Source: http://federaltaxcrimes.blogspot.co.uk/2015/02/
Timestamp: 2018-04-26 05:56:12
Document Index: 474208902

Matched Legal Cases: ['§ 3402', '§ 7501', '§ 6672', '§ 6672', '§ 6672', '§ 5321', '§ 1621', '§ 7206', '§ 7701']

The Internal Revenue Code requires employers to withhold social security and federal excise taxes from their employees' wages. [§§ 3402(a), 3102(a).] The employer holds these monies in trust for the United States.§ 7501(a) [here]. Accordingly, courts often refer to the withheld amounts as “trust fund taxes”; these monies exist for the exclusive use of the government, not the employer. Payment of these trust fund taxes is not excused merely because as a matter of sound business judgment, the money was paid to suppliers in order to keep the corporation operating as a going concern – the government cannot be made an unwilling partner in a floundering business.
The Code assures compliance by the employer with its obligation to pay trust fund taxes by imposing personal liability on officers or agents of the employer responsible for the employer's decisions regarding withholding and payment of the taxes. Slodov v. United States, 436 U.S. 238 (1978). To that end, § 6672(a) [here] of the Code provides that “[a]ny person required to collect, truthfully account for, and pay over any tax . . . who willfully fails” to do so shall be personally liable for “a penalty equal to the total amount of the tax evaded, or not . . . paid over.” § 6672(a). Although labeled as a “penalty," § 6672 does not actually punish; rather, it brings to the government only the same amount to which it was entitled by way of the tax.
In addition to the TFRP which is a civil liability only, Section 7202, here, imposes a parallel criminal penalty for those individuals who are responsible within the employer organization to attend to the withholding, accounting for and paying over.
Tax practitioners deal frequently with clients who are facing IRS action or potential action against them individually for their employer's nonpayment of trust fund penalties. Often clients will say that the potential civil liability for the TFRP is bad enough, but they certainly don't like the risk of criminal prosecution. I have had clients ask me if I can illustrate when conduct crosses the line from civil TFRP liability only into potential criminal prosecution.
Posted by Jack Townsend at 10:12 AM 2 comments Links to this post
Posted by Jack Townsend at 9:15 AM 5 comments Links to this post
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A superseding indictment has been filed in United States v. Berlinka, Frei & Keller (SDNY S 12 Cr. 02 (JSR)). For discussion of the original indictment, see New Swiss Enabler Indictments - Bankers Related to UBS and, Allegedly, Wegelin (Federal Tax Crimes Blog 1/3/12), here. The superseding indictment continues the original offense and defraud / Klein conspiracy charge and adds one charge each against the three defendants. One of the defendants, Keller, was recently arrested in Germany. See Wegelin Banker Arrested in Germany on U.S. Charges (Federal Tax Crimes Blog 2/6/15), here, so this apparently was the time to expand the scope of the indictment..
The additional charge against each defendant is the substantive crime of tax obstruction, Section 7212(a), here. The charge is under what is called Section 7212(a)'s Omnibus Clause. Tax obstruction has been called a one-person Klein conspiracy (which is also charged against each of the defendants). So, I thought I would discuss the new tax obstruction charge as it relates to the conspiracy charge.
138. From at least in or about 2002 up through and including in or about 2011, in the Southern District of New York and elsewhere, MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with Wegelin, Managing Partner A, Executive A, Client Advisor A, Beda Singenberger, Gian Gisler, Clients A through JJ, and others known and unknown, willfully and knowingly did combine, conspire, confederate, and agree together and with each other to defraud the United States of America and an agency thereof, to wit, the IRS, and to commit offenses against the United States, to wit, violations of Title 26, United States Code, Sections 7206(1) and 7201.
139. It was a part and an object of the conspiracy that MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with others known and unknown, willfully and knowingly would and did defraud the United States of America and the IRS for the purpose of impeding, impairing, obstructing, and defeating the lawful governmental functions of the IRS in the ascertainment, computation, assessment, and collection of revenue, to wit, federal income taxes.
140. It was further a part and an object of the conspiracy that various U.S. taxpayer-clients of MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with others known and unknown, willfully and knowingly would and did make and subscribe returns, statements, and other documents, which contained and were verified by written declarations that they were made under the penalties of perjury, and which these U.S. taxpayer-clients, together with others known and unknown, did not believe to be true and correct as to every material matter, in violation of Title 26, United States Code, Section 7206(1).
