in the same fashion used the identical type of back-to-back loan arrangement which was used by Kashfi and her bankers. As in the first case this was enacted to shield his unreported account activity. In the conclusion of the case against him, he also plead guilty to the same one-count conspiracy charge and similarly agreed to pay a fifty-percent FBAR fine of the peak balance which was four-million for only the one year, precisely as was paid by Kashfi.  The unreported revenue on Sperling's accounts was roughly three-hundred, eighty-one thousand dollars.

As a result of the plea agreement acceptance, both Sperling and Kashfi have granted their cooperation to the Department of Justice in the investigation of the Israeli Banks.  The DOJ's hopes are that the final result of their testimony and other evidence collected will bring an indictment and guilty plea as in the case of Wegelin & Co which is the oldest Swiss private bank. A deferred prosecution settlement that was put together with UBS AG, which is the largest Swiss Bank, would also be a win for the DOJ. Through the concluding agreement with UBS, a fine of $780 million was paid as well as the Institution revealing names of depositors that are US citizens. The DOJ is hoping for the same result in their investigation of the Israeli banks.

Individuals who have confidence that they're discovering a safe harbor by hiding cash assets in foreign banks with unreported offshore accounts in Switzerland, Israel and other countries are finding out that the IRS can locate them even if back-to-back loan transfers are enacted, their account is registered under a nominee entity, or other evading tactics are used to hide their identities.

If an individual has made the decision to apply for amnesty under the IRS's Offshore Voluntary Disclosure Program or has had charges filed against them for pending federal charges, an attorney should be present during all discussions with the government to protect that person's rights. To find out more about the IRS's 2013 Offshore Voluntary Disclosure Program click here.

Call Michael B. Cohen, Esq. at 954-928-0059 or 561-366-8200 for a free consultation when any federal criminal charges are imminent.  

Related Article