Another UBS Client Sentenced (10/6/11)

Another UBS client, Peter A. Schober, was sentenced on 10/5/11.  I blogged the original charges, Other UBS Account Holders are Charged (10/28/10), here.  The following are the key bullet points as of now:

Taxpayer: Peter A. Schober
Bank: UBS
Entities: ?
Guilt: By Plea Agreement - 1 Count FBAR violation.
Sentence: 1 month incarceration; 2 months home; 6 months supervised release
Unreported Income: ?
Tax Loss: $77,870.67
FBAR Penalty: $773,652
Court: D MA
Judge: Nathaniel M. Gorton

I will supplement these bullet points when more information is available.  I will also update the spreadsheet at that time.

Another UBS Client is Sentenced - 1 Yr Home Detention (5/24/11)

Taxpayer: Harry Abrahamsen
Banks : UBS AG
Entities: Yes
Guilt: By Plea Agreement - FBAR violation (one count)
Incarceration (in months): 0
Home Detention: 1 year
Probation: 3 years (apparently including the home detention)
FBAR penalty: $300,000 +
Fine: ?
Court: D NJ
Judge: Denis Cavanaugh
Age at sentencing: 69

Articles:
USAO D NJ Press Release

His daughter, Lucille Abrahamsen Jackson, was sentenced yesterday.  See blog on her sentencing here.
Read more »

Another UBS Client is Sentenced to Probation (5/23/11)

Taxpayer: Lucille Abrahamsen Jackson
Banks : UBS AG
Entities: Yes
Guilt: By Plea Agreement - Tax Perjury (one count)
Incarceration (in months): 0
Probation: 1 year
FBAR penalty: $379,688
Fine: ?
Court: D NJ
Judge: Denis Cavanaugh
Age at sentencing: ?

Articles:
USAO D NJ Press Release
Read more »

An Outlier Foreign Bank Account Sentencing (5/10/11)

I recount below the key objective facts in the most recent sentencing, but caution that this sentencing is outside the mainstream for the current initiative -- i.e., more or less ordinary high net worth U.S. tax cheats who have legal source income stashed in overseas banks. The defendant in this case, one Arthur Allen Ferdig, operated a Ponzi Scheme through Tradex. The plea agreement is for the tax offense only but appears animated chiefly by his nontax skullduggery.  The plea agreement describes the nature of his tax offense as:

NATURE OF THE OFFENSE

4. Defendant understands that for defendant to be guilty of attempting to evade and defeat income tax, in violation of Title United States Code, Section 7201, defendant must have willfully attempted to evade or defeat the assessment and payment of a tax due and owing with respect to income received by defendant during the year 2002 by, among other things, committing an affirmative act of evasion. Defendant admits that during the year 2002, defendant knowingly received income from Tradex, a business that defendant operated and failed to report that income. Defendant admits that his failure to report income resulted in a tax due and owing to the Internal Revenue Service. Defendant acted with the specific intent to violate the law. Defendant admits that defendant is, in fact, guilty of this offense as described in the first superseding information.

Read more »

Another UBS Client is Sentenced (4/23/11)

Taxpayer: Ernest Vogliano
Banks : UBS AG
Entities: Yes
Guilt: By Plea Agreement - Klein conspiracy (one count) and tax perjury (five counts)
Incarceration (in months): 0
Probation: 2 years
FBAR penalty: $940,381
Fine: $10,000
Court: SD NY
Judge: Thomas Griesa
Age at sentencing: 80

Articles:
Reuters
Wall Street Journal

I will update the spreadsheet tomorrow.

More on the Simon Conviction

I previously report on United States v. Simon involving convictions for four tax perjury counts (§ 7206(1)), three FBAR counts (31 U.S.C. §§ 5314, 5322), eight mail fraud counts (§ 1341), and four financial aid fraud counts (20 U.S.C. § 1097). (For my blogs on Simon, see here.)  Because of the facts and the other counts of conviction, Simon is outside the mainstream of the criminal cases being brought in the Government's current civil and criminal juggernaut against offshore account holders.

I had not previously reported the actual sentence in Simon. The sentence is 6 years. I picked up the sentence from a recent decision denying bail pending appeal. United States v. Simon, ___ F. Supp. 2d ___, 2011 U.S. Dist. LEXIS 37001 (N.D. IN 2011). This decision did not report the various sentencing factors, hence my spreadsheet (downloadable to the right) is incomplete.

