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Financial Fraud Law

#10 in Financial Fraud Law for the Year Is….

 So many topics, so many people, so many issues, so many laws, so many rules, so many cases. Is it at all possible to choose the year’s Top 10 in Financial Fraud Law? Well, we here at the Financial Fraud Law Blog are going to make the effort, and we welcome your feedback and comments.  Without any further ado, let’s begin with #10 in Financial Fraud Law for this year:

# 10: Overseas bank accounts.

The Justice Department has been seeking the U.S. owners of overseas bank accounts for quite some time, and the issue heated up quite a bit this year. In fact, it is not going to go away – and will be even more significant in 2014.

For one thing, New Year’s Eve Day is the deadline for Swiss banks to notify the Justice Department that they are seeking non-prosecution agreements to resolve past cross-border criminal tax under the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks that was announced several months ago in a joint statement signed by Deputy Attorney General James M. Cole and Ambassador Manuel Sager of Switzerland. 

But the DOJ’s efforts go beyond Swiss banks. Consider that in the past six months or so alone, the Justice Department has obtained two convictions after trial and six guilty pleas of defendants who maintained, or assisted others in maintaining, undeclared bank accounts in foreign countries.  Here’s a reminder: 

-          In October 2013, Dr. Patricia Lynn Hough of Englewood, Fla., was convicted by a jury in Fort Myers, Fla., of conspiring to defraud the IRS and of filing false individual income tax returns.  According to evidence presented at trial, Hough concealed millions of dollars in assets and income in offshore bank accounts at UBS and other foreign banks, and filed tax returns that failed to report the existence of those foreign accounts or the income earned in those accounts. 

-          In October 2013, Ashvin Desai, the owner of a medical device company in San Jose, Calif., was convicted of filing false tax returns, aiding and assisting in the preparation of false tax returns and failing to file Reports of Foreign Bank and Financial Accounts (FBARs) following a three-week trial.  According to evidence presented at trial, Desai, his wife and two adult children maintained bank accounts worth more than $7 million with The Hongkong and Shanghai Banking Corporation Ltd. (HSBC) in India.  Desai prepared and filed income tax returns for his family members that failed to report the accounts or over $1.1 million in interest generated by them over three years.    

-          In August 2013, Edgar Paltzer, a former partner at a Swiss law firm, pleaded guilty to conspiring with U.S. taxpayer-clients and others to help U.S. taxpayers hide millions of dollars from the IRS in offshore accounts and to evade U.S. taxes on the income earned in those accounts. 

-          In August 2013, Henry Seggerman of New York and Los Angeles pleaded guilty to charges related to his participation in a scheme with family members to hide over $12 million in secret Swiss bank accounts inherited upon their father’s death.  Seggerman’s siblings Suzanne Seggerman, Yvonne Seggerman and Edmund Seggerman each previously pleaded guilty to one count of conspiracy to defraud the United States and two counts of subscribing to false and fraudulent tax returns. 

In addition, in July 2013, Liechtensteinische Landesbank AG, a bank based in Vaduz, Liechtenstein, entered into a non-prosecution agreement and agreed to pay more than $23.8 million stemming from its offshore banking activities, and turned over more than 200 account files of U.S. taxpayers who held undeclared accounts at the bank.

And, to highlight the U.S. government’s continuing efforts in this area, keep in mind that two court orders entered in November 2013 in a New York federal court authorized the IRS to serve what are known as “John Doe” summonses on five banks to obtain information about possible tax fraud by individuals whose identities are unknown.  The John Doe summonses directed the five banks to produce records identifying U.S. taxpayers holding interests in undisclosed accounts at Zurcher Kantonalbank (ZKB) and its affiliates in Switzerland and at The Bank of N.T. Butterfield & Son Limited (Butterfield) and its affiliates in Switzerland, the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta and the United Kingdom.  The summonses also directed the five banks to produce information identifying foreign banks that used ZKB’s and Butterfield’s correspondent accounts at the five banks to service U.S. clients.

For all these reasons, overseas bank accounts are Number 10 in the year’s Top 10 in Financial Fraud Law.

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