Uncle Sam has become quite adept at ferreting out foreign bank accounts. Get caught with an unreported offshore account and you could even wind up in prison. One man in Kentucky thought he could outsmart the IRS by hiding his money in a Swiss account. Today that man, Peter Canale, is awaiting his fate when sentenced this December. Canale, age 62, is facing 5 years in prison.
Tragically, Canale’s tale is a family affair. His brother, Michael, pleaded guilty to similar charges in 2012 and was sentenced to 6 months in prison.
The two bankers from UBS that helped Peter open his Swiss account have also been charged.
Having a Swiss or other foreign account isn’t illegal. Failure to report foreign accounts annually, however, can be a felony.
All offshore financial holdings must be reported if their aggregate value exceeds $10,000. Even if the accounts exceed that threshold for just one day, all accounts must be reported.
Foreign accounts are reported on one’s individual income tax return and on an FBAR, Report of Foreign Bank and Financial Accounts. The willful failure to file an FBAR is a felony punishable by up to 5 years.
Taxpayers who create fictitious account names (called nominee entities or shell companies) can also be charged with tax evasion, another felony crime.
The Canales’ tale is a cautionary one for anyone who inherited a foreign bank account. According to court records, Peter and Michael Canale inherited a Swiss bank account when a relative died in 2000.
The feds say that the Canales conspired with a Swiss national, Beda Singenberger, who operated a financial advisory firm called Treuhand Sinco. Singenberger allegedly provided “tax advice” to wealthy Americans. The men also worked with a former UBS client advisor, Hans Thomann, who left the bank to also set up a Swiss financial advisory firm.
The indictment claims Singenberger helped Peter Canale open a Swiss account using a sham entities. As noted earlier, the IRS considers nominee entities with no valid business purpose to be an affirmative act of tax evasion.
After his relative’s death, Peter and his brother inherited a substantial sum of money, all of it in an undeclared Swiss account. Without more, the feds would have a tough time proving the brothers willfully concealed the account. There was more, however. Plenty more.
Apparently in a New York hotel room in late 2000 or 2001, Thomann and Singenberger met the Canales and discussed keeping the funds in unreported accounts.
Later Peter would meet again with Singenberger, this time in Miami. There Singenberger helped Peter set up a Liechtenstein foundation and then open an account at Swiss bank Wegelin & Co. [Ed. Note: Wegelin was criminally prosecuted by the Justice Department for helping Americans commit tax evasion. After paying a huge fine, Wegelin shut its doors permanently.]
Within a couple years, Peter and Michael had over $2.5 million in undeclared Swiss accounts.
Although Michael Canale accepted responsibility early on, Peter challenged the indictment. His lawyers claimed that prosecutors waited to long to indictment him. In the alternative, he argued that if the case wasn’t dismissed the case should be transferred to Kentucky where he lives.
Both motions were denied earlier this summer.
Generally tax evasion and tax conspiracy charges must be brought within 6 years. Peter was indicted in 2014. Although the initial meetings to hide the accounts took place in 2000 or 2001, the court ruled that unlike tax evasion, a conspiracy charge only requires that one act of the conspiracy must have taken place with 6 years of the indictment. Since the conspiracy was ongoing and since the last act of the conspiracy took place in 2011, the IRS could reach all the way back to 2000.
Because Peter also failed to report his account on his tax return, prosecutors could also have easily brought additional criminal charges for filing false tax returns.
After losing his bid to dismiss the case, Peter Canale pleaded guilty to a single conspiracy count earlier this month. Although he faces 5 years, his plea agreement purportedly says he will not appeal if he receives a sentence less than 30 months. In addition to any prison time, Canale must also pay the IRS $106,000 in back taxes and a civil penalty of $394,460 (half the highest balance of the account).
At any time prior to the criminal investigation, Canale could have come clean and in all likelihood would have avoided prison and being classified as a convicted felon.
The IRS generally operates on a “first contact” policy. If you contact the IRS before they find you, tax evasion and other criminal tax charges can usually be avoided. With the prosecution of Wegelin, the two Swiss financial advisors and his brother, Peter should have long ago seen the handwriting on the wall.
If you are under investigation for tax evasion, failure to file tax returns, filing false tax returns, failing to file FBAR forms or conspiracy to defraud the IRS, contact a qualified IRS tax lawyer immediately. Ditto if you are under audit or know if you have unreported foreign bank accounts. Wait too long and you might become the next Peter or Michael Canale.
Need more information? Contact attorney Bethany Canfield at or by telephone at (414) 223-0464. (Already under criminal investigation? One of our criminal tax lawyers can help as well.) All inquiries are protected by the attorney – client privilege and kept strictly confidential.
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