I review here the decision on bail.
Read more »

Sentencing Simon (Preliminary and Final)

Note to Readers:  This blog initially discussed only the opinion on Preliminary Sentencing Findings.  I have since obtained the subsequent sentencing opinion.  I accordingly ad a link to the sentencing opinion and a short discussion of it at the end of this blog.

PRELIMINARY SENTENCING OPINION 3/14/11

Only 3 defendants have been tried recently amidst the Government's juggernaut against foreign bank accounts. All were convicted. I have previously discussed here, 2 of those defendants, father and son, who were convicted and sentenced to 40 months each. I want to talk today about the other whose prosecution, technically, did not arise from that juggernaut, but who was tried for foreign bank account violations during the ongoing juggernaut. He is James A. Simon whom I have discussed before here.

Mr. Simons' prosecution apparently arose from an investigated that predated the UBS brouhaha from whence the flurry of criminal charges arose. He had a number of criminal issues beyond just failing to report and pay tax on income stashed in foreign banks and filing the required FBAR. He did not plead and was convicted of multiple counts as will be noted.
Read more »

Another Sentencing for Taxpayer with UBS Account

There is another sentencing of taxpayer. The DOJ Tax press release is here. The key facts (which may be supplemented as I learn additional key facts) are:

Taxpayer: Arthur Joel Eisenberg
Bank: UBS AG
Entities: Yes
Guilt: By Plea Agreement - one count of tax perjury
Sentence: Incarceration 0; home confinement 0; Probation 3 years
FBAR penalty: $2.1 million (Reportedly 50% of high balance)
Court: WD Washington State
Judge: John Coughenour

I have updated the spreadsheet.

Addendum 3/7/10:  Bill Singer's Street Sweeper Blog (Forbes).

First Sentencing in Offshore Case that Went to Trial

Maricio Cohen Assor and Leon Cohen-Levy, previously blogged here, were sentenced yesterday. I include below links to the SD FL USAO press release and some articles, but here are the bullet points I found interesting:

1. Each was convicted of one count of conspiracy (Klein conspiracy) under 18 USC 371 and 2 counts of filing false tax returns under 26 USC 7212.  The maximum permissible sentence for those counts of conviction was 11 years each.

2. Each received 10 years incarceration (mitigated only if they qualify for the rather minimal good time benefit).

Read more »

Yet Another UBS Client Bites the Dust

On September 21, 2010, Jules Robbins, an 84 year old retired watch distributor, was sentenced to one year probation for hiding his Swiss accounts that held, at their peak, almost $42MM. From the USAO SDNY Press Release:

In 2000, ROBBINS used the services of a U.S.-educated Swiss attorney to set up a sham Hong Kong corporation which was listed as the holder of his account and to serve as the nominal head of the corporation. In fact, UBS internal documents specified that ROBBINS wanted to be "100% in charge" of investment decisions concerning his UBS accounts. ROBBINS also took numerous steps to conceal his interest in these accounts from the IRS, including having his Swiss attorney receive all of the correspondence relating to the account at his law firm in Switzerland. As of December 31, 2007, ROBBINS' UBS accounts collectively contained almost $42 million.

ROBBINS, 84, of Jericho, New York, pled guilty on April 15, 2010, to five counts of subscribing to false federal income tax returns. As part of his plea agreement with the Government, ROBBINS paid a civil FBAR penalty of $20,833,345, an amount equal to 50 percent of the highest value of his UBS accounts as of December 31 for the years in which he failed to file FBARs.

According to news reports, Robbins' attorney argued in support of a light sentence that Robbins, the octogenarian, was in fragile health and the FBAR penalty is 80% of his net worth (meaning that his remaining 20% would be about $5MM. From the Bloomberg report, Robbins apologized and "asked the judge for mercy, breaking down several times as he told Holwell of the 'shame, aggravation and sleepless nights during the past many months.'"

Another UBS Client Bites the Dust - One Year Sentence

Another UBS client was sentenced today in New York. According to this blog posting by Janet Novack of Forbes' Taxing Matters, Frederico Hernandez was sentenced to a year in prison. After I get more details, I may do another posting if there is something material to add or correct. In the meantime, I recommend you to Ms. Novack's blog post which is quite good for such quick reporting.

