Ohio Attorney Convicted of Tax Fraud for Failure to Report Foreign Accounts
On April 20, 2012, the U.S. Department of Justice and the Internal Revenue Service announced that an Ohio attorney Aristotle “Rick” R. Matsa was convicted of tax fraud and obstruction of justice related offenses, including witness tampering, making a false statement, conspiracy to obstruct justice, commit perjury, and make false statements. The conviction followed a five-week trial in Columbus, Ohio.
According to the indictment and the evidence at trial, Rick Matsa created and operated several nominee entities in order to disguise and conceal his income and assets from the IRS. The false trust return charges relate to filings for at least five separate trusts during the period of 2003 to 2005. Each of the trusts reported receiving significant amounts of interest income each year, generated from funds held in numerous bank accounts, yet no income tax was reported due as a result of fraudulently claimed deductions for distributions to purported foreign beneficiaries, whereas Matsa was the true beneficiary of the funds. The evidence at trial also showed that Matsa violated the foreign bank account reporting requirements by failing to disclose his ownership and control over a foreign bank account held in the Netherlands. The evidence at trial was that Rick Matsa maintained more than $300,000 in funds in that undisclosed foreign bank during 2003.
In the statement made by the Assistant Attorney General for the Tax Division, the government said that “those who illegally attempt to hide their income and assets from the IRS through fraudulent trusts or offshore bank accounts will be prosecuted and punished.” Rick Raven, Acting Chief for the IRS Criminal Investigation said that the IRS will not tolerate abusive tax schemes that use offshore accounts to illegally escape taxes. Rick Matsa faces a maximum potential sentence of 108 years imprisonment, a fine of up to $3.25 million, and five years of supervised release.
This case is another example of the government’s efforts to crack down on the offshore tax evasion and enforce FBAR rules. Although not every case where a foreign bank account was not properly reported bears a high risk of criminal prosecution, those type of situations are very sensitive and taxpayers with undeclared foreign bank accounts are encouraged to consult tax attorneys in order to evaluate their options.
Rand Paul Seeks to Block Tax Treaty Change on Swiss Accounts
In another development, Senator Rand Paul is trying to block an amendment to a U.S.-Swiss tax treaty, thus, slowing Switzerland’s handover of data on thousands of Americans with Swiss bank accounts hidden from the IRS. The protocol, which was negotiated in September 2009, would amend a 1996 treaty and make it more difficult for Switzerland to refuse requests from the IRS for tax information about U.S. customers of Swiss banks.
Under the current treaty, the Swiss can grant a U.S. request seeking data only as it relates to a taxpayer suspected of “tax fraud and the like,” which involves acts such as using false documents or third parties to disguise account ownership. The Swiss won’t hand over data if taxpayers are suspected of tax evasion. Under the new U.S.-Swiss protocol, Swiss officials would be allowed to hand over account data to the U.S. upon a request without specifying taxpayers by name.
Paul said that the protocol is too “sweeping” and would threaten protections under the Fourth Amendment to the U.S. Constitution, which guards against unreasonable search and seizure. Paul said he is exercising his privilege to delay a Senate vote. Paul’s stand could require Democrats who control the Senate to spend a week of floor time before voting to ratify the protocol, which requires assent by two- thirds of the senators.
Former IRS Trial Attorneys of Holtz, Slavett & Drabkinare available to assist you with the issues related to offshore assets and foreign accounts. To arrange for a consultations, please contact us at (310) 550-6200.
Copyright (c) 2012 Igor S. Drabkin. All Rights Reserved.