Peter Canale is charged with conspiracy to defraud the IRS. The allegations date back to 1993. The indictment didn’t happen until 2014 and was filed in Manhattan. According to the Peter, that is when Peter and his brother Michael allegedly conspired to hide money they inherited from their deceased father.
Last month Canale’s lawyer filed a motion to transfer venue to Kentucky. Although the court proceedings focus on venue, the case is also important for statute of limitations purposes.
Just How Long Does the IRS Have to File a Criminal FBAR Case?
The normal statute of limitations is six years. If you listen to Peter’s lawyers, the last alleged overt act in furtherance of the criminal conspiracy last occurred in 2001 when Peter and Michael met with a Swiss financial consultant named Beda Singenberger and a UBS client advisor from Switzerland, Hans Thomann. The feds believe that Singenberger met with the brothers in New York and helped them hide their money offshore.
If you have an unreported foreign account, it is easy for prosecutors to get around the traditional 6 year statute of limitations.
The Bank Secrecy Act requires all foreign accounts to be reported every year if the aggregate balance of all offshore accounts exceeds $10,000. Reporting is done on a report of Foreign Bank and Financial Account (“FBAR”) as well as on Schedule B of the income tax return. Even if an account was opened 30 years ago, it must be reported every year.
Failing to report dividends or interest on foreign accounts is also illegal. Each year is a new violation. Filing a false tax return is a felony and can keep a conspiracy charge alive as well. Prosecutors often say that the failure to properly report is also an act in furtherance of an ongoing criminal conspiracy (meaning yet another possible charge.)
Venue was proper in New York
Any improper tax returns were likely prepared in Kentucky where Peter lives. His lawyer argues the only allegation in the entire indictment connecting the case to New York is the single meeting Peter allegedly had with Singenberger and his company Sinco Treuhand AG, a meeting that took place over a decade ago. Because the case was charged as a conspiracy, however, the government has the ability to file the complaint in any jurisdiction where “an overt act” in furtherance of the conspiracy took place.
The lessons in this case are several.
First, every year that a taxpayer fails to file a required FBAR is a crime. Every time a taxpayer fails to disclose a foreign account on Schedule B of the tax return is also a potential crime. Failure to report income from a foreign account is yet another possible criminal charge.
Even if the prosecutors are correct and show that an illegal account was opened decades ago, the ongoing failure to disclose the account and income from the account is itself criminal.
Trying to move the case to more friendly turf also fails if prosecutors have done their homework and can demonstrate some action or activity in the jurisdiction where the crime is charged.
The bottom line? Don’t think after 6 years an undisclosed foreign account is immune from prosecution. It probably isn’t. Prosecutors often have the upper hand in deciding where to bring the case as well.
If you have an unreported foreign account, take immediate action. The IRS has become extremely efficient at ferreting out unreported accounts. Bank secrecy and tax haven jurisdictions are now virtually nonexistent. Those that still do exist are probably not the safest place to put your hard earned money.
Penalties for willful failure to file an FBAR can include prison or up to 100% of the highest historical account balance.
Need more information? Our consultations are free and without obligation. Our FBAR and foreign account reporting services are offered worldwide.
For more information, contact attorney Beth Canfield at or by telephone at (414) 223-0464. All inquiries protected by the attorney client privilege and kept completely confidential.
MahanyLaw – America’s FBAR Lawyers