I do make the following points:

1. The report is that Mr. Hernandez got a one-year sentence which is a more defendant friendly sentence because the good time credit (about 15%, although the calculation can be tricky) is not available for sentences of less than one year and one day. 18 USC 3624(b). The good time credit for a sentence of one year and one day is 47 days, making the defendant with good time serve only 319 days. A defendant with a one year sentence must 365 days with no good time credit.  What a difference a day makes..  The Judge (Denny Chin) surely knew of this difference and, apparently was not quite willing to go there.

2. Hernandez and the Government agreed in the plea that the tax loss was $84,423. However, the Government apparently asserted at sentencing that the real tax loss was in excess of $500,000. I have not seen the plea agreement, so there is a nuance somewhere that I am missing on this. In any event, the Probation Office and the Court are not locked into the tax loss that the Government and the defendant agree upon in the plea agreement (dare I say conspire to smoke past the court; the devil made me say that). The higher tax loss would, of course drive up the base offense level and, as a result, the Guidelines sentencing range after all adjustments.  And, of course, with a higher Guidelines sentencing range, a sentencing judge will have to vary more than if the sentencing range were lower.

3. According to the article, the plea was for tax perjury (Section 7206(1)) for the years 2004-2008, during which period he reported $503,682 of AGI, whereas during the period his real AGI was $1.9 million. And, as alleged by the government, he had the same pattern of conduct in the years 2001 through 2003. With the higher amounts, the Guidelines range would have been 30 to 37 months. Question for students: assuming that the pattern of the conduct was the same in all years, what would have been the effect had he pleaded to a single count?

4. Even the year is the longest UBS depositor sentence to date. Was this guy worse than the earlier ones or did he just get in line later than they did? What does that portend for later comers?

5. The Government urged the Court to sentence to 18 to 24 months to send a message. The court obviously wanted to send a different message -- first to the defendant before the court and, perhaps only derivatively, to the universe of tax cheats and wannabe tax cheats.

Ms. Novack also has a prior blog on how courts are lenient in tax crimes and certain other federal crimes relative to the typical federal crimes prosecuted in the courts. That blog is here.

Addendum:  9/17 @ 5:40pm:  Readers might want to take a look at this, at least tangentially related, WSJ Law Blog titled Planning A Prison Stay? The Options Can Be Overwhelming.

Addendum #2 9/18 @ 9:15am:  I have corrected the federal good time credit calculation which was in error in an earlier version of the blog.  There has been some confusion over the years about precisely how it is calculated.  But, the BOP controls the process and calculates it to allow 47 days GTC for a 1 year and 1 day sentence.  For a discussion, see here.

Addendum #3 9/20/10 @ 10:15am.  See Bloomberg article here and USAO SDNY release here.

Government Sends Message to Aged and Infirm Offshore Bank Account Owners

The Government squeezed a plea from one Leonid Zaltsberg, a UBS depositor. On some factors, he looked liked a prime target. He had a high balance of $2.6 million, and he used an offshore entity to hide his ownership. Both of these likely made him appear on the initial round of disclosures from UBS. Also, he was an immigrant to the U.S. (the immigrant community being statistically more likely to have foreign bank accounts). He was also an international sports figure, at least in his younger days, and a message may be needed there. But, other factors might make him an unlikely candidate for the full court press in a prototypical criminal tax case. He is 75 years old and reportedly "suffers from bladder and prostate cancer, as well as depression." Is this someone the Government really wants to put in jail? Probably not. The UBS defendants are not generally going to jail anyway, even those much younger and healthier. Presumably, the hapless Mr. Zaltsberg will not either, particularly with the problems that could make his stay at club fed pretty expensive to the Government. So what's the point?

I speculate that the Government wants other aged and otherwise infirm offshore bank holders to pony up to the continuing voluntary disclosure opportunity. Of course, the Government did squeeze its typical 50% highest amount FBAR penalty from the Mr. Zaltsberg, walking away with a nice $1.3 million on the FBAR penalty alone. The income tax, however, appears to be slim pickings, at least relatively, for his lawyer is quoted as saying the "tax loss" was "about $60,000." (More on the income tax loss below.) But, this "return" from civil penalty exaction will be paltry if the message sent to others similarly situated that they should get into the program. For those entering the program after 10/15/09 (when the 20% penalty regime was offered), the penalty is expected to rise but will, it is speculated, be less than 50%, so if the message works there should be a whole lot more coming in to the fisc.

