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Monthly Archives: August 2012

Whistleblower Case Hinges on IRS Time Frame for Setting Awards

August 17, 2012

The U.S. Tax Court has given the IRS until Sept. 24 to respond to an amicus brief in support of what could amount to an award of tens of millions of dollars for whistleblower Joseph Insinga, an informant who implicated seven major corporations in tax evasion in 2007 (Insinga v. Comr., Tax Court Order No. 4609-12W (7/31/12)).
The issue is whether the Administrative Procedures Act applies to the IRS in this case and whether inaction is tantamount to a negative determination.
The case will be closely watched by informants because of its potential to impact other slow-moving IRS whistleblower claims and also because it is the first to invoke the Administrative Procedures Act in a whistleblower case. The act confers jurisdiction on the court if agency action or failure to act aggrieves an individual.
Five-Year Wait
For Insinga, it is a matter of having waited five years for the IRS to decide if it will pay him on claims he made as a former Rabobank managing director against corporations such as General Mills and Newell Rubbermaid. The IRS has already collected hundreds of millions of dollars in taxes, penalties, and interest on his information, according to the court documents.
In the original Tax Court petition, Insinga alleged that the IRS advised him that his submission was defective because the IRS had recently discovered “other sources” of the information he had furnished in April 2007.
If they deny his claim, he has the right to go to federal court and seek the court's help. However, they haven't denied his claim and they haven't approved it either.
A June 27 amicus brief filed by Dean Zerbe, attorney with Zerbe, Fingeret, Frank & Jadav, on behalf of the National Whistleblowers Center, was designed to compel the Tax Court to make a final decision without delay.
The IRS, in its March 21 motion to dismiss the case, said that the court does not have jurisdiction until the IRS issues a determination letter. There has been no denial letter issued to Insinga, nor has a determination been made in the case, IRS said. Furthermore the IRS said the statute does not set forth any time limits within which a determination must be made.
The IRS is taking the position that they don't have to pay us until the last of all the cases we reported is paid or otherwise disposed of.
Insinga has argued that he should have an award determination based on the amount the IRS has already collected from his claim—an estimated $600 million—within 90 days after the IRS was paid.
He estimated that the offshore and other tax avoidance transactions he identified would result in a total of $1.5 billion in collection of unpaid taxes, penalties and interest for the IRS.
The IRS has come under pressure from a number of sources to move whistleblower claims along. Sen. Charles Grassley (R-Iowa), for one, said the IRS's handling of the program has been inexcusable, and threatened to block two pending Treasury Department nominees from getting a confirmation vote until he got answers about implementation of the program. Grassley wrote the 2006 legislation that overhauled the whistleblower program, and has kept a lookout over its development.
 
IRS Deputy Commissioner for Service and Enforcement, Steven Miller, also buoyed the hopes of whistleblower community when he announced June 20 that he is reviewing the program, which will lead to “a set of expectations for timely action.”
Until that time he said the Whistleblower Office should evaluate claims within 90 days, and whistleblowers should be notified of an award decision within 90 days of when collected proceeds can be finally determined.
But all eyes are on the Tax Court, since the Miller memo is not binding. “If the court comes out and directs the IRS to make a decision in a set number of days—such as 90 days—it would really break a logjam, because there are so many folks waiting for the IRS to make a decision.

If you have questions about the IRS' Wistler Blower Program, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).

Read more at: Tax Times blog

Ft. Myers Convenience Store Owner Arrested For Fallure to Pay Over Fla. Sales Tax

August 17, 2012

Munaf M. Rashid, the owner of Snack Shack Food Mart, located in Ft. Myers, has been arrested on charges that he stole more than $8,000 in sales tax he collected from customers, but failed to send in to the state, the Florida Department of Revenue announced.

Mr. Rashid, 47, who lives in Cape Coral, was arrested by the Lee County Sheriff's Department on July 31, 2012 on a felony charge relating to theft of state funds. If convicted, he faces up to 5 years in prison and up to $5,000 in fines, as well as possible repayment of stolen tax, interest, penalty and investigative costs. Mr. Rashid's convenience store is located at 8671 Littleton Road in North Fort Myers.

According to Revenue Department investigators, Mr. Rashid collected tax from customers at his store. However, during various periods in 2011, he failed to send in to the state all of the sales taxes that he had collected. Under state law, sales tax is the property of the state at the moment of collection.

“It is an honor to serve the vast majority of Florida businesses who comply with State tax requirements,” said Marshall Stranburg, Interim Executive Director, Florida Department of Revenue. “For those that don't, it is our job to enforce the law and ensure honest businesses are not placed at a competitive disadvantage by those who ignore the law or intentionally collect and steal taxpayer dollars.”

