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The IRS and Department of Justice have been cracking down on Americans with unreported offshore accounts. The penalties for not reporting a foreign bank, brokerage or hedge fund account can include prison and a civil penalty of 50% or more of the highest account balance. With a look back period of up to 8 years, those penalties can be severe.

The Bank Secrecy Act and FATCA already require Americans and resident aliens to report their foreign holdings. Compliance, however, has been spotty at best. Many foreign born Americans, ex pats living overseas and dual nationals simply don’t understand the law.

Under the next phase of FATCA, foreign banks will essentially become the eyes and ears of the IRS. Beginning in 2014, foreign financial institutions will be required to review their accounts and report any accounts that ties to the United States. That portion of the law has been immensely unpopular with foreign banks and with taxpayers too. Because some view the new law as so onerous, many foreign banks are simply closing accounts owned by Americans. Thats rough for the thousands of Americans living or retired offshore.

Rand Paul has long been a vocal critic of FATCA. In introducing legislation to repeal portions of the law, Paul said “FATCA is a textbook example of a bad law that doesn’t achieve its stated purpose but does manage to unleash a host of unanticipated destructive consequences. FATCA’s harmful impacts cover the spectrum. It is a violation of Americans’ constitutional protections, oversteps the limits of Executive power, disregards the mutual respect of sovereignty among nations and drains money from the federal treasury under the guise of replenishing it, and discourages overseas investment in the United States.”

While unpopular overseas, it is unlikely that Sen. Paul can gain enough votes to repeal FATCA. Tonight, however, many people are secretly hoping for him to be successful.

We understand that tax evasion is a problem. Unfortunately, the number of tax evaders who deliberately attempt to hide money in secret Swiss numbered accounts is quite small. Many of our clients are dual nationals or recent immigrants –  hard working restaurant owners, physicians, computer programmers and store owners. These are people that have foreign accounts in order to send money “home” to family members. Unfortunately, the IRS often treats both the criminals and non-criminals alike.

According to RepealFATCA.com, a similar version of Sen. Rand’s repeal legislation is also being introduced in the House. Although supported by the banking industry, lobbyists and political analysts on Capitol Hill say the bills have little chance of success.

If you have an unreported account, there are options. The IRS is presently running an amnesty program called the Offshore Voluntary Disclosure Program (“OVDI” or “OVDP” for short). For certain ex pats living overseas, people with account values under $75,000 and those who can prove their failure to report was accidental, other better alternatives may be available.

Whatever you do, don’t wait. Once the IRS obtains your name through a foreign FATCA disclosure or otherwise, all bets are off.

For more information, contact attorney Bethany Kroes at bckroes@mahanyertl.com or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence. Our initial consultation is without cost or obligation.

Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific tax topics, just click the tax tab or type in the name of a particular tax topic such as “foreign accounts” or “FBAR” in the search bar. We have posted hundreds of informative articles on our website.

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Two of the biggest brokerage industry failures last year were Peregrine Financial Group and MF Global Holdings. In August of last year we covered the Peregrine story after the firm’s CEO attempted suicide and left a note confessing to a massive theft from customers. At that time, we questioned why the firm’s auditors weren’t able to detect a fraud that had gone on for years. Now it seems the feds are asking the same questions.

When accountants and auditors fail to properly due their job, accounting malpractice occurs. Usually the malpractice claim refers to a breach of duty between the accountant and his or her client but third parties such as investors can also bring claims.

Almost immediately after the Peregrine fraud came to light, investors who lost money sued the auditor who gave the firm a clean bill of health. Investors say Veraja Snelling could have “easily detected” the fraud with “minimal investigation.” They say the audit company refused to lift a finger to stop or even detect the fraud.

Earlier this month, the Commodity Futures Trading Commission (CFTC) levied accounting malpractice charges against audit firm Tunney & Associates and owner Michael Tunney for its “audit” of Linn Group Inc, a Chicago firm specializing in trading grain futures.

The CFTC says that Tunney, who was paid $18,000 per year for audit work, had no experience with futures firms. Worse, he outsourced the work to another accountant. Ultimately, the feds say that both were guilty of accounting malpractice since neither was able to discover that Linn was commingling customer monies with its own. (Linn paid a fine and is still in business).