I think the background for the message is that U.S. taxpayers with Mr. Zaltsberg's profile, particularly if they were not UBS depositors, might otherwise be sorely tempted just to ride this tsunami out. The risk / reward ratio where their age and health made them historically unlikely for criminal prosecution might be very attractive. But the Government's message is that that risk / reward ratio is not quite so attractive as one might otherwise speculate. (It is always about speculation anyway.) The offshore bank initiative cannot be measured by historical tax prosecution imperatives.

For more on this plea (if not my speculations about it), see:

US DOJ Press Release
USAO D-NY Press Release
Criminal Information
Bloomberg Business Week Article

I said I was going to say more about the tax loss. I have not a clue as to whether Mr. Zaltsberg's lawyer was right in asserting that the tax loss was only $60,000, nor for that matter do I know what his definition of tax loss is. It seems to me, however, that the potential tax loss might be much greater than that. If fraud were involved (and that has not been conclusively determined because Zaltsberg admitted only tax perjury and not evasion), then the statute of limitations would be open for all years -- going back to the 1990s when, presumably, he socked away the loot perhaps without paying tax on it. Of course, for those taxpayers getting into the voluntary disclosure program, the IRS does not look beyond 2003, but Zaltsberg was not in the voluntary disclosure program so it is at least theoretically possible that a lot more civil tax dollars, penalties and interest could be at stake. Moreover, I presume that the parties negotiated over the sentencing tax loss in the plea agreement, but that does not mean that the Probation Office cannot look at all relevant conduct in calculating the tax loss for sentencing guidelines purposes and, of course, relevant conduct tax loss can go beyond the criminal statute of limitations.

Lenient Sentencing in White Collar Crime / Tax Crime Cases

I have previously noted in this blog the lenient sentencing in the offshore financial account sentences to date (see here). The concept of lenient sentencing is a relative concept; lenient means relative to the Guidelines Sentence -- i.e., downward departures and variances from the Guidelines. Booker and its progeny seem to have encouraged lenient sentencing. Sentencing judges realize that they have considerable leeway to fashion an appropriate sentence and often find some reason, particularly in white collar crime cases (of which tax crimes are a subset), to depart downwards, sometimes significantly.

In a case decided yesterday, the Eleventh Circuit reminded sentencing judges (at least those in the Eleventh Circuit) that their discretion is not boundless in white collar crime cases. In United States v. Livesay, ___ F.3d ___ (11th Cir. 2009), the defendant was a player in the "massive accounting fraud conspiracy at Healthsouth Corporation." He participated in "an illegal scheme to artificially inflate HealthSouth’s earnings and to falsely report HealthSouth’s financial condition is at the heart of the fraud." Basically, he would manipulate various financial accounts via fraudulent entries to meet senior Healthsouth officials' earnings goals and the results of these manipulations were reported in public documents filed with the SEC.

Livesay pled to three counts: (i) conspiracy to commit wire fraud, securities fraud, and falsifying books and records; (ii) falsely certifying financial information filed with the SEC; and (iii) a forfeiture count related to count one. The Government's bargain in the plea agreement was (i) to recommend the 3 level reduction for acceptance of responsibility; (ii) recommend that he be sentenced at the low end of the Guidelines range; and (iii) recommend a 5K1 departure.

The sentencing pursuant to the plea then commenced a saga involving three appeals in total in which the sentencing judges (on the third time, the original sentencing judge recused himself) were fixed upon a sentence of probation and the Eleventh Circuit saw it differently and sufficiently differently to reverse. I will let you read the short summary of that saga in the opinion.

In any event, the Guidelines calculations all along was a range of 78 to 97 months (note that this is after the acceptance of responsibility reduction but before the 5K1 departure). The sentence on this third appeal was 5 years probation. The Eleventh Circuit reversed because it found the sentence unreasonable. In a prior opinion involving another defendant from the same conspiracy, the Eleventh Circuit had said that sentencing in white collar crime cases serves important deterrence goals and that "[a] sentence of probation for a high-ranking officer in a corporation where over a billion dollars of fraud was perpetrated on an unsuspecting work force and investing public is not reasonable." The Livesay court emphasized the deterrence factor in white collar crimes and has some good language which I do not cherry pick because the opinion is short and pungent and should be read.

