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Grand Jury Returns Indictment Against Virginian for Conspiracy and Tax-Related Offenses
On July 10, 2011 the U.S. Attorney’s Office for the Eastern District of Virginia announced that a federal grand jury has indicted Jeffrey Charles, of Mathews County, Va., for conspiring with his daughter and son-in-law to defraud the United States. The docket also indicates that a warrant has been issued in this matter.
According to the indictment, Charles conspired with his daughter and son-in-law to impair and impede the IRS in ascertaining, computing, assessing and collecting federal income taxes. The government charged this count under the general conspiracy statute, 18 U.S.C. 371. General conspiracy makes it a crime for two or more persons to agree to work together to commit any federal crime, so long as the participants in the conspiracy undertake any act, commonly referred to as an overt act, to further the underlying criminal activity. This overt act itself does not have to be a criminal act or illegal. Accordingly, in its indictment, the government alleges no less than 21 overt acts in furtherance of the alleged conspiracy to defraud the United States of tax revenue.
The indictment also alleges that Charles aided and assisted in the preparation of three false tax returns in his daughter’s name for tax years 2000, 2001, and 2005, and attached false documents to each tax return. The statute, 26 U.S.C. 7206(2), makes it a criminal offense for anyone to assist in the filing of a false return. The statute specifically disregards whether or not the fraudulent information or falsity was included with the knowledge or consent of the person authorized or required to present the documents to the IRS. Therefore, tax preparers can be liable for this offense even if the taxpayer himself intentionally produced false or fraudulent information. In such a scenario the tax preparer would have to demonstrate that they could not have reasonably known the information presented to them was false.
As alleged in the indictment, Charles also filed a false tax return in his own name for tax year 2006 in which he allegedly falsely reported earning $0.00 income. Since this count is with regards to Charles’ own tax return, the count is charged as 26 U.S.C. 7206(1), which targets the actual taxpayer or the person obligated to file, not the preparer.
An interesting note about this case is that according to the indictment Charles was affiliated with an organization known as the American Rights Litigators (ARL) (a.k.a. the Guiding Light of God Ministries). The organization is a tax protest group located in Lake County, Florida. As alleged in the indictment, Charles utilized materials provided by this organization to fulfill his alleged criminal endeavors.
However, it may be constitutionally improper for the government to use Charles’ affiliation with this group against him at trial. Using someone’s political affiliations against them in the court of law gets dangerously close to offending the First Amendment. Therefore, defense counsel in this matter should probably attempt to limit its usage in court and look into whether the investigation into Charles was originally initiated due to his association with this protest group.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
South Florida Retiree Pleads Guilty for Failing to Report Assets in Swiss Banks
Wolfgang Roessel of Ft. Lauderdale, Florida, pleaded guilty on Wednesday in the U.S. District Court in the Southern District of Florida to filing a false tax return for 2007, the Justice Department and Internal Revenue Service (IRS) announced.
According to the court documents, Roessel, a U.S. citizen, maintained bank accounts at UBS AG in Switzerland, which he failed to report on his 2002 through 2007 personal income tax returns. He also failed to file a Report of Foreign Bank and Financial Accounts (FBAR) for these same years. In 2002, Roessel opened a UBS numbered investment account in the nominee name of a foreign entity, Neptune Trust, with an opening balance of approximately $4 to $5 million. In around 2004, this account and subaccounts were transferred into the nominee name of another foreign entity, Cyan United, and traded in U.S. and foreign securities. Allegedly, Roessel met with a Swiss banker periodically to discuss the performance of his accounts.
The IRS requires U.S. persons to file an FBAR for every taxable year reporting their interests in foreign financial accounts, if the foreign account is in excess of $10,000 at any one time during the calendar year. According to the IRS, the reporting requirement has been implemented because foreign financial institutions do not follow the same regulations as U.S. banks. Of course, the obvious reason for such a reporting requirement is so that the IRS can tax the funds once they have been reported.