While clients of and even shareholders of investment firms have long filed accounting malpractice suits against auditors that were asleep at the wheel, the suit earlier this month by the CFTC marks the first time that regulators have taken an interest in the firms that audit brokerage firms and other financial institutions.

We have long believed that the millions lost in MF Global and Enron were preventable if the accountants charged with auditing the companies simply did their jobs.

The audit system is broken. Auditors and accountants find themselves in a “Catch 22″. If they fail to give their client high marks they run the real risk of losing the client. Who wants to pay for failing grades? Yet if they do’t tell the truth, investors and customers may sue for accounting malpractice.

If you lost money to a Ponzi scheme, investment fraud or dishonest stockbroker, you probably have a claim. Unfortunately, fraudsters often disappear or spend lengthy sentences in prison. It’s possible to win a judgment but not collect any money.

Successful fraud recovery lawyers find responsible third parties that can be held responsible for losses. That includes filing accounting malpractice actions against auditors that gave a clean bill of health to a company rife with fraud. Not every fraud is easy to detect. Auditors will never have 100% accuracy but should be able to pick up widespread systemic fraud. Particularly if the fraud has been going on for years.

The accounting malpractice lawyers at Mahany & Ertl  have helped businesses and individual recovery millions in damages. For more information, contact attorney Brian Mahany at brian@mahanyertl.com or by telephone at (414) 704-6731 (direct). All inquiries protected by the attorney – client privilege and are held in strict confidence.

Mahany & Ertl – America’s Tax and Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many locations.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific topics, just click the tax or fraud tab or type in the name of a particular topic such as “accounting malpractice” in the search bar. We have posted hundreds of informative articles on our site.

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Earlier this week the Pennsylvania Supreme Court refused to dismiss a $500 million legal malpractice case against AmLaw 100 firm, K&L Gates. That decision paves the way for the case to head to trial.

The firm was sued years ago by a bankruptcy trustee on behalf of Le-Nature, Inc. The company filed for bankruptcy after a massive internal fraud caused that company to go under. The trustee says that K&L Gates and an accounting firm were negligent in their work investigating the possible fraud. The former president of Le-Nature, Gregory Podlucky, is currently serving a 20 year prison sentence for his role in the company’s collapse.

The trustee says K&L Gates is guilty of legal malpractice. The law firm was hired by an audit committee of the company. A state court judge originally threw out the case saying the trustee did not have standing to bring the claim as the audit committee hired the firm, not Le-Nature. That decision was overturned last May by a 3 judge court of appeals. The firm then appealed that decision to the Pennsylvania Supreme Court.

By refusing to review or reverse the appeals court, the Supreme Court in essence ruled that the legal malpractice can go forward. K&L Gates denies any wrongdoing.

This isn’t the first time the law firm finds itself accused of legal malpractice. Last year in a high profile political case the firm was also sued, that time for an alleged conflict of interest.

With almost 2000 lawyers, the firm is bound to collect some bad press now and then. A case accusing the firm of a half billion dollar loss, however, may spell the demise of the firm. According to a recent article in published by the American Bar Association, many of the biggest firms are already on shaky footing.

Ultimately, we believe the model of how legal services are delivered is changing. We think the days of the mega “BigLaw” firms are numbered. Ironically, however, not for the reasons identified in the Le-Nature complaint. In most instances, we find the big firms in trouble because of billing issues or conflicts of interest and not substandard work.

We know several lawyers at K&L Gates and think their work product is excellent. We simply feel that legal services can be delivered better and for less than half the cost by speciality boutique and virtual firms.

Whether or not the firm is breached its duty of care to Le-Nature will probably be decided after a trial. At this point, the courts have only ruled that the trustee’s claims can proceed.

If you believe that you have received less than adequate representation by a lawyer, accountant or other professional, call us. We are one of the few law firms willing to pursue legal malpractice cases. For more information, contact attorney Brian Mahany at brian@mahanyertl.com or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege.

