Source: http://federaltaxcrimes.blogspot.co.uk/2014/
Timestamp: 2017-09-26 07:29:20
Document Index: 787413526

Matched Legal Cases: ['§ 7212', '§ 7206', '§ 7206', '§ 7206', '§ 7201', '§ 7206', '§ 7206', '§ 1503', '§ 7212', '§ 1503', '§ 1503', '§ 7212', '§ 1503', '§ 7212', '§ 7212', '§ 7212', '§ 1503']

Federal Tax Crimes: 2014
Reasonable Doubt and Jury Nullification (12/30/14)
This is good stuff guys. Read and enjoy: Eugene Volokh, ‘If you do not have a reasonable doubt … then you will enter a verdict of guilty’ (Volokh Conspiracy 12/24/14), here.
I will post later some recent musings I have had about reasonable doubt. In the meantime, those with an interest should just link to this short blog entry.
Labels: Beyond a Reasonable Doubt, Jury Nullificaiton
Posted by Jack Townsend at 11:36 AM 14 comments Links to this post
IRS Updates List of Foreign Financial Institutions or Faciliators with Bank Leumi and Sovereign Management & Legal Ltd. (12/26/14)
The IRS has updated its list of Foreign Financial Institutions or Facilitators, here. One function of this list is to identify banks that the insided OVDP penalty rate increases to 50%. (See FAQ 7.2, here.)
The new list is as follows (with the additions in bold-face):
For the Federal Tax Crimes Blogs postings on the newly added institutions, see:
Bank Leumi Admits Tax Wrongdoing, Agrees to Deferred Prosecution agreement, and Agrees to $400 Million Payments (Federal Tax Crimes Blog 12/22/14), here.
New Direction for John Doe Summonses to An Enabler's Service Providers Subject to Summons Power (Federal Tax Crimes Blog 12/19/14), here.
Labels: Bank Leumi, CIBC FCIB, Credit Suisse, HSBC, IRS Enabler List, Liechtensteinische Landesbank, N.T. Butterfield Bank., siwsspartners, Sovereign Mgmt, Stanford Offshore, UBS, Wegelin Bank, Zürcher Kantonalbank
Article Tallying Results on U.S. Prosecution of Offshore Account Enablers (12/23/14)
Bloomberg has this article on prosecution of enablers: David Voreacos, Offshore Tax Crimes Scorecard: Bankers, Lawyers, Advisers (Bloomberg 12/22/14), here. The article has specifics on the enablers involved. The article starts with:
Since 2008, the U.S. has charged 38 people, including bankers from Switzerland’s three top wealth managers -- UBS Group AG, Credit Suisse Group AG and Julius Baer Group Ltd.
Labels: Enablers, Offshore Account Acquittals, Offshore Account Convictions, Offshore Account Prosecutions
Tax Return Preparers Convicted of Conspiracy and Failure to File FBARs (12/23/14)
DOJ Tax announced in a press release, here, that David Kalai and Nadav Kalai, tax return preparers, were convicted by a jury of one count of conspiracy to defraud the Internal Revenue Service (IRS) and two counts of willfully failing to file FBARs. Key excerpts are:
As further proven at trial, the co-conspirators incorporated offshore companies in Belize and elsewhere to act as named account holders on the secret accounts at the Israeli banks. The co-conspirators then facilitated the transfer of client funds to the secret accounts and prepared and filed tax returns that falsely reported the money sent offshore as a false investment loss or a false business expense. The co-conspirators also failed to disclose the existence of, and the clients’ financial interest in and authority over, the secret accounts and caused the clients to fail to file FBARs with the U.S. Treasury. \
I think the banks are Bank Leumi and Bank Hapoalim, both Israeli banks.
Posted by Jack Townsend at 7:47 AM 0 comments Links to this post
Labels: Bank Hapoalim, Bank Leumi, Offshore Account Convictions, Offshore Account Enablers, Return Preparers
Bank Leumi Admits Tax Wrongdoing, Agrees to Deferred Prosecution agreement, and Agrees to $400 Million Payments (12/22/14)
DOJ Tax just issued this press release -- "Bank Leumi Admits to Assisting U.S. Taxpayers in Hiding Assets in Offshore Bank Accounts," here. Key excerpts (bold-face supplied by JAT)
The Bank Leumi Group’s parent company is Bank Leumi le-Israel, B.M. Bank Leumi le-Israel is one of Israel’s largest banks, with subsidiaries in seven countries and more than 13,000 employees. Other subsidiary banks entering into this deferred prosecution agreement include The Bank Leumi le-Israel Trust Company Ltd., the oldest and largest of all bank trust companies in Israel; Leumi Private Bank S.A., a Switzerland-based subsidiary; Bank Leumi (Luxembourg) S.A., a Luxembourg-based subsidiary; and Bank Leumi USA, a FDIC-insured, full-service commercial bank with offices in California, Florida, Illinois and New York.
