Lush Caribbean islands, secret unreported Swiss accounts, tens of millions of dollars and a husband who disappears into the night. Is this the plot of a new best seller suspense novel? No! It’s some of the events unfolding in a Ft. Myers federal court room where prosecutors say that Patricia Hough conspired to defraud the IRS and filed false tax returns.
According to her indictment, Patricia Hough was a medical doctor living in Florida. She and her husband owned or controlled two medical schools located in the Netherlands Antilles and the West Indies. The IRS says that the schools were ultimately sold in 2007 and the couple pocketed $34 million. They say the money ended up in an unreported Swiss account at UBS bank.
Not so says Dr. Hough. She claims that the money belonged to the foundations that operated the schools. What does her husband say? He hasn’t been seen since the indictments were unsealed in May.
The case is quite complex, meaning a trial that could last for weeks. The indictment lists many nominee entities allegedly created by the couple with accounts in Switzerland and Liechtenstein. The IRS takes a particularly dim view of nominee entities that have no apparent business purpose. Frequently tax evaders create offshore entities in a third party name to hide the trail of money. Press reports quote Assistant U.S. Attorney Leigh Kessler telling jurors, “You will see evidence that these nominee accounts served no business purpose other than to hide the income of the defendant and [her husband] David Fredrick.”
The feds also claim they have emails from the couple that discuss avoiding disclosure. If so, Hough might not be able to place the blame on her missing husband.
Since 2008, the IRS has filed criminal charges against dozens of Americans with unreported foreign accounts. Federal law requires taxpayers to report foreign financial accounts on an FBAR form ( Report of Foreign Bank and Financial Accounts). Failure to file an FBAR is a felony.
In this case, the IRS charged the couple with other felonies including conspiracy to defraud the IRS and filing false tax returns. The missing FBARs, however, will still play into the penalty phase. The civil penalty for willful failure to file an FBAR is 50% of the highest account balance for each year the account was not reported.
The indictment claims that the couple had help opening the accounts from a Swiss CPA, Beda Singenberger and a UBS banker. The Justice Department frequently targets bankers, lawyers and accountants associated with the opening of the foreign accounts. These folks will often cooperate and turn over their client lists in return for a lighter sentence or deferred prosecution agreement.
An indictment is only an accusation. Hough’s trial is likely to last at least a week or more.
If you are one of the millions of Americans with unfiled FBARs, seek legal help. Although the risks of criminal prosecution are small, the chances of being saddled with huge civil penalties are quite high. (Even if Hough is acquitted, she still faces the FBAR penalties.)
If you have an unreported foreign bank, brokerage, annuity or precious metals account, speak with one of our experienced FBAR lawyer immediately. The risk of prosecution, prison and penalties are too great to try and handle by yourself. There are many alternatives including a streamlined reporting procedure for Americans living overseas, an amnesty program (Offshore Voluntary Disclosure Program) and traditional voluntary disclosure options. You must act quickly, however, as amnesty is off the table if the IRS finds you first.
To speak with a lawyer and learn more information about your options and responsibilities, contact us today. Our team of IRS lawyers has helped taxpayers across the world with FATCA and FBAR problems. We usually offer flat fees for our services. Because we handle many of these cases, we can offer our services for less cost than many other tax lawyers.
Post by Brian Mahany, Esq.