Want to learn more, visit our Due Diligence blog for hundreds of tax, fraud and legal malpractice stories. Click the “legal malpractice” tab or use the convenient search feature in the upper right hand corner.

Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many jurisdictions.

[Ed. Note: This post was originally posted on the Guerilla Law Firm Blog, our newest blog that features stories about the high cost of legal services, the trend away from traditional law firm models and the future of law.]

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The National Law Journal conducts a yearly survey of attorney billing rates. For the 2012 annual survey, the NLJ sampled 55 of the largest law firms in the United States. The results were disappointing.

While American businesses struggle and are just beginning to see real signs of recovery, the caviar and champagne continues to flow freely at “BigLaw.”

Between 2011 and 2012, the median hourly billing rate for the large firms increased from $410 to $432. The median partner rate also increased slightly, now up to a mere $517 per hour. With some partners routinely billing at $1000 or more, it amazes us that businesses continue to pay these rates.

We were amused to see the median associate rate – typically lawyers with 7 years or less experience – is just about at our partner rate of $350.  (According to data from the American Bar Association, tax partners – our nearest competitors – charge on average over $600 per hour.)

For years, the nations top 100 firms typically set the standard for billing rates. That may soon be changing, however. As business clients demand greater accountability, we believe the large law firm model will soon fail. Boutiques and virtual law firms can now offer the same or better service and at half the cost.

Our firm, for example, can maintain partner rates consistently below the national averages by eliminating overhead and unprofitable business areas. We are full service but don’t try to offer every service. We look for the best lawyers and keep them where they are located and use technology to build our firm and connect our teams.

Like what you are reading? Our Guerilla Law Firm Blog is new and welcomes submissions from businesses and lawyers. We hope to use these pages to explore the high cost of legal services, the end of traditional law firm models and fees and discuss the future of law. Even are competitors are welcome to post. Wish to remain anonymous; just tell us when you are writing and we will honor your wishes.

Think about joining our LinkedIn group Virtual Law as well. It’s brand new as well. We hope to offer a forum for virtual boutiques and clients to exchange ideas and find answers to their questions.

For more information, contact attorney Brian Mahany at brian@mahanyertl.com or by telephone at (414) 704-6731 (direct).

Mahany & Ertl – America’s Tax & Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many jurisdictions.

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[Ed. Note: This post, and may just like it, appeared in our sister Guerilla Law Firm Blog. That site looks at the practice of law. It also explores the benefits in expertise and costs that law firm boutiques and virtual firms offer. Bookmark that site and visit often!]

There have been plenty of class action lawsuits filed in the wake of the 2008 financial crisis. Mortgage backed securities, toxic debt, mortgage defaults, credit default swaps, LIBOR fixing and even suits against rating agencies such as Standard & Poor’s. Just about every big law firm has their fingers in the pie. Some, however, may have become to greedy.

In 2007, a group of Citigroup shareholders sued the bank for allegedly hiding the truth about mortgage-backed securities. Kirby McInerney (KMLLP) was the firm hired by the investors. A well respected, well heeled firm that dates back to just after World War II, KMLLP has a history of successful big securities litigation.

The Citigroup case was ultimately settled for $590 million. For its work, the firm asked for a whopping fee of $100 million. One of the class members has now objected to the fee request. He claims that the firm marked up work by temporary workers by as much as 20 times.

According to a story published by law.com, some temporary workers were billed at $275 to $500 per hour. (If true, we can only imagine the hourly rate of associates and partners.) William Ruane, a former general counsel at Wyeth Pharmaceuticals, was quoted as saying the fees were “outrageous.”

Like us, Ruane believes the hourly rate model should be dead. “There are a lot of inefficiencies in the hourly billing system. And the whole trend for the past 10 years or longer for clients who pay for their own legal work is to reduce the cost of that,” said Ruane.

We believe that not only are hourly rates headed for extinction but so are the traditional BigLaw institutions that rely on those rates. Hourly billing is not efficient, does not reward great results and provides no incentives for firms to keep billings within reason.

Mahany & Ertl – America’s Tax and Litigation Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California.