According to documents filed in the case, to account for their criminal conduct, Bank Leumi Group will pay the United States a total of $270 million. Of this total payment, $157 million represents a penalty for U.S. taxpayer accounts held at Leumi Private Bank in Switzerland. This $157 million penalty is consistent with the department’s Swiss Bank Program, which permits certain Swiss Banks to avoid prosecution by making a full and complete disclosure of their U.S. taxpayer-held accounts and paying substantial penalties. The agreement further provides that Bank Leumi Luxembourg and Leumi Private Bank will cease to provide banking and investment services for all accounts held or beneficially owned by U.S. taxpayers.
According to the filed statement of facts, from at least 2000 until early 2011, the Bank Leumi Group took affirmative and extensive steps to assist U.S. clients in concealing their assets offshore, including:
For articles I just picked up, see
Israel's Bank Leumi to pay $400 million for U.S. tax settlement (Reuters 12/22/14), here.
Posted by Jack Townsend at 7:22 PM 1 comments Links to this post
Labels: Bank Leumi, Deferred Prosecution Agreements, Swiss Bank Criminal Investigations
Posted by Jack Townsend at 4:37 PM 5 comments Links to this post
Posted by Jack Townsend at 9:44 AM 13 comments Links to this post
Posted by Jack Townsend at 4:48 PM 1 comments Links to this post
Labels: 6201(a)(4), 6211(a), 6213(a), 6213(b)(5), Assessment - Prohibitions, Restitution, Tax Deficiency
1. "The information flow from the [DOJ Swiss Bank] program "is good," according Acting DAAG Tax Larry Wsalek.
2. On the Streamlined program, David Horton LB&I director for international compliance, said that there are differences between the OVDP and Streamlined, particularly noting to Streamlined "requires a certification of non-willfulness, and a false certification could lead to possible criminal liability."
3. On the certification statement of reasons for noncompliance, Horton said that a "conclusory statement" will not suffice and that there is not a "checklist on willfulness."
4. "He ]Horton] warned of 'a lot more John Doe summonses' in the next 12 to 24 months, in other parts of the world and 'beyond banks.' The focus will be on intermediaries, he said, referring to those who promoted or facilitated transactions for stashing money abroad."
5. John McDougal, IRS special trial attorney, a major IRS player in the offshore initiative, noted that, unlike UBS, "most foreign financial institutions don't have a presence in the United States," thus requiring that Agents "piece together a picture of evasion based on records of transactions in correspondent banks."
7. Away from the offshore initiative, identify theft is "the leading concern.
8. Anecdotally, a prosecutor from the Los Angeles area said that IRS CI was focusing on cybercrimes, transactions in bitcoin and transactions on "on eBay and other online-only businesses."
JAT Note: I used to attend this conference when it was in San Francisco, where I have daughter, son-in-law and grandchildren. I have no such connection in Las Vegas or other interest in going to that venue.
Labels: Cheek Willfulness, Criminal Tax Enforcement, IRS Summons-John Doe, Offshore Streamlined Filing Procedure, OVDP 2012
Posted by Jack Townsend at 1:21 PM 0 comments Links to this post
Plea in Corporate Corruption Case with Tax Charge (12/18/14)
The FBI Press issued a press release titled Former Bechtel Executive Pleads Guilty in Connection with a $5.2 Million Kickback Scheme (12/4/14), here. The case is principally a nontax case, but in the excerpts below, I highlight the tax charge:
The former Principal Vice President of Bechtel Corporation and General Manager of the Power Generation Engineering and Services Company (PGESCo) pleaded guilty today in connection with a $5.2 million kickback scheme intended to manipulate the competitive bidding process for state-run power contracts in Egypt.
