by Brian Mahany
Once upon a time, stories like these were big news. Now, they are fairly common place. A few weeks ago, Wolfgang Roessel, age 72, was convicted of filing a false tax return, a felony that carries a sentence of up to 3 years in federal prison. Roessel’s case is interesting because it highlights the dangers of using nominee accounts.
According to court records, Roessel is a U.S. citizen and resident of Florida. He inherited several million dollars in a Swiss account after his mother died in 1999. Rather than repatriate the money or file the required FBAR forms (Report of Foreign Bank and Financial Account), Roessel transferred the account from his own name to a nominee account called Neptune Trust. Prosecutors said he owned and controlled the trust which was registered in Liechtenstein.
They say he also created an International Business Corporation in Belize and used that to open an account as well.
The IRS says that even before his mother died, Roessel had his own unreported Swiss account at Wegelin & Co, Switzerland’s oldest private bank.
Nominee accounts are often used to conceal one’s ownership interest in the account. By using foreign business entities, offshore trustees and titling the accounts in the name of a third party, tax officials have a tougher time identifying the real beneficial owner of the funds. One the government does find out, however, account holders can expect an indictment unless the account was properly reported.
Recently, U.S. prosecutors have begun targeting foreign banks and individual bankers for criminal indictments. These folks usually immediately flip and cut deals with prosecutors in exchange for leniency. Usually those deals include disclosing the names of their U.S. clients.
Although Roessel has not been sentenced yet, published reports say he has already agreed to pay tax and IRS penalties of over $6 million. So much for inheriting a $4 million account. By the time he is released from his sentence, Roessel will probably be broke.
The warning here is to be cautious of using nominee accounts and third parties to disclose your ownership in foreign financial assets. The risk of criminal prosecution is quite high.
Whether or not the IRS directly catches you, one of the highest risks comes from your banker and CPA. As noted above, expect your banker to “sing like a canary” if caught. And contrary to popular opinion, taxpayers don’t enjoy the same type of privilege with their accountant as they do when talking to their attorney.
If you have an unreported account, there is still time to avoid prison and significantly reduce your penalties. For those with nominee accounts, consider the IRS’ offshore tax amnesty program known as the “Offshore Voluntary Disclosure Program” or “OVDI” for short.
Taxpayers that can prove that they didn’t act willfully and didn’t attempt to hide their foreign accounts might do much better with a traditional voluntary disclosure. The risks are higher but if successful, the penalties are much lower.
What should you do? Each case is different of course but finding a good tax lawyer or even a CPA well versed in offshore reporting requirements is a critical first step. Finding a good accountant is a wide investment for future tax returns but we recommend a lawyer if you haven’t filed FBARs in a while and have financial assets overseas.
The tax lawyers at Mahany & Ertl have helped many people with a wide variety of offshore reporting and other tax problems. For more information, contact attorney Bethany Kroes at or by telephone at (414) 223-0464. We represent people across the nation and the world. All inquiries are protected by the attorney client privilege and are kept in strict confidence.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Detroit, Minneapolis and Portland, Maine.