If you want more information about us or what we can do, visit our Mahany & Ertl or better yet, give us a call. Managing partner Brian Mahany can be reached at brian@mahanyertl.com or by telephone at (414) 704-6731 (direct).

Like what you read? Consider joining our new LinkedIn group, Virtual Law. We hope to offer a place for boutique and virtual lawyers to interact with one another and clients. Contributions to this blog or Virtual Law gladly accepted. When writing to submit a guest post, just let us know if you wish your blog post to be anonymous.

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A former CPA and banker at Deutsche Bank AG was sentenced to 3-1/5 years and ordered to pay $115,700,000 for his role in helping clients evade taxes. David Parse will have to serve about 3 years before eligible for early release. He was convicted of mail fraud and obstruction charges.

Prosecutors say he steered clients into bogus tax shelters that he helped create. He then helped those same customers avoid detection by the IRS. For his efforts he made $3 million but must pay many times that in restitution. The restitution figure represents lost tax revenues.

The IRS and Department of Justice has not flinched when it comes to prosecuting bankers, lawyers and accountants. This case was no exception and was part of one of the largest tax evasion conspiracies in history. Interestingly, the jury acquitted Parse of the conspiracy charges.

Parse was involved with former law firm giant Jenkens & Gilchrist. At one time, that firm had 600 lawyers. After a number of malpractice suits tied to the phony tax shelters, the firm folded and ultimately paid a $76 million fine to the IRS.

As is common in most criminal tax evasion cases against bankers and accountants, the IRS ultimately gets the client lists. That is bad news for the many businesses and people who participated in these abusive tax shelter transactions. Although Parse elected to go to trial, most bankers immediately turn over their client lists and agree to cooperate in return for a reduced sentence.

After the sentencing, United States Attorney Preet Bharara said, “David Parse used his professional acumen to help his wealthy clients make an end-run around the IRS, depriving the treasury of billions in tax revenue. And for his role in this sprawling and massive fraud, he is now paying the price.”

A Deputy Assistant Attorney General for the Department of Justice expressed similar thoughts. “Today’s sentencing reflects the Justice Department’s continuing commitment to the investigation and prosecution of accountants and other professionals who promote fraudulent tax shelters. The sentence imposed is a clear warning that those who commit such frauds risk significant jail time and other criminal sanctions.”

Four lawyers from the former Jenkens firm were previously convicted and are appealing.

The messages from this case are clear. Financial professionals who promote illegal tax shelters will be prosecuted. The hidden message is Justice’s drive to use the professionals to gain access to the clients participating in these schemes. We have seen many criminal prosecutions of bankers involved in setting up unreported foreign accounts or offshore accounts formed in the name of a fictitious entity (“nominee accounts”).

The tax shelters involving Parse were extremely large and attracted very wealthy taxpayers. Much more common are illegal welfare benefit plans set up under section 419 or 412 of the Internal Revenue Code. We have seen an uptick in phony captive insurance plans as well.

If you are the victim of a fraudulent tax shelter or nonconforming 419 plan, give us a call. Our tax fraud lawyers have helped taxpayers unwind these plans, negotiate penalty abatements with the IRS and even sue the promoter (insurance agent or stockbroker) selling these plans.

For more information, contact attorney Brian Mahany at brian@mahanyertl.com or by telephone at (414) 704-6731 (direct). All inquiries protected by the attorney – client privilege and are held in strict confidence.

Mahany & Ertl – America’s Tax and Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Services available in many locations.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific topics, just click the tax or fraud tab or type in the name of a particular topic such as “accounting malpractice” in the search bar. We have posted hundreds of informative articles on our site.

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While everyone makes mistakes from time to time (including attorneys), civilized society has no room for thieves. This is especially true for lawyers who take an oath of office to uphold justice. Earlier today, the Wisconsin Lawyers’ Fund For Client Protection Committee announced that 17 victims were receiving checks from the state to reimburse them for some of their losses.This process is repeated throughout the United States every month.

Most lawyers carry malpractice insurance to cover them in case they make an error. Missing a deadline, filing the wrong form or trying to practice in an unfamiliar area of law are frequently the cause of malpractice claims. Insurance, however, does not cover outright fraud or theft.

