Doc Pleads Guilty to Unreported Bank Leumi Acct (IRS Whistleblower Post)

[Updated May 2018 to include sentencing and information on IRS Whistleblower Program.] Earlier this month, a physician from Laguna Beach, California pleaded guilty to Willful Failure to File an FBAR form (Report of Foreign Bank and Financial Accounts). As a result of his guilty plea, Dr. Baruch Fogel faces 5 years in prison when sentenced later this year in July.

U.S. taxpayers with $10,000 or more in a foreign bank account must annually report those accounts to the IRS. Reporting is done on the individual income tax return and on an FBAR. Willful failure to file an FBAR is a felony. In addition to possible imprisonment, FBAR violations carry steep civil penalties. The IRS routinely imposes penalties up to the greater of $100,000 or 50% of the highest historical account balance. Penalties can be imposed for each year an account wasn’t properly reported.

The criminal complaint says Fogel had $2,500,000 in an offshore account at Bank Leumi, an Israeli bank. The account was located in Luxembourg. Press reports say that his offshore accounts may at one point been as high as $8 million.

Like many others with offshore accounts, Dr. Fogel was born outside the United States. Originally a citizen of Israel, Fogel moved to the United States in 1984. In 1991, Dr. Fogel hired United Revenue Service (URS) to help him with his taxes. That is noteworthy because another URS customer with an account at the same Luxembourg bank was recently convicted of filing a false tax return.

Fogel’s plea agreement said that URS charged as much as $100,000 per year to prepare his taxes, an obvious red flag.

URS helped Dr. Fogel open a new account in the name of an offshore corporation. Creating nominee entities with no valid business purpose is considered an affirmative act of tax evasion if the account is used to hide money from the government. In this case, however, there was much more.

The plea agreement says that URS assisted Fogel in a complex series of transaction designed to show a phony business deduction of $4 million. Reading between the lines, it appears that URS helped Fogel not only hide hs money but evade taxes on his income as well.

Although court records do not identify the Israeli bank in Luxembourg, it is widely believed that the bank is Bank Leumi. Both Bank Leumi and URS are reportedly under investigation by the IRS and Justice Department. Taxpayers with unreported accounts at Bank Leumi or that have foreign accounts set up by URS are strongly urged to seek legal representation immediately.

Dr. Baruch Sentenced for Failure to Report Offshore Account

Dr. Baruch got luck and only received a sentence of 2 years probation. But was it worth a felony conviction?

Why did Dr. Baruch get so lucky? We think it is because of his clean record and the fact that he didn’t owe that much tax. In fact, the IRS said that based on his income he only owed $44 additional for 2009. Was it worth becoming a convicted felon over 44 bucks? Of course not.

There is more to the story, however. Much more.

At the time the government stumbled across Dr. Fogel and his unreported Bank Leumi account, they were just beginning to investigate URS. In the words of the government,

The government first learned of defendant [Dr. Fogel] when his name appeared on an “OFFSHORE CORPORATIONS” list and other documents that were seized from the offices of United Revenue Service, Inc. in March 2011. At that time, David Kalai and Nadav Kalai were under investigation for assisting U.S. taxpayers with opening foreign bank accounts in the names of nominee offshore corporations to evade income taxes. On June 14, 2012, an indictment was filed charging David Kalai and Nadav Kalai with conspiring to defraud the United States by marketing and implementing a scheme to use offshore bank accounts and nominee offshore corporations to conceal URS clients’ assets and fraudulently reduce URS clients’ income taxes. In or about October 2012, [Dr. Fogel] agreed to meet with the government regarding his participation in URS’s offshore scheme and began cooperating with the government.

Although $44 dollars in additional tax doesn’t sound like much but after penalties and interest, the good doctor was ordered to pay $196,000 to the IRS. That number is significant because whistleblower awards are based on the amount collected from the wrongdoer.

As noted above, the IRS takes unreported FBAR cases seriously. Although the probability of being criminally prosecuted for an FBAR violation remains low, the use of shell or nominee companies and the creation of phony business expenses is enough to put anyone to the top of the list. More frequently, offshore tax cheats are prosecuted civilly.

IRS Whistleblower Program and Unreported Offshore Accounts

Obviously, we encourage everyone to report their offshore accounts. Like it or not, it is the law.

We know from this post, however, that some folks will try and beat the system. They think that offshore tax service companies such as URS can help them evade taxes.

Catching offshore tax cheats is tough. When the bank turns over a list of clients or account holders the job certainly becomes easier. And to encourage folks to report tax cheats, Congress created the IRS whistleblower program and empowered the agency to pay whistleblower awards of up to 30% of whatever money gets collected from tax cheats.

To claim an award, you need inside information about a taxpayer or a third party who assists a taxpayer in evading taxes. A bank or tax service company insider with a list of clients could qualify. (For example, a Bank Leumi banker or former United Tax Service worker.)

Even if you have inside information about a single taxpayer, you may still qualify for an award.  That means someone on Dr. Fogel’s staff could have also qualified for an award.

By coming forward and reporting offshore tax cheats, whistleblowers help make sure that everyone pays their fair share and that no one gets a free ride.

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If you have information about unreported foreign accounts or individuals that assist taxpayers in setting up unreported accounts, you may be entitled to an IRS whistleblower award. For more information, visit our IRS foreign account whistleblower page. Want to speak to someone immediately? Contact attorney Brian Mahany online, at or by telephone at (202) 800-9791. All inquiries are kept strictly confidential.

(If you have failed to file an FBAR form for one or more years, seek competent assistance immediately. That is not a service we provide, although we can refer you.)

MahanyLaw – America’s IRS Whistleblower Lawyers