141. It was further a part and an object of the conspiracy that MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with others known and unknown, willfully and knowingly would and did attempt to evade and defeat a substantial part of the income tax due and owing to the United States by certain of Wegelin's U.S. taxpayer clients, in violation of Title 26, United States Code, Section 7201.
Posted by Jack Townsend at 2:44 PM 8 comments Links to this post
Labels: 18 USC 0371, 7212(a), Conspiracy - Defraud, Conspiracy - Offense, Tax Obstruction, Wegelin Bank
According to court documents and statements, Georges Briguet, a naturalized U.S. citizen, had Swiss financial accounts at UBS AG and at Clariden Leu Ltd., which was a wholly owned subsidiary of Credit Suisse AG. He opened the UBS account in Switzerland in or around 1992, with approximately 7 million Swiss francs. In 2008, he transferred the UBS funds to a numbered account at Clariden Leu in Switzerland, which he maintained until at least 2011. For tax years 2001 through 2010, Briguet filed false federal income tax returns on which he failed to report his foreign financial accounts, failed to report any income earned thereon and failed to pay any taxes on such foreign income.
In addition, Briguet was interviewed by an IRS revenue agent who was conducting a civil audit. During the interview, Briguet falsely stated that he had no foreign income and no foreign financial accounts. He then later repeated those false statements to an IRS special agent who interviewed Briguet as part of a criminal investigation.
At sentencing, Briguet faces a statutory maximum sentence of three years in prison and a $250,000 fine. As part of his plea agreement, Briguet has agreed to pay the IRS restitution in the amount of $169,935.
Posted by Jack Townsend at 7:56 AM 0 comments Links to this post
Labels: 7212(a), Clariden Leu, Offshore Account Convictions, Tax Obstruction, UBS
a prisoner who is serving a term of imprisonment of more than 1 year [1] other than a term of imprisonment for the duration of the prisoner’s life, may receive credit toward the service of the prisoner’s sentence, beyond the time served, of up to 54 days at the end of each year of the prisoner’s term of imprisonment, beginning at the end of the first year of the term,
[Note the [1] is a footnote indication that the original has no comma this point but probably should]
Thus, at the end of the first year (Year 1) that prisoner would earn the statute's maximum credit of 54 days. The relevant official (whom we shall call the “good time calculator”) would note that fact and, in effect, preliminarily put the 54 days to the side. At the end of Year 2 the prisoner would earn an additional 54 days of good time credit. The good time calculator would add this 54 days to the first 54 days, note the provisional total of 108 days, and again put the 108 days' credit to the side. By the end of Year 8, the prisoner would have earned a total of 432 days of good time credit (8 years times 54 days). At that time, the good time calculator would note that the difference between the time remaining in the sentence (2 years, or 730 days) and the amount of accumulated good time credit (432 days) is less than 1 year (730 minus 432 equals 298 days, which is less than 365). The 432 days of good time credit that the prisoner has earned by the end of Year 8 are sufficient to wipe out all of the last year of the 10-year prison term and to shorten the prisoner's 9th year of imprisonment by 67 days.
As we said, the statute provides that “good time” for this “last year or portion” thereof shall be “prorated.” Thus, the good time calculator must divide the 298 days into two parts: (1) days that the prisoner will have to serve in prison, and (2) credit for good behavior the prisoner will earn during the days served in Year 9. In other words, the number of days to be served in Year 9 plus the number of good time credit days earned will be equal to the number of days left in the sentence, namely, 298. And to keep the award of credit in the last year proportional to awards in other years, the ratio of these two parts of Year 9 (i.e., the number of good time days, divided by the number of days served) must be 54 divided by 365, the same ratio that the BOP applies to full years served. We can use some elementary algebra, described in the Appendix, infra, to work out the rest. The result is that if the prisoner serves 260 days, he can earn an additional 38 days of credit for good behavior. That is to say, of the 298 days remaining in his sentence, the prisoner will have to serve 260 days in confinement, after which point, his sentence will be fully accounted for (given the additional 38 days' credit earned), and he will be released. In sum, a prisoner subject to a 10-year (3,650-day) sentence who earns the maximum number of days the statute permits will serve 3,180 days in confinement and receive 470 days of “good time” credit, about 15% of the prison time actually served.
