Another UBS Client is Sentenced

Press reports note that another UBS client was sentenced on 11/6. The highlights from the first I have seen, a Bloomberg report here.

1. Guts of the Guilty Plea (DOJ Tax Press Release here): The guilty plea was a bare bones plea to a single count of filing false income tax return (§ 7206(1), with a maximum possible sentence of 3 years (less good time credit of about 15%). The details which are often seen in plea agreements were left to flesh out in the sentencing process.

2. Key Sentencing Factors as Reported; (i) taxes evaded apparently "less than $26,000 for 2001-2007 (so why'd this guy do it???); (ii) $1.89 million FBAR penalty (this amount may include the civil tax penalty which, in any event on the numbers report would have been around $19,500 (does require accrual of interest)); and (iii) contrition for having done it (subtext for having been caught).

3. Sentence: 2 months of home incarceration; 150 (about 5 months) days home confinement; 215 days probation (about 7 months).

4. Leniency. Prosecutors sought leniency because of substantial assistance. I have not seen the prosecutors' motion, but will post further when and if I see it. The article does report that publicity about his case (presumably his guilty plea) helped spur more than 7,500 taxpayers to join the voluntary disclosure program that ended 10/15/2009. (As I have mentioned before, counsel in all criminal cases should encourage the Government to publicize the indictment, conviction and sentence so that this downward sentencing factor may be in play).

5. Judge's comments about offshore accounts:

“I think the public has become weary about people with all the trappings of success becoming involved in tax evasion,” said U.S. District Judge James Cohn in federal court in Fort Lauderdale, Florida. “Why does one set up offshore banking accounts? I’m sorry, it’s to set up to hide money and deceive the government.”

6. Collateral Consequences. Moran is a yacht broker. The article reports that, according to this lawyer, he will lose his Florida license to sell new yachts. [JAT tacky comment: Perhaps he will take that business offshore, which would not seem to be too difficult for yacht sales.] Tax crimes practitioners and students are aware that there may be collateral consequences of guilty pleas. One of the problems that surfaced in the voluntary disclosure initiative was whether such collateral consequences might attend entering the program; even though there will be no conviction, the required cooperation may require a taxpayer to admit facts from which a crime may be inferred (even if perhaps not a direct admission).

JAT additional comment: the lenient sentencing relative to other tax crimes continues. See my question to readers here.

Get in Line Brother #13 - FAQs Revised

The IRS has revised and substantially added to the FAQs. The revised and enhanced FAQs may be viewed here. These FAQs as revised are must reads for taxpayers who have FBAR and related income tax noncompliance over the past 6 years, and for practitioners who represent them.

The FAQs do raise some interesting issues which I will address in later blogs.

Offshore Tax Investigation Files Exempt from FOIA Disclosure

In a nonprecedential summary order in Radcliffe v. IRS & Geithner (2d Cir. 08-1513-cv), issued May 27, 2009, the Second Circuit affirmed the denial Radcliffe's FOIA request for documents related to the IRS's investigation of U.S. taxpayers using offshore credit card accounts. The credit card initiative was launched several years ago well in advance of the current offshore initiative focusing on UBS that we have discussed here which resulted in the current voluntary disclosure initiative which we discussed here. The earlier offshore credit card initiative also used the John Doe Summons to get information and documents and also resulted in a voluntary disclosure initiative (referred to by the initialism OVCI (Offshore Voluntary Compliance Initiative), which followed with another initialisim LCCI (Last Compliance Chance Iniatitive or some such)).

The reason the court summarily affirmed was the rather obvious reason:

We have no doubt that the documents retrieved pursuant to the government's search were exempt from production as "records or information compiled for law enforcement purposes" the production of which "could reasonably be expected to interfere with enforcement proceedings," 5 U.S.C. § 552(b)(7)(A); see also 26 U.S.C. § 6103(e)(7). Radcliffe has essentially conceded as much, asserting that this FOIA suit stems from the Internal Revenue Service's ongoing investigation of whether and to what extent Radcliffe has used undeclared offshore credit card accounts to shelter his income and avoid his federal tax obligations. By letter dated July 25, 2007, Radcliffe, through counsel, stated that his "FOIA suit became necessary due to the IRS' failure to provide [information relating to the tax audit] willingly." Letter from Frank Agostino to Gary A. Nichols, Internal Revenue Service (July 25, 2007).