Read more at: Tax Times blog

Sentencing—Apprendi Applies to Criminal Fines

August 17, 2012

The Supreme Court has extended the rule in Apprendi  v. New Jersey, 530 U.S. 466 (2000). Apprendi held that the Sixth Amendment reserves to juries the determination of any fact, other than the fact of a prior conviction, that increases a criminal defendant's maximum potential sentence.
In Southern Union Co. v. United States, 132 S. Ct. 2344 (2012), the question presented was whether the same rule applied to sentences of criminal fines. Southern Union, a natural gas company, was convicted of violating a federal statute, 42 U.S.C. § 6928(d) (2) (A), by knowingly storing liquid mercury without a permit. The jury verdict form stated that Southern Union was guilty of unlawfully storing liquid mercury "on or about September 19, 2002 to October 19, 2004." 132 S. Ct. at 2349. Violations of the statute are punishable, inter alia, by "a fine of not more than $50,000 for each day of violation." 42 U.S.C. § 6928(d) (2) (A). At sentencing, the probation office set a maximum fine of $38.1 million, on the basis that Southern Union had violated the statute for each of the 762 days from September 19, 2002 through October 19, 2004. Southern Union objected that the calculation violated Apprendi because the jury had not been asked to determine the precise duration of the violation.
Further arguing that the verdict form and the court's instructions permitted conviction if the jury found even a one-day violation, Southern Union maintained that the only violation the jury necessarily found was for one day and that imposing any fine greater than the single-day penalty of $50,000 would require fact finding by the court, in contravention of Apprendi. While acknowledging that the jury had not been asked to specify the duration of the violation, the Government argued that Apprendi did not apply to criminal fines.
The district court held that Apprendi applied, but it concluded from the verdict that the jury had found a 762-day violation. The court therefore set a maximum potential fine of $38.1 million and imposed a fine of $6 million and a community service obligation of $12 million. On appeal, the First Circuit rejected the district court's conclusion that the jury had necessarily found a violation of 762 days, but it affirmed the sentence, holding, in conflict with other circuits, that Apprendi did not apply to criminal fines.
The Supreme Court reversed the First Circuit and held that Apprendi did apply to criminal fines. The Court stated that it had applied Apprendi to a variety of sentencing schemes involving imprisonment or a death sentence and could see no principled basis under Apprendi for treating criminal fines differently. The Court also rejected the Government's argument that fines are less onerous than incarceration and the death sentence and thus do not implicate the primary concerns motivating Apprendi. Not all fines are insubstantial, however. Moreover, the relevant question is the significance of the fine from the perspective of the Sixth Amendment's jury trial guarantee. "Where a fine is substantial enough to trigger that right, Apprendiapplies in full." 132 S. Ct. at 2352. The Court remanded the case for further proceedings.

Mark Rieber—Senior Attorney

Read more at: Tax Times blog

Swiss Banks Giving Up Employees to IRS

August 17, 2012

Looking for leniency in tax evasion investigation, banks surrender data

Thousands of employees of Swiss banks are finding that their employers are hanging them out to dry in exchange for hoped-for leniency in connection with American accounts involved in a tax evasion investigation.

Bloomberg reported Thursday that several Swiss banks so far have turned over data that included telephone records and e-mails for employees who were within Swiss law but in violation of U.S. law in setting up accounts for U.S. citizens who were then able to evade taxes.

Swiss bank Wegelin & Co. was indicted by the U.S. Department of Justice Other Swiss banks have seen their country’s tradition of secrecy worn down as the DOJ continued to pursue its investigation. Swiss companies are forbidden to turn over evidence in foreign legal proceedings; however, the Federal Council made an exception in April after the Swiss government was petitioned by numerous banks in the matter.

UBS headquarters in Zurich. (Photo: AP)As a result, the council gave its consent to allow banks to surrender the names of staff members, a move that Alec Reymond, a former president of the Geneva Bar Association, called illegal in the report. Reymond is representing two members of Credit Suisse’s staff.

According to estimates, at least five banks have given up the data on up to 10,000 employees to pacify U.S. authorities. He also said banks have turned over not just correspondence, but also copies of their employees’ passports.

Credit Suisse said that it had been authorized to surrender staff names by the Swiss government. Marc Dosch, a bank spokesman, said in the report, “Credit Suisse provided the U.S. authorities with internal business documents that show how it ran its U.S. cross-border business. The large majority of Credit Suisse employees complied with the applicable laws and regulations and have nothing to fear.”

Julius Baer and Zuercher Kantonalbank also said they were authorized to take the action. HSBC said it is cooperating with U.S. authorities and has also turned over documents. Credit Suisse, HSBC and Julius Baer have all said they expect to resolve the issue by paying fines.
  

“I don’t think anybody understood back in 2006 when they were going after UBS the full extent to which the DOJ and IRS would pursue this,” said Jeffrey Morse in the report. Morse, a Geneva-based lawyer at Withers LLP, added, “We now live in a world where banks are willing to break local laws if they deem it helpful in defending against the IRS.”

Eric Delissy, who headed the legal department at HSBC’s Swiss unit from 1998 to 2003, said in the report, “We didn’t even have any U.S. clients back then. I feel betrayed.” Delissy said that because his name was among those sent to the U.S., he now expects to be arrested if he travels outside Switzerland.

If you have have Unreported Income From a Foreign Bank or are a one of the estimated 10,000 Former Employees of a Foreign Bank, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax and/or Criminal Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).

Read more at: Tax Times blog

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