Fortunately, most states have a client protection fund for such events. Typically the size of the payments that can be made is quite limited. That means that a $500,000 loss may only yield a $20,000 check.

The cases announced in Wisconsin today almost all involve fees charged to clients but for which no work done. When a lawyer simply takes the money and runs, that is considered theft. One of the lawyers in today’s announcement also is alleged to have taken money from an estate. Stealing from the dead, in other words.

Typically when a state client protection fund pays a claim, the lawyer is not long for the profession. Stealing and fraud can get you disbarred. Making a costly mistake, however, usually doesn’t mean the lawyer’s license to practice law is effected.

Unfortunately, very few lawyers are willing to handle legal malpractice cases. Often the defendant is friends with lawyers in the area. While no one obviously wants to be labeled as a thief, sadly many lawyers also don’t want a reputation for suing colleagues.

If a lawyer has botched your case, contact a legal malpractice lawyer right away. Very often malpractice insurance companies won’t renew the lawyer’s policy if they know a lawyer is having problems. By waiting, you may find the insurance is gone or already claimed by another victim.

If you think your lawyer has stolen from you or done something illegal, contact the state bar. There may be a client security fund that can provide some relief.

The legal malpractice lawyers at Mahany & Ertl have represented victims (clients) of bad lawyers and accountants throughout the country. We are one of the few law firms willing to sue other professionals for malpractice. Often there is a code of silence within the profession. Not with us. If you feel like another lawyer, accountant, insurance agent or other professional has defrauded you or provided substandard service, give us a call. All inquiries are kept in strict confidence.

For more information, contact attorney Brian Mahany at brian@mahanyertl.com or by telephone at (414) 704-6731 (direct).

Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Legal malpractice services available in many jurisdictions.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific fraud topics, just click the fraud recovery or legal malpractice tabs or type in any key words such as “legal malpractice” or “accounting malpractice” in the search bar. We have many informative articles on our site.

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As the Dow Jones industrial index pushes new highs and comes off the longest winning streak in 17 years, I paused to think today why our phones continue to ring off the hook with new fraud claims. When the markets and economy collapsed in 2007 & 2008, many Ponzi schemes were exposed. Desperate people do desperate things so the rise in fraud crimes wasn’t surprising. Today, however, the housing market is on the mend. The stock market has also recovered and then some. So why does economic crime continued unabated?

Some would argue that capitalism is broken or not the answer. I disagree. It’s human greed. The rich get richer not because of some fundamental flaw with our economic system. They get richer because of greed and avarice.

How Pope Francis and the Roman Catholic Church will survive the next several generations remains to be seen but I was gratified to hear in his opening remarks that the Church needs to be “for the poor.” This is the same Pope who took a bus and paid his hotel bill in person. The Pope’s humility is a lesson for us all.

We are fraud and tax lawyers and don’t think for one second that we have all the answers to the world’s problems. How society and government meets the challenges of our economy is of critical importance, however. As lawyers, we are committed to eliminating injustices and leveling the playing field. That means routing out corruption and holding fraudsters and businesses that go astray accountable.

Unfortunately, many politicians are susceptible to the same insatiable greed for riches and power that motivates corporate criminals. Luckily, we live in a society where juries composed of ordinary Americans have the final word.

As long as we have concerned citizens that are willing to come forward, honest judges and folks willing to serve on juries, we still have a chance. Mahany & Ertl is honored to represent whistleblowers and help in the fight against greed, fraud and corruption.

If you have information about a fraud against the government or taxpayers or have been the victim of a fraud yourself, give us a call. We specialize in whistleblower cases under the false claims act and cases against stockbrokers, accountants, lawyers, and large banks.

For more information, contact attorney Brian Mahany at brian@mahanyertl.com or by telephone at (414) 704-6731 (direct). All calls are protected by the attorney – client privilege and kept in strict confidence.

Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. Fraud recovery available in many jurisdictions.

Need more information? Our Due Diligence blog has a search engine located in the upper right hand corner. For more information on specific fraud topics, just use the “fraud recovery” tab or type in key words such as “bank fraud” or “whistleblower” in the search bar. We have many informative articles on our site.

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