H. Jacob Lager

Archive for the ‘Tax Crime’ Category

Iraq reconstruction legacy: Kickback conspiracies and tax crimes

In Court decisions, Tax Crime on October 12, 2012 at 7:49 am

This past Wednesday, Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney for the Northern District of Alabama Joyce White Vance announced the sentencing of two former Parsons Company employees for their participation in a kickback conspiracy in Iraq and related tax crimes.

According to court documents, Gaines R. Newell Jr and Billy Joe Hunt worked for Parsons in Iraq as program managers to support the U.S. Army Corps of Engineers in its efforts to keep abandoned munitions from insurgents and unfriendly forces.  In their plea agreements, the Defendants admitted to taking over $1 million in kickbacks from certain (shall we say “more friendly”) subcontractors, in return for awarding them valuable munitions clearance program contracts.

Newell and Hunt also admitted to filing false federal income tax returns by not disclosing the kickback income.  If that last part sounds familiar to you – yes, “that’s how they got Capone.”

In what’s becoming a tax crime tradition here at TSF, lets run down what $1 million of illegal income cost our perps:

Billy Joe Hunt (age 57) received:

  • 15 months in prison:
  • 3 years of supervised release;
  • A tax restitution bill for $66,212; and
  • Forfeiture of $236,472.

Gaines R. Newell Jr. (age 53) received:

  • 27 months in prison;
  • 3 years of supervised release;
  • A tax restitution bill for $241,088; and
  • Forfeiture of $861,027 to the U.S. Army Corps of Engineers.

I would ever advise a client to engage in an illegal business activity. BUT, I would advise him to, at the very least, pay his taxes on the income.

Read the official presser here.

Flag image provided by cudmore.

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The dramatic tale of “A True FBAR Criminal”

In FBAR, Foreign taxes, IRS regulations, Tax Crime on July 27, 2012 at 8:02 am

One question I often hear when explaining FBAR liability is, “Are they really going to come after me?”

It’s not an unreasonable question.  Oftentimes, the penalties for FBAR non-compliance can seem very severe, especially when dealing with a foreign client who may have recently become a U.S. taxpayer and unknowingly retained reportable accounts abroad.

This week, the U.S. Attorney’s Office for the Southern District of Florida issued a press release that provides an example of just who “they” are truly “going after.”

The presser announced yesterday’s sentencing of Miami Beach resident Luis A. Quintero for willful failure to file his FBARs.  So what was the sentence?  Roddy, tell him what he won!

  • Four months in federal prison;
  • Three years of supervised release;
  • 250 hours of community service; and
  • A $20,000 criminal fine.

But wait!  There’s more!

Is that 27.5% OVDP penalty looking more attractive?

Before anyone panics, lets take a look at what Quintero actually did.  Court documents indicate that he formed two offshore corporations, which were then used to open certain Swiss UBS accounts, which housed (and hid) roughly $4 million.  Quintero then facilitated multiple transfers to and from the subject accounts.  Of course, none of that is necessarily illegal had he disclosed the accounts’ existence and their activities.

Which he didn’t.

The U.S. Attorney’s Office also noted that there was no question that Quintero knew that he was required to file an FBAR for the subject accounts.  In fact, Quintero had previously filed FBARs for other Mexican bank accounts to which he was attached.  That’s a bad fact if you’re trying to argue that your subsequent failure wasn’t “willful.”

The press release further indicates that the Quintero prosecution was a direct result of UBS’s 2009 agreement to cooperate with U.S. authorities in identifying suspected tax cheats.  If you have a U.S. client that is, or was, a Swiss UBS customer in the recent past, you may want to suggest a review of their reportable foreign accounts.

U.S. JUSTICE DEPARTMENT ANNOUNCES TAX FRAUD INDICTMENT AGAINST UBS CLIENTS

In FBAR, Offshore Accounts, Tax Crime on January 31, 2012 at 12:34 pm

UBS clients Stephen M. Kerr and Michael Quiel have been charged with filing false tax returns and failure to file Reports of Foreign Bank and Financial Accounts (FBAR), the U.S. Justice Department announced on January 30. The indictment also charged the defendants, along with former San Diego attorney Christopher M. Rusch, with conspiracy to defraud. Rusch was arrested Jan. 29 in Miami after being expelled from Panama at the request of the U.S. government.

According to the indictment:

“Beginning in or before 2004, and continuing through at least December 2007, Kerr and Quiel obtained control of shares of stock of publicly traded domestic companies in a way that concealed their ownership of the stock. Kerr and Quiel then deposited the stock, or proceeds from the sale of the stock, to multiple undeclared bank accounts set up with the assistance of Rusch at UBS in Switzerland and at another Swiss bank. These accounts were all held in the names of nominee entities to further conceal Kerr’s and Quiel’s ownership.”

More from the Justice Department here: http://www.justice.gov/opa/pr/2012/January/12-tax-136.html