We have blogged about important cases related to crackdown on offshore accounts, involving US taxpayers and foreign bankers. In a recent case, the government prosecuted two tax return preparers with offices located in California, Maryland and New York, for assisting wealth clients to hide millions of dollars in Israeli Banks.
David and Nadav Kalai, father and son, were sentenced in Los Angeles, to 36 and 50 prison sentences, respectively, for facilitating an offshore tax fraud scheme and conspiracy to defraud the Internal Revenue Service. An alleged co-conspirator, David Almog, who was also charged for conspiracy, remains a fugitive. The Kalais advised and assisted their high net-worth clients in concealing millions of dollars of assets and income in secret foreign bank accounts and filing false federal income tax returns. They also maintained a secret offshore account of their own at Bank Leumi in Luxembourg in the name of a foreign sham corporation and failed to disclose the account to the IRS or the U.S. Treasury.
The Kalais were owners of United Revenue Service Inc. (URS), a tax return preparation business with 12 offices located throughout the United States. Evidence at trial established that they purposefully prepared false individual income tax returns for their URS clients that did not disclose the clients’ foreign bank accounts nor report the income earned from those accounts. In order to conceal the clients’ income, ownership and control of assets from the IRS, the Kalais incorporated offshore companies in Belize and other countries, and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, Bank Leumi and Bank B. Three of Kalais’ former clients who testified at the trial have also pleaded guilty to tax felonies. Alexei Iazlovsky, a client of URS and Nadav Kalai, pleaded guilty in U.S. District Court in Los Angeles to signing and filing a false federal income tax return for tax year 2008, failing to report a total of $2.6 milliion in untaxed gross receipts. Moshe Handelsman pleaded guilty in U.S. District Court in San Jose, California, to signing and filing a false income tax return for the 2007 tax year, with approximately $1.47 million sent offshore during 2003-2007 tax years. Baruch Fogel pleaded guilty in U.S. District Court in Los Angeles to failing to file an FBAR declaring his Bank Leumi account in Luxembourg, and admitting to the scheme involved obtaining $8 million in loans from Bank Leumi USA and transferring that money through one or more of Fogel’s U.S. businesses to Fogel’s Luxembourg bank account, thus, creating a fraudulent deduction on the tax return.
According to the statements made by the Assistant U.S. Attorney and IRS Criminal Investigation agent, the government will continue to aggressively prosecute financial professionals like the Kalais, who assist U.S. taxpayers in concealing assets offshore and evading their tax obligations.
Undisclosed foreign accounts continue to represent high risk for those U.S. taxpayers who have not availed themselves to the Offshore Voluntary Disclosure Procedure, which allows taxpayers to avoid criminal prosecution. With more and more banks cooperating with the U.S. government, account holders who have not made steps to come into compliance will continue to run a risk of criminal prosecution, with hefty fines and long prison sentences. Former IRS Attorneys of Holtz, Slavett & Drabkin have successfully resolved many offshore account cases and can assist you with developing an appropriate defense strategy. To schedule your consultation, please call us at (310) 550-6200.