Labels: 18 USC 3624(b), Good Time Credit
Posted by Jack Townsend at 1:31 PM 2 comments Links to this post
Labels: IRS Summons-John Doe, Offshore Account Enablers, Offshore Account Prosecutions, OVDP, U.S. DOJ Swiss Bank Program
Since being handed enforcement authority from the Financial Crimes Enforcement Network in 2003, the Service has begun a campaign to provide stricter enforcement of the long-neglected Report of Foreign Bank and Financial Accounts (FBAR), which requires disclosure of foreign financial assets through Form TD F 90-22.1. Willful violations were required for any penalty under the pre-2004 law and carry heavy penalties under existing law, so these enforcement efforts rely to a great extent on the interpretation of the willfulness provision.
Williams and McBride were the first two cases to address the willfulness requirement for an FBAR civil penalty. In Williams, the court held that failing to file an FBAR after signing a tax return constitutes “a conscious effort to avoid learning” about the FBAR requirement, which satisfies the willfulness requirement. In McBride, the court held that signing a tax return constitutes knowledge of the duty to comply with FBAR, which satisfies the willfulness requirement. By holding that taxpayers willfully violate the FBAR statute simply by signing a tax return and then failing to file, both Williams and McBride construe the willfulness requirement more broadly than applicable precedent would have dictated.
This Comment argues that the current text of the statute and precedent require a more narrow reading of the FBAR willfulness requirement. It argues that taxpayers should not be charged with constructive knowledge after signing a tax return. Instead, a court should have to find that the taxpayer is aware of the existence of the FBAR requirement in order to find a willful violation. In addition to being consistent with the text of the statute and precedent, this approach would avoid the liability nightmare created by a combination of the Williams–McBride strict liability standard and the ill-defined “other financial account” language in the law.
The Williams–McBride interpretation of the willfulness requirement in 31 U.S.C. § 5321(a)(5) is flawed because it imposes a strict liability standard where both the statute and the case law indicate otherwise.
Before addressing the ways this standard misapprehends precedent, it must be noted that this standard cannot possibly be applied to the current version of section 5321(a)(5). Under the pre-2004 version applicable in Williams and McBride, the civil penalty in section 5321(a)(5) could be assessed only for willful violations. But under the current version of section 5321(a)(5), there are separate penalties for non-willful violations. Using the Williams–McBride standard of willfulness, it is difficult to conceive of how a violation could be nonwillful.
IV. Conclusion: Future Courts Should Look to Sturman
Posted by Jack Townsend at 10:32 AM 1 comments Links to this post
Labels: Cheek Willfulness, FBAR Willful Penalty, Willful Blindness, Willfulness, Willlful Blindness
IRS Commissioner John Koskinen said February 11 that the agency changed its civil asset forfeiture policy last October because an internal review found that it was applied inconsistently, and it decided it won't pursue cases in which serial bank deposits are just under the $10,000 threshold for reporting under the Bank Secrecy Act of 1970 unless there are indications that the funds were illegally obtained.
That deposit practice, called structuring, may be linked to organized crime, drug dealers, and terrorism, Koskinen told the House Ways and Means Oversight Subcommittee. In each forfeiture case, the IRS prepares a search warrant for review by the appropriate U.S. attorney's office, he said. The warrant must then be approved by a federal judge before a seizure can take place, he noted.
The IRS conducted 146 civil asset forfeitures in fiscal 2014, accounting for about 5 percent of the workload of the IRS Criminal Investigation division, Koskinen said. The median value of assets seized was less than $34,000, Rep. Patrick Meehan, R-Pa., said, though the commissioner said the average is well over $100,000. In 60 percent of forfeitures, Koskinen added, no taxpayer challenged the IRS seizure, suggesting the depositor was probably involved in some illegal activity.
"We came up with the decision that the right balance between law enforcement and trying to protect taxpayers was, when there was no evidence that the funds were from illegal sources, there would be no seizure," Koskinen said. The new policy has been communicated to IRS agents, and appropriate changes will be made to the Internal Revenue Manual by the end of the first quarter of 2015, he added.
