On September 9th, 2014, a multi-count indictment for securities fraud, tax fraud and money laundering was unsealed in federal court against six corporate executives and six corporate entities[1]. The indictment is based on an investigation conducted by multiple government enforcement agencies including IRS Criminal Investigation (CI), Federal Bureau of Investigation (FBI), U.S. Immigration and Customs Enforcement (ICE) and Homeland Security Investigations (HSI).
According to the indictment, the responsible parties were using offshore tax havens to run illicit schemes responsible for sheltering five hundred million dollars of assets. The scheme had a three prong approach as follows. First, the scheme helped conceal the identities of clientele and their ownership interests in U.S. publicly traded companies in order to manipulate the price and volume of stock artificially. Second, due to the concealed identities, the scheme helped clientele “circumvent” the reporting requirements set forth under the Foreign Account Tax Compliance Act (FATCA). Under FACTA, a U.S. taxpayer with a total value of fifty thousand dollars or more in specified foreign financial assets (SFFAs) must report their ownership interest on IRS form 8938, which is attached to the annual 1040 individual income tax return. Finally, the scheme helped clientele use money laundering techniques upon the sale of the stock.
The offshore tax havens used were Belize and Nevis, West Indies via shell companies. To add insult to injury, one of the main corporate executives under indictment, Robert Bandfield, boasted to undercover law enforcement agents that he “specifically designed a slick corporate structure to counter President Barack Obama’s new laws.” This is a specific reference to the aforementioned U.S. law, FATCA.
For more information about this case, explore these resources from KPMG and the U.S. Treasury
Take-Away
In November 2009, the Financial Fraud Enforcement Task Force (FFETF) was created to investigate crimes like this. This task force, in combination with the seasoned enforcement units of the IRS, FBI, SEC, ICE and HIS, has far reaching power and funding to conduct global investigations.
For those U.S. taxpayers that are participating in these types of schemes it is highly advisable to seek immediate representation with a criminal attorney that has experience with these issues. For those U.S. taxpayers whose actions are not criminal to the point of participating in fraudulent schemes, but are nonetheless non-compliant with either FATCA, FBAR or foreign informational reporting, there are several programs that the Department of Justice and IRS have for voluntarily disclosing this information and regaining compliance without criminal prosecution. It is thus equally advisable for these U.S. taxpayers to seek a tax attorney that has significant experience with these issues.
Please note that due to the potential criminality in either scenario, the advice of an attorney under the attorney-client privilege is always the best way to start. As one can see with this recent federal case, the U.S. Government is committed to finding, stopping and prosecuting individuals and businesses that are conducting these illicit schemes. In order to avoid, criminal prosecution the time to act is now.
About Five Stone Tax Advisers
Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome for you. Our International Tax Advisory and Compliance unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact that will provide services for all the legal, compliance and financial reconstruction aspects of these cases.
[1] http://www.justice.gov/usao/nye/pr/September14/2014Sep9.php
[2] http://www.irs.gov/Businesses/Corporations/FATCA-Information-for-Individuals
[3] http://www.scribd.com/doc/239813494/SEC-v-Bandfield-Et-Al-Doc-4-Filed-12-Sep-14