I think this reaction of appellate judges to the deterrence factor is a trend that may well play out in sentencing for tax crimes, which I have noted are merely a subset of white collar crime. Indeed, the Guidelines raise deterrence as a principal factor in tax crimes sentencing. The introductory commentary at S.G. 2T1 says:

The criminal tax laws are designed to protect the public interest in preserving the integrity of the nation’s tax system. Criminal tax prosecutions serve to punish the violator and promote respect for the tax laws. Because of the limited number of criminal tax prosecutions relative to the estimated incidence of such violations, deterring others from violating the tax laws is a primary consideration underlying these guidelines. Recognition that the sentence for a criminal tax case will be commensurate with the gravity of the offense should act as a deterrent to would-be violators.

Of course, if the Government does not appeal a downward variance that does not serve the deterrence purpose, then the sentencing judges do have free rein. Presumably, the Government is not appealing the lenient variance sentences in the offshore financial account pleas. But those who have cases in the pipeline (or, for that matter, in the future) should be aware of this appellate trend to view such generous downward variances with skepticism. The trend, if it continues, will not go unnoticed by sentencing judges.

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.

Second UBS Client, Chernick, Sentenced

The press reports today proclaim the sentencing of Jeff Chernick on October 30. (See, e.g., the associated press article here.) The sentence is 3 months of incarceration (no good time credit), 6 months of home confinement, and no fine. The Government had requested 9 months incarceration for the alleged substantial cooperation Chernick had given, but probably signaled the judge that some home confinement may be OK. The Government's 9 months request was 50% of the low end of the Sentencing Guidelines calculated range. The 3 incarceration and 6 months home confinement gives the Government its request of 9 months, but, as I have said before, if you must be incarcerated, home confinement is the way to go.

The sentencing judge, Judge Cohn, was unmoved by a request for probation, reasoning that a sentencing that amounts to a "slap on the wrist" is "negative publicity," which "informs the public that you can cheat on your income taxes and get away with probation."

Chernick paid back taxes and a $4.5 million penalty. In the plea agreement he had agreed to a 50% FBAR penalty, which on the reported $8 + million foreign accounts would account for most of the reported penalty.

Chernick also prostrated himself (figuratively) before the court with the appropriate mea culpa and contrition.

Chernick had accounts at UBS and NZB Neue Zurcher Bank (sometimes NZB Neue Zuercher Bank).

Chernick had attempted a voluntary disclosure (even before the special initiative was announced and found that the Government already had him in its sight.

JAT editorial comment: I am not sure I see a material difference between Rubinstein (1 year home confinement) and Chernick (3 months incarceration and 6 months home confinement).

Questions to readers: Do you see a material difference between persons who cheat through foreign accounts and persons who cheat the old fashion, historically more visible way who do not get such lenient sentencing (the ordinary cheats who are routinely sentenced to significant jail time, even post-Booker)? What is the explanation(s) for the leniency for cheating through foreign accounts? (In this regard, I assume that, at least in the gut, there may be some difference between (i) a foreign account tax cheat who funds the foreign account with U.S. tax paid money or money not subject to U.S. tax and (ii) a foreign account tax cheat who funds the foreign account with money that was subject to U.S. tax but U.S. tax was not reported and paid (e.g., funds that went to the foreign account without U.S. reporting or by claiming improper deductions).)

First UBS Client, Rubinstein, Sentenced

The New York Times Deal Book and other publications report today that the first UBS client to plead in the current round, Steven Michael Rubinstein (previously blogged here), was sentenced yesterday to home confinement for one year. If you gotta go, that's the way to go.

Rubinstein is the first of the former UBS clients to be sentenced. Jeffrey Chernick (blogged here and here) will be sentenced tomorrow. I have not seen the sentencing filings in the Chernick case. If any reader has one or more of those filings, I would appreciate receiving them via email -- jack@tjtaxlaw.com.

The New York Times Deal Book report is here.