Following Koskinen's remarks, the subcommittee heard from angry small business owners who said their companies were hobbled or threatened with closure after the IRS seized their bank accounts claiming they had repeatedly made bank deposits of less than $10,000 to avoid reporting requirements under the Bank Secrecy Act.
Posted by Jack Townsend at 9:20 AM 7 comments Links to this post
Labels: Forfeiture, Forfeiture - Civil, Structuring
Investigators are looking into UBS’s use of so-called bearer securities, which can be redeemed by anyone holding the paper, making them a potential tool for hiding assets. Authorities are focusing on whether UBS issued the securities to clients or invested in them on their behalf, according to the person. Investigators suspect the conduct may have occurred when the bank was still bound by the deferred-prosecution agreement, which expired in October 2010, the person said, asking not to be identified because the inquiries aren’t public.
If that’s true, the Justice Department could take the unusual step of reopening the accord and prosecuting the bank on the original conspiracy charge, according to lawyers including Michael Perino, a law professor at St. John’s University in New York.
“If you’re violating the terms of a deferred-prosecution agreement, that means the government can go back on its decision not to prosecute you,” Perino said.
Prosecutors also could file new charges against UBS and seek stiffer penalties and oversight at sentencing for violating the previous agreement, according to Brandon Garrett, a University of Virginia law professor who has written a book examining corporate prosecutions.
“UBS has already settled three prosecution agreements since 2009,” Garrett said. “UBS is already a recidivist many times over,” he said. The government may decide to seek a conviction with probation supervision, he said.
Popularized after the U.S. Civil War, bearer bonds were traditionally issued in paper form and were payable to whomever physically held them. Because they’re unregistered, they can be used to evade taxes or launder money, according to tax specialists including Stephen Land, a lawyer with Duval & Stachenfeld LLP.
‘Mostly Illicit’
Rendered virtually illegal in the U.S. by tax regulations, they are still common investments in Europe, he said. If held in paper form, a bearer bond offers complete anonymity.
“When you think of that kind of anonymity, you can understand why the government hates bearer bonds,” Land said.
Bearer securities largely disappeared from the U.S. market following the 1982 budget law. U.S. restrictions tightened further within the past few years, making it impractical for U.S. companies to issue bearer bonds, Land said.
U.S. investors also face strict regulations and tax consequences making the bonds unattractive, according to a 2012 client notice published by law firm Milbank Tweed Hadley & McCloy LLP.
“A lot of people believe that the advantages would be mostly illicit” and “the legitimate advantages are few,” said Richard Painter, a corporate law professor at the University of Minnesota.
While the bonds can be traded electronically, eliminating some of the secrecy benefits, they may still be treated as unregistered for the purposes of a financial institution’s internal procedures, tax experts said.
“Until you actually take the bond out of the clearing system, there is an electronic record,” said Remmelt A. Reigersman, a lawyer with Morrison & Foerster LLP. “It’s just that nobody decides to look behind the curtain.”
Also those with access to Tax Notes Today might want to read Amy S. Elliott, UBS Discloses Bearer Bond Tax Evasion Investigation, 2015 TNT 29-2 (2/12/15) (no link available) for further or at leastl different detail.
Labels: Tax Evasion, UBS, Unregistered Securities
"In U.S. law, you have a very different test, a much lower test. In the U.S., companies can be prosecuted for crimes committed for their benefit by their employees or their agents."
At common law, breathless, lifeless corporations could not be charged with crimes. In N.Y. Cent. & Hudson River R.R. Co. v. United States, 212 US 481, 494 (1909), the Supreme Court held that corporations could be criminally liable for the acts of agents. see also United States v. Sun-Diamond Growers of Cal., 138 F3d 961, 970-71 (D.C. Cir. 1998), aff'd on other grounds, 526 US 398 (1999) (citing cases). For modern expansion of this concept to collective knowledge of the entity in the Bank Secrecy Act context, see United States v. Bank of New England, 821 F2d 844, 856 (1st Cir. 1987). Generally, if an agent acts within the scope of employment in a way that reflects some intent to benefit the organization, the organization may face criminal liability. One of the former Enron prosecutors summed it up nicely: “The legal rule is that if an agent of the organization committed a crime within the scope of employment, meaning basically while doing his job, and acted with even a partial intent to benefit the organization - in other words, not exclusively for self-interest, then the organization is criminally liable, full stop,” Samuel Buell quoted in Jonathan D. Glater and Lynnley Browning, Deal Likely to Let KPMG Avoid Charge in Tax Case, New York Times (8/11/05). Notwithstanding this general rule of criminal prosecution for corporations, corporations cannot be tried for some crimes. For example, general perjury (18 USC § 1621, here) requires a false statement under oath. Corporations cannot make statements under oath; people do. Accordingly, the corporation cannot be tried for perjury, but the corporate agent (officer or director) so testifying can be tried for perjury. But, tax crimes enthusiasts should be aware that, somewhat inconsistently, a corporation can be charged and convicted for tax perjury, § 7206(1) because it permits conviction of a person which the Code defines in § 7701(a)(1) to include a corporation. See United States v. Ingredient Technology Corporation, 698 F2d 88 (2d Cir. 1984), cert. denied 462 US 1131 (1983) (Section 7206(1), here, tax perjury, prosecution).
