Yearly Archives: 2018

According to Law360, New York federal prosecutors announced the indictment of a lawyer and three other men on December 4, 2018 on charges of wire fraud, tax evasion and money laundering, tying the case to the 2016 leak of documents from the law firm Mossack Fonseca called the Panama Papers.

Law enforcement officials described the charges against attorney Ramses Owens, who remains at large, and investment manager Dirk Brauer, accountant Richard Gaffey and businessman Harald Joachim von der Goltz, all of whom have been arrested, as a warning to would-be tax criminals and those who would help them. The defendants could face decades in prison.

“Law firms, asset managers and accountants play key roles enabling entry into the global financial system,” Assistant Attorney General Brian Benczkowski said in a statement.  

According to the government, Owens and Brauer, who worked for a firm called Mossfon Asset Management SA with close ties to Owens’ law firm, have spent decades helping U.S. citizens avoid their tax obligations. One such client was von der Goltz, although four other unnamed clients are referred to in the indictment. Gaffey allegedly helped von der Goltz and at least one other client of of Mossack Fonseca.

With help from Mossack Fonseca, the government claims, clients like von der Goltz used shell companies in offshore jurisdictions with strict financial secrecy laws that were technically owned by sham foundations to hide untold amounts of money from the IRS. Von der Goltz falsely told prosecutors that his 102-year-old mother, who lives in Guatemala, was the beneficial owner of companies linked to him, the government claims.

The defendants, who range in age from 50 to 81, face a total of 11 counts. Two of the counts are against von der Goltz alone for allegedly providing false statements to the government after an unnamed representative of a U.S. law firm reached out to the U.S. Department of Justice after the Panama Papers disclosure and offered to set the record straight, according to the indictment.

Authorities said the investigation was a joint effort of investigators at the IRS, the FBI and the U.S. Department of Homeland Security.
 

said Don Fort, who leads the tax agency’s criminal investigations unit. “Cases like this help maintain the public’s confidence in our tax system by letting them know that we investigate and prosecute those who evade their tax obligation.” The case is U.S. v. Owens et al., case number 1:18-cr-00693, in the U.S. District Court for the Southern District of New York.

 



IRS deputy commissioner for services and enforcement Kirsten Wielobob issued a memorandum on November 20, 2018 that the IRS posted publicly Thursday, November 28, 2018, which outlines the process for all voluntary disclosures following the closing of the IRS’s Offshore Voluntary Disclosure Program on Sept. 28, 2018. She noted in the memo that the 2014 OVDP began as a modified version of the OVDP that launched in 2012 after earlier programs in 2009 and 2011. 

Voluntary disclosure is a long-standing practice of the IRS to provide taxpayers with criminal exposure a means to come into compliance with the law and potentially avoid criminal prosecution. See I.R.M. 9.5.11.9. This memorandum updates that voluntary disclosure practice. Taxpayers who did not commit any tax or tax related crimes and do not need the voluntary disclosure practice to seek protection from potential criminal prosecution can continue to correct past mistakes using the procedures the updated Voluntary Disclosure Program or by filing an amended or past due tax return. When these returns are examined, examiners will follow existing law and guidance governing audits of the issues.
“These programs were designed for taxpayers with exposure to potential criminal liability or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets,” Kirsten Wielobob wrote.

The new procedures are effective for all disclosures after Sept. 28, 2018. The penalties have continue to increase, since the original OVDI program began in 2009.
 

The process begins with taxpayers requesting “pre-clearance” for participation from the agency’s Criminal Investigation Division, after which civil examiners determine tax liabilities and penalties. The civil penalties, which may be assessed for fraud or the fraudulent failure to file income tax returns, could be higher than what would have been assessed under the old Offshore Voluntary Disclosure Program that the IRS ended Sept. 28.

For all cases where CI grants preclearance, taxpayers must then promptly submit to CI all required voluntary disclosure documents using a forthcoming revision of Form 14457. This form will require information related to taxpayer noncompliance, including a narrative providing the facts and circumstances, assets, entities, related parties and any professional advisors involved in the noncompliance.

Once CI has received and preliminarily accepted the taxpayer’s voluntary disclosure, CI will notify the taxpayer of preliminary acceptance by letter and simultaneously forward the voluntary disclosure letter and attachments to the LB&I Austin unit for case preparation before examination. CI will not process tax returns or payments.  

The updated Voluntary Disclosure Procedures also provide for various outcomes depending upon the extent of taxpayers’ cooperation with the IRS.

 

According to Law360, a Manhattan federal judge sentenced English lawyer Michael Little to 20 months in prison on November 20, 2018 for helping the children of a deceased investor dodge taxes on their $14 million inheritance over a decade and for failing to pay his own taxes, ruling also that the former Royal Marine lied as he testified in his own defense.

U.S. District Judge P. Kevin Castel ordered Little, 68, to report to federal prison on Feb. 19. The sentence came in well below a request by prosecutors for a prison term in the range of 10 to 12 years as contemplated by official guidelines.

Judge Castel held off on the government’s request to order Little to pay roughly $4.4 million of restitution. Little contests the amount, and the matter will be briefed in coming weeks.

The judge did find that Little lied repeatedly on the witness stand during his trial earlier this year. A jury convicted Little on 19 criminal counts on April 10, finding:

• he obstructed the IRS,
• conspired with the family of deceased investor Harry Seggerman to file false tax returns from 2001 to 2010,
• failed to report foreign bank accounts, and
• failed to file his own taxes from 2005 to 2010.

Among other lies Little told the jury, he said he did not enter into a conspiracy with the Seggermans, prosecutors said in a court filing after the verdict. That contention was adopted by Judge Castel, who found Little also lied when he told the jury he had had no intention to break the laws of the U.S.

Prosecutor Christopher DiMase said Little’s conduct amounted to “an egregious pattern of lies and deception.”

Acting as his own counsel, as he did at trial, Little pushed back against many of the prosecution’s characterizations of his conduct during the lengthy sentencing hearing, which stretched over three hours.

“I am being blamed for their misdeeds,” Little said of the Seggerman family.

Four of Harry Seggerman’s children, all government cooperators who have admitted guilt, took the stand during the trial to testify against Little. That included Seggerman’s daughter Yvonne Seggerman, who told the jury that Little was present at a 2001 meeting at the Four Seasons hotel in Manhattan when a plan to avoid paying the IRS was crafted.

“They will pay for their crimes at the time of their sentencing,” Judge Castel said, calling both Little and the Seggerman family “tax cheats.”

Little had asked for a non-prison sentence, saying his legal saga has “broken” his health and telling Judge Castel that he suffered a heart attack on July 1. Little also said in court filings that he has reported all income to British tax authorities.

But the prosecution noted Tuesday that he did not do so until after he was criminally charged. Little was arrested in May 2012.

Little said at the end of Tuesday’s hearing that he intends to file an appeal.

The case is U.S. v. Little, case number 1:12-cr-00647, in the U.S. District Court for the Southern District of New York.