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 an Israeli bank. The account was located in Luxembourg. Press reports say that his offshore accounts may have 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 his 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.
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.
If you have failed to file an FBAR form for one or more years, seek competent legal counsel immediately. An accountant can help keep your foreign reporting current but if you have past due FBAR forms, seeking a lawyer is a better choice. Unfortunately, accountants don’t share the same attorney – client privilege as lawyers.
For more information, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. All inquiries are kept in complete confidence.