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Labels: 18 USC 1621, 7206(1), Perjury (18 USC 1621), Tax Perjury
Posted by Jack Townsend at 10:39 AM 7 comments Links to this post
Labels: Corporate Criminal Liability, Deferred Prosecution Agreements
Posted by Jack Townsend at 8:21 AM 7 comments Links to this post
Keller is among 38 offshore bankers, lawyers and advisers charged in the U.S. since 2008 with tax crimes. About two dozen have yet to answer the charges in court. They include bankers from Switzerland’s top three wealth managers -- UBS Group AG, Credit Suisse Group AG and Julius Baer Group Ltd. Most live in Switzerland, where they remain off-limits to U.S. prosecutors because the Swiss don’t extradite people for tax crimes. They risk arrest if they cross into other countri
“Swiss bankers under indictment are in a situation where their lifestyle is in jeopardy and they’re under a form of detention,” said Bruce Zagaris, a Washington attorney not involved in the case. “They’re used to traveling worldwide. Suddenly, they’re faced with a choice of remaining in Switzerland or traveling abroad and being arrested.”
Frankfurt prosecutors said they arrested a 50-year old Swiss citizen based on an international search alert by the U.S. seeking his extradition, Alexander Badle, a spokesman for the Frankfurt General Prosecutor’s Office, said in an e-mail. Keller was 47 when he was indicted three years ago.
‘Less Vulnerable’
The indictment said the Wegelin bankers told clients their undeclared accounts would stay hidden from the IRS because the bank “had a long tradition of bank secrecy, and, unlike UBS, did not have offices outside Switzerland,” making it “less vulnerable to United States law enforcement pressure.”
“In or about 2008, the managing partners affirmatively decided to take advantage of the flight of U.S. taxpayers with undeclared accounts by opening new undeclared accounts for many of them at Swiss Bank A,” the indictment said. “Swiss Bank A opened new undeclared accounts for at least 70 U.S. taxpayers.”
Berlinka [another Wegelin banker] began working at the bank in 2008, Frei [another Wegelin banker] started in 2006 and Keller began in 2007, according to a statement by U.S. Attorney Preet Bharara at the time. The men face as long as five years in prison if convicted.
The indictment details how Berlinka, Frei and Keller allegedly helped 23 U.S. clients open undeclared accounts at their bank. Kenneth Heller, a disbarred New York maritime attorney who pleaded guilty to hiding more than $26.4 million in accounts at UBS and Wegelin, also is referred to in the indictment.
The three bankers conspired with two other Swiss financial advisers already under indictment, Gian Gisler and Beda Singenberger, according to the charges.
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(1) two or more people agreed to defraud the United States; (2) the defendant became a member of that agreement; (3) the defendant joined the agreement knowing its purpose was to defraud the United States and intended to achieve that goal; and (4) a conspirator committed an overt act in furtherance of the objective.
By contrast, the offense conspiracy charge to evade VI tax, does require that the defendant act willfully because the offense conspiracy imports the willfulness requirement from the offense (here tax evasion) that is the object of the conspiracy.
Labels: 18 USC 0371, 6531, Conspiracy - Defraud, Conspiracy - Offense, Conspiracy - Statute of Limitations, Statutes of Limitations, Willfulness
Posted by Jack Townsend at 5:16 PM 27 comments Links to this post
Labels: Bank Leumi, Offshore Account Convictions