Qui Tam

Offshore Tax Evasion Scheme to Defraud IRS Alleged in Indictment of Miami Beach Developers

By Finch McCranie, Esq.

A high priority for IRS Whistleblower cases is the abuse of offshore "tax havens" or offshore financial centers to conceal income from the IRS that is subject to U.S. taxation. Over drinks in Miami Beach recently with IRS agents who worked the massive UBS matter, I discussed some of the recent announced cases the IRS has made involving offshore abuses.

Using shell corporations and "nominee" entities established in the Cayman Islands, Switzerland, or a host of other countries that market "secrecy," those looking to conceal income from the IRS, or assets from potential creditors, have made offshore tax havens a booming business.

An interesting example of allegations of offshore tax violations was described in the Justice Department's announcement yesterday of the indictment of two Miami Beach hotel developers. Mauricio Cohen Assor and his son, Leon Cohen-Levy. They were charged with conspiring to defraud the United States and filing false tax returns. The government alleged as follows:

According to court documents, the two men and their co-conspirators used nominees and shell companies formed in tax haven jurisdictions, including the Bahamas, the British Virgin Islands, Panama, Liechtenstein and Switzerland to conceal their assets and income from the IRS. In order to further conceal their assets and income from the IRS, court documents state the men also provided false and forged documents to banks, opened bank accounts in the name of nominees, titled their personal residences and luxury vehicles in the name of shell companies, filed false and fraudulent tax returns, failed to file other tax returns, suborned perjury in a civil matter pending before the New York Supreme Court by directing individuals to testify falsely under oath, and induced other individuals to make false statements to federal law enforcement agents.

Both defendants are permanent resident aliens who, in 2000, received approximately $33 million from the sale of the New York Flatotel, according to the government. They transferred the proceeds using various Swiss bank accounts in the names of foreign nominee entities, including at least one "bearer share" corporation.

When bearer shares are used, the corporation's records do not list its owners, as the owners are whoever has physical possession of the stock certificates. As IRS Special Agent Scott Johnson testified by affidavit, "[b]earer share corporations are often used to hide the true ownership of assets because ownership records are not maintained and nominee officers and directors are often used to control the affairs of the corporation.'

Later, the defendants allegedly transferred the funds to accounts of nominee companies at that bank's New York location, and later to the escrow account of a Florida attorney. The government also alleged that defendants used the money to "fund a luxury lifestyle for themselves and for their family members."

Offshore tax abuse remains a great priority of the IRS, and thus is a major focus of many IRS Whistleblower claims. The new IRS Whistleblower Program recognizes that whistleblowers have an enforceable right to 15-30% of what the IRS recovers based on information whistleblowers provide.

The government's full press release is below:

Full post as published by Whistleblower Lawyer Blog on May 27, 2010 (boomark / email).