Offshore Bank Account Crackdown; Analysis of Recent Plea – August 2014

83 year-old “Hot Lips” Pleads to Federal Tax Crimes

As part of our Offshore Voluntary Disclosure and Tax Compliance practice, we follow cases of interest.    Last week, the U.S. Attorney’s office announced a guilty plea of conspiracy to defraud the United States and willfully failing to disclose offshore bank account held in Switzerland and Israel.   According to the United States Attorney, for more than 25 years, Bernard Kramer hid at least $1.1 million in an undeclared account at UBS AG (“UBS”), a Swiss bank.  Kramer did not list it on his tax returns (form 1040) and made sure that all disbursements made to him in the U.S. were for amounts less than $10,000.  Kramer and his Swiss bankers referred to the account by the code name “Hot Lips.”

The Charges

83 year-old Kramer was charged with conspiring to defraud the U.S. and one of its agencies (the IRS).  Counts included the following:

         Attempt to evade or defeat tax. By willfully and knowingly attempting to evade and defeat a substantial part of his income taxes, Kramer was in violation of Title 26, U.S.C. 7201, a felony punishable by fines of up to $100,000 ($500,000 in the case of a corporation), or imprisonment of not more than 5 years, or both, plus the costs of prosecution. 

         Conspiracy to Commit Offense or to Defraud the United States. Kramer conspired with UBS to evade detection and assessment of taxes, a violation of Title 18, U.S.C. 371, which is punishable by fines or imprisonment of not more than five years, or both.  

         Subscribing to False Individual Tax Returns. Kramer was charged under Title 26, U.S.C. 7206(1) for willfully and knowingly signing tax returns, which are verified by written declarations made under penalties of perjury although he knew that those statements were false. This is a felony punishable by fines of up to $100,000 ($500,000 in the case of a corporation), or imprisonment of not more than 3 years, or both, plus the costs of prosecution. 

         Committing an offense by commanding another to perform illegal acts.  Directing UBS to engage in acts intended to defraud the U.S. led to charges against Kramer as the principal party in the crimes under 18 U.S. Code 2.

             

In addition to a large amount of back taxes, Kramer has been ordered to pay $588,042 in penalties and faces up to 8 years in prison. Moreover, the “Hot Lips” are no longer sealed – as part of his plea agreement, Kramer is now aiding the government investigation into his affairs.   

Sentencing is set for February 6, 2015.  We will keep you posted and are especially interested if his cooperation with ongoing government tax investigations will persuade the Court for a variance of the statutory recommendation for sentencing.   Moreover, we are also keeping an eye on the 7th circuit’s review of a 5k sentencing variance afforded to Ty Warner in his case involving offshore bank accounts and tax evasion.    ( See government’s appeal of a sentencing involving tax evasion / Offshore Bank Accounts).  It will be interesting to see how the Appeals Court reviews the sentencing variance as to tax cases – especially when one of the greatest factors involved in calculating sentencing recommendations is the tax loss to the government.  Click here to listen to the oral arguments. 

The crackdown on Americans hiding money abroad

Kramer is just one of many Americans who have been prosecuted for tax evasion by means of hiding funds in foreign accounts, part of a recent crackdown by the Department of Justice and the IRS. The IRS reports that through voluntary IRS amnesty programs, more than 45,000 Americans have paid $6.5 billion in back taxes, interest and penalties.

Our attorneys are key to your peace of mind

For over 30 years, the Law Firm of Moskowitz LLP has been successfully defending individuals and companies in criminal tax matters for over 30 years.  At the first indication that you are being investigated by the federal government for a tax offense, you need to call our office.  Our seasoned criminal tax attorneys are key to your proper defense and peace of mind.

 

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