In his plea agreement, Elgawhary admitted that, from 1996 to 2011, he was assigned by Bechtel – a U.S. corporation engaged in engineering, construction and project management – to be the general manager at PGESCo, a joint venture between Bechtel and Egypt’s state-owned and state-controlled electricity company (EEHC). PGESCo assisted EEHC in identifying possible subcontractors, soliciting bids and awarding contracts to perform power projects for EEHC. Elgawhary admitted to accepting a total of $5.2 million from three power companies, which they paid to secure a competitive and unfair advantage in the bidding process. According to court documents, the power companies and their consultants paid more than $5.2 million in kickback payments into various off-shore bank accounts under the control of Elgawhary, including various Swiss bank accounts.
As Elgawhary admitted in his plea agreement, he attempted to conceal the kickback scheme by routing the payments through various off-shore bank accounts, including Swiss bank accounts, under his control. Elgawhary also sent various documents and “Representation Letters” to Bechtel executives and members of the PGESCo Board of Directors in Maryland, falsely certifying that he had no knowledge of any fraud or suspected fraud at PGESCo, and that there were no violations or possible violations of law or regulations that should have been considered for disclosure in PGESCo’s financial statements. Elgawhary also admitted that, in further attempt to conceal the scheme, he made misrepresentations to counsel for Bechtel when he was interviewed in April 2011.
Elgawhary also admitted to conspiring to launder the proceeds of the scheme and to obstructing and impeding the administration of U.S. tax laws by falsely claiming that he maintained only one foreign bank account, denying that he received any income from a foreign bank account, and failing to report any of the kickback payments as income for the tax years 2008 through 2011.
The case is being investigated by the FBI’s Baltimore Division and IRS-CI’s Washington D.C. Field Office. Significant assistance was provided by the Criminal Division’s Office of International Affairs, and law enforcement counterparts in Switzerland, Germany, Italy, Saudi Arabia and Cyprus.
I previously reported on the charges in Corporate Corruption Case Charged With Swiss Bank Accounts to Hide the Loot (Federal Tax Crimes Blog 2/10/14), here. As I noted there, it is not clear why the charges did not cover FBAR violations, but, of course, the Government has a veritable smörgåsbord of charges that it can make in this type of fact pattern. More charges will not have a great effect on sentencing or on the message sent from the prosecution and conviction and would likely be viewed as piling on. Note also that the tax perjury charge apparently did not indicate that there was a pending investigation that was the object of the obstruction. See Sixth Circuit Holds that § 7212(a)'s Omnibus Clause Requires Knowledge of a Pending Proceeding / Action and Intent to Obstruct (Federal Tax Crimes Blog 12/13/14), here.
Posted by Jack Townsend at 1:14 AM 0 comments Links to this post
Labels: 7212(a), FCPA, Tax Perjury
Posted by Jack Townsend at 12:58 AM 0 comments Links to this post
Bank Leumi Reported to Be Near Deal with U.S. DOJ and NY State Dept of Financial Services (12/18/14)
Steven Scheer, UPDATE 1-Israel's Leumi sees 1.4 bln shekel U.S. tax settlement by mid-Jan (Reuters 12/10/14), here.
Leumi, Israel's second largest bank, expects to pay 1.4 billion shekels ($355 million) to settle a U.S. investigation into whether it helped American clients evade taxes, mainly through its private bank in Switzerland.
The process is expected to be completed by the middle of January 2015, if not by the end of this year, Leumi's legal adviser Hanan Friedman told parliament's economics committee on Wednesday, according to a statement from the committee.
A source told Reuters last week that Leumi would likely pay $270 million to the U.S. government and another $130 million to New York State's Department of Financial Services (DFS), which regulates certain banks in the state.
"After the (Leumi) investigation is completed, we will examine ... the responsibility of the bank's managers," David Zaken, Israel's banking regulator, told the panel.
Financial daily Calcalist reported on Wednesday that as part of the final settlement Leumi's U.S. activities will be supervised by U.S. regulators. The bank has started the process of transferring client assets in its Swiss private banking business to Julius Baer.
