Husband and wife Florida physicians have been charged with conspiring to defraud the United States and the IRS by stashing tens of millions of dollars in unreported foreign accounts. They join Beda Singenberger, a former UBS banker and CPA, who was charged in July of 2011 with the same conspiracy. Singenberger remains at large. Prosecutors say that the three conspired to hide millions of dollars in UBS and other Swiss banks.
Like so many of these cases, the trio created nominee accounts to disguise the paper trail of money. Unless there is a valid business purpose for these third party entities, the IRS views their use an affirmative act of tax evasion.
Nominee entities are a common way of hiding unreported foreign accounts. Instead of opening an account in one’s own name, some taxpayers create trusts, international business corporations (IBC’s) or foreign LLCs an open an account in the name of the new entity. That makes the IRS’ job much more difficult but beginning next year, foreign banks will be required to investigate and report all offshore accounts including those owned by third party entities. FATCA – short for the Foreign Account Tax Compliance Act – requires banks to identify accounts with any connections to the United States.
In addition to not reporting their offshore accounts, prosecutors say that the Dr. Patricia Hough and her husband Dr. David Frederick didn’t report much of the income that was funneled into those accounts. That money was used to purchase an airplane and 3 homes.
Shortly after being indicted this spring, Dr. Patricia Hough filed a motion seeking to have the more serious conspiracy charge dismissed. Last week the court denied the motion meaning she is facing a total of 17 years in prison if convicted of all charges.
The couple’s former banker, Beda Singenberger, remains at large. Like many Swiss bankers facing charges, Singenberger is probably in Switzerland. Although Switzerland won’t extradite, other neighboring nations will meaning that Singenberger is likely to be stuck in Switzerland and unable to travel.
Having unreported foreign accounts is a felony punishable by 5 years in prison for each account and for each year the account isn’t reported. In addition, prosecutors can also charge tax evasion and conspiracy to defraud in many cases. The conspiracy charge has become a new tool in the governments war on tax evasion. While some countries won’t extradite for tax crimes, most will extradite fugitives charged with fraud charges.
An indictment does not mean that anyone is guilty of the charges. All 3 defendants are presumed innocent until proven otherwise.
Have unreported foreign accounts? Give us a call. We can explain your responsibilities and explore your options. Our tax lawyers have helped many taxpayers with a wide variety of foreign reporting problems including the Offshore Voluntary Disclosure tax amnesty program and unfiled FBARs. In many cases it is possible to avoid all or most penalties.
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 about unreported foreign accounts? Our Due Diligence blog has a search engine located in the upper right hand corner. Our website also has an article titled FBAR 101 – Critical Information for FBAR Filers which may answer many of your questions.
Post by Brian Mahany, Esq.