Posted by Jack Townsend at 12:49 AM 0 comments Links to this post
Labels: Bank Leumi, Israeli Banks
Swiss Cantons Want More Access to Swiss Bank Information for Their Tax Revenue (12/18/14)
Irony alert -- Guest Post, Final Nail In The Coffin Of Banking Secrecy (Value Walk 12/12/14), here. Excerpts:
Posted by Jack Townsend at 12:42 AM 0 comments Links to this post
Labels: Secrecy Rules, Swiss Banks, Swiss Government
Failure to Give Standard Cheek Willuflness Instruction is Not Plain Error (12/17/14)
In United States v. Taylor, 2014 U.S. App. LEXIS 22674 (6th Cir. 2014) (unpublished), here, the Sixth Circuit held that the trial court's failure to instruct the jury with the standard Cheek formula for the willfulness element -- the voluntary, intentional violation of a known legal duty -- because there was no plain error requiring reversal since he did not object at the trial level. Here is the Court's entire discussion:
Next, Taylor contends that the district court erroneously instructed the jury regarding § 7206(1)'s requirement that a defendant act "[w]illfully." We agree with Taylor that the instruction in question is somewhat incomplete. The district court instructed the jury that "[t]he term willfully, as used in these instructions to describe the defendant's state of mind, means that he knowingly performed an act deliberately and intentionally as contrasted with accidentally, carelessly or unintentionally." Missing from its explication of the pertinent standard is the longstanding recognition that § 7206(1)'s willfulness requirement obligates the government to prove the defendant's "voluntary, intentional violation of a known legal duty." Cheek v. United States, 498 U.S. 192, 201 (1991); see United States v. Pomponio, 429 U.S. 10, 12 (1976).
Nevertheless, Taylor concedes that, because he made no objection at trial to the instruction in question, our review is only for plain error. See Knowles, 623 F.3d at 385. This requires a showing of (1) error (2) that is plain, (3) that affects substantial rights, and (4) that "seriously affects the fairness, integrity, or public reputation of judicial proceedings" such that we should exercise our discretion to correct it. United States v. Miller, 734 F.3d 530, 536-37 (6th Cir. 2013) (citation omitted). Even assuming that an error is "plain," a defendant's substantial rights ordinarily are affected only if the error was "prejudicial"; that is, if it "affected the outcome of the district court proceedings." United States v. Olano, 507 U.S. 725, 734 (1993). And unlike under a typical harmless error analysis, see O'Neal v. McAninch, 513 U.S. 432, 437-38 (1995), the party seeking relief on the basis of plain error bears "[t]he burden of persuasion [*8] . . . to make a specific showing of prejudice." United States v. Jones, 108 F.3d 668, 672 (6th Cir. 1997) (en banc).
Taylor has made no such showing. We have observed that a willfulness instruction is the inverse of an instruction on a good-faith defense, see United States v. Damra, 621 F.3d 474, 502 (6th Cir. 2010), and Taylor argues only that the district court's instruction improperly failed to require the jury to decide whether he acted in good faith in failing to report as income the funds that he obtained from his investors. But the remaining elements of § 7206(1), unlike those of many other criminal tax statutes, see, e.g., 26 U.S.C. §§ 7201, 7203; Cheek, 498 U.S. at 193-94, overlap in significant ways with the tax code's generally applicable willfulness requirement because they require a finding regarding the defendant's subjective beliefs. See United States v. Tarwater, 308 F.3d 494, 506 (6th Cir. 2002) (characterizing § 7206(1) as a "perjury statute"). Even under the district court's partially incomplete instruction, the jury was permitted to convict Taylor only after it found that he "deliberately and intentionally" filed tax documents that he did "not believe to be true and correct as to every material matter." 26 U.S.C. § 7206(1). In other words, even absent the willfulness requirement, the jury in convicting Taylor needed to find that he knew and believed that his income was reportable before it could find that he purposefully filed tax forms that he subjectively believed were materially false.
As a result, Taylor's argument rings hollow when he claims that the result of his trial would have been different if the jury had been more precisely instructed. After all, in finding him guilty even under the incomplete instruction, the jury necessarily rejected Taylor's assertion that he subjectively believed that he did not need to report the income in question to the IRS. The jury found that Taylor knew that he was providing materially false information to the IRS but did it anyway. Thus, for the proper jury instruction to have made a difference in Taylor's case, the jury would have had to accept his argument that he in good faith did not know that it was unlawful for him to deliberately lie to the IRS about a material tax matter.
Labels: 7206(1), Cheek Willfulness, Tax Perjury, Willfulness
Caplin & Drysdale, a major player in the offshore account saga, has this new posting, titled "Switzerland Narrows Advance Notice to Account Holders of Treaty Requests: Americans with Unreported Accounts Impacted," here. I encourage readers having an interest in the issue to read the entire posting, but here is a bottom-line for those U.S. taxpayers still not making affirmative choices about their otherwise unreported Swiss accounts:
Americans can no longer count on being warned beforehand that information about a Swiss account might be provided to the IRS or the U.S. Justice Department ("DOJ"). By the time notice is given, it may well be too late for the account holder to make a voluntary disclosure.
The article notes that, pursuant to the DOJ Program for Swiss Banks the DOJ and, of course, the IRS will be receiving aggregate data from the banks that will permit "group" requests -- I call them John Doe requests because they function like John Doe summons and subpoenas -- to be made under the exchange of information provision of the double tax treaty, with the Swiss competent authority and the banks then being required to identify the taxpayers within the group (scope of the characteristics in the request).
Thanks to Caplin & Drysdale for reporting this development.
Addendum 12/18/14 12:26 AM:
Hugo Miller, Switzerland Fissures as Account Secrecy Loses Charm, Bloomberg News (12/16/14), here.
Posted by Jack Townsend at 9:34 AM 0 comments Links to this post
Labels: Secrecy Rules, Swiss Government, Tax Treaties - Exchange of Information
Section 7212(a), here, was derived from Title 18’s obstruction provisions. The key Title 18 obstruction provision is § 1503, here. Both of the sections have an Omnibus Clause providing:
corruptly influences, obstructs, or impedes, or endeavors to influence, obstruct, or impede, the due administration of justice.
26 USC 7212(a)
corruptly . . . obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title.
In United States v. Kassouf, 144 F.3d 952 (6th Cir. 1998), here, the Sixth Circuit noted that the Omnibus Clause in § 7212(a) and the Omnibus Clause in § 1503 were virtually identical and thus held that the Supreme Court's interpretation of § 1503 in United States v. Aguilar, 515 U.S. 593 (1995), here, to require that the defendant know of a pending investigation that he intended to obstruct applied to § 7212(a) as well. Just as this interpretation restricts the application of the same words in the Omnibus Clause of § 1503, so this interpretation of the same words restricts the application of the words in the Omnibus Clause of § 7212(a). Subsequently in United States v. Bowman, 173 F.3d 595 (6th Cir. 1999), here, the Sixth Circuit restricted Kassouf to its facts and applied § 7212(a)’s Omnibus Clause where the defendant, by filing information forms, attempted to trick the IRS into investigating his creditors. Bowman could be read as a repudiation of Kassouf’s requirement for a pending investigation and thus giving a broader interpretation to § 7212(a)’s Omnibus Clause than to § 1503’s Omnibus Clause. United States v. Floyd, 740 F.3d 22, 32 n4 (1st Cir. 2014); United States v. Kelly, 564 F. Supp. 2d, 843, 844-45 (N.D. Ill. 2008)}}; and United States v. Willner, 2007 U.S. Dist. LEXIS 75597 (S.D.N.Y. 2007) (finding support in the defraud conspiracy interpretation).
On December 12, 2014, the Sixth Circuit in United States v. Miner, 774 F.3d 336 (6th Cir. 2014), here, held that Bowman did not change the requirement it announced in Kassouf that the conduct must be intended to obstruct an IRS investigation. Significant to the Court’s decision was its Circuit authority that the first decision trumps a later decision that might be viewed as in conflict. The Court made much of the point that the Government’s sweeping claims that the Omnibus Clause untethered to a pending proceeding were expressly considered and rejected in Aguilar and Kassouf, the precedential authority in the Sixth Circuit. The Court concluded:
In summary, post-Kassouf and post-Bowman, a defendant may not be convicted under the omnibus clause unless he is "acting in response to some pending IRS action of which [he is] aware." McBride, 362 F.3d at 372 [United States v. McBride, 362 F.3d 360 (6th Cir. 2004), here] (internal quotation marks omitted). The extension of Bowman that is urged by the government in this case does not represent a path that was unconsidered by Kassouf; it represents the path that was not taken.
Posted by Jack Townsend at 2:02 PM 0 comments Links to this post
Labels: 18 USC 0371, 18 USC 1503, 7212(a), Conspiracy - Defraud, Klein Conspiracy, Obstruction, Tax Obstruction
Posted by Jack Townsend at 11:27 AM 11 comments Links to this post