Court records also allege that, dating back to the 1980s and up through the late 2000s, Roessel held accounts at different times at Bank Wegelin and another Swiss bank (Bank A) into which he deposited foreign proceeds from his business, yet which he neither reported on his tax returns nor on the required FBARs. In the early 2000s, the foreign account at Bank A was put into the nominee name of Cyan United. A Swiss money manager made investments on Roessel’s behalf and met with him periodically to discuss the performance of the account. In 2008 and 2009, during which period Roessel was aware of the government’s grand jury investigation into his foreign UBS accounts, he disclosed only the existence of the UBS accounts on his tax returns for those years and did not report the other Swiss account.
In recent years, the IRS has spent more energy investigating and penalizing U.S. citizens that maintain offshore accounts in an effort to subject these accounts to U.S. tax and banking regulations. At one time, holding a large amount of assets in a foreign account, particularly Switzerland, was highly desirable due to the little or no tax that was assessed on the assets. However, as the case against Roessel demonstrates, the maintenance of an offshore account can have financially and criminally devastating consequences if U.S. reporting requirements are not met.
The plea agreement includes a tax loss of $312,802.95 for 2002 through 2007, and an FBAR penalty owing to the U.S. Treasury of $5,750,933.99, which is 50 percent of the 2007 unreported foreign bank accounts year-end balance of over $11 million. Roessel faces a potential maximum prison term of three years and a fine of up to $250,000. A sentencing date has not been set.
This plea comes only a few months after the DOJ’s indictment of Bank Wegelin for allegedly enabling U.S. citizens to avoid U.S. taxes, and a $16 million seizure from Wegelin’s correspondent bank, UBS AG. Roessel’s case may be the tip of the iceberg of the investigation into U.S. citizens with accounts at these banks.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Nine Family Members in Alabama Indicted for Tax Fraud and Identity Theft Conspiracy
Barbara Murry, Douglas Murry, Douglas Murry III, Yolanda Moses, Lee Moses, Veronica Temple, Jeffrey Temple, Almetta Johnson and Courtney Johnson were charged in an indictment by a federal grand jury in the Middle District of Alabama on a variety of counts stemming from an alleged identity theft and tax fraud scheme, according to the Justice Department and the Internal Revenue Service (IRS). The 33-count indictment charges all nine with conspiring to defraud the United States and to commit theft of public funds and with theft of public funds. Barbara Murry, Yolanda Moses and Veronica Temple are also charged with aggravated identity theft. The indictment was unsealed last Friday, May 4.
According to the indictment, all of the individuals are related to each other. Barbara Murry owned and operated B&B Weaving Shop, located in Montgomery, Alabama. B&B Weaving Shop was located in the same building as B&B Tax Service. Barbara Murry’s daughter, Yolanda Moses, owned and operated B&B Tax Service. Between 2006 and 2012, Barbara Murry, Yolanda Moses and Veronica Temple allegedly filed false federal income tax returns with stolen identities and had refunds directly deposited into the bank accounts of their family members and others. According to the government, the bank accounts received at least $1.3 million in false tax refunds.
The specific instances of conduct included in the indictment are limited to deposits made in late 2011, and a majority of the deposits are in the amount of $1,400. This seems to be an odd time of the year to receive tax refunds. Further, the indictment alleges that the conspiracy was ongoing since approximately 2006, yet the deposits all take place in 2011. An indictment does not have to provide specific details of the circumstances giving rise to the case, but an individual has the right to be put on fair notice of the charges against them. The government is either being overly inclusive in the indictment regarding the dates of the alleged conspiracy, or the indictment fails to include everything.
Unfortunately, the indictment does not discuss in detail the government’s theory of the case and fails to connect the dots between the allegations and counts contained therein. The indictment only gives a cursory overview of the alleged scheme but manages to accuse nine family members of conspiring to defraud the IRS by means of identity theft. As this case continues, it will be interesting to hear the government’s foundation for the alleged conspiracy of fraud and identity theft.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
New York Man Arrested for Alleged Identity Theft and Tax Fraud
Gary Rogers, of East Meadow, N.Y., was arrested on Monday after being charged with identity theft and tax fraud after allegedly filing more than 200 false tax returns with the Internal Revenue Service (IRS).
Rogers was named in a federal criminal complaint that alleged he used stolen identification information to make false claims against the U.S. government by filing false tax returns to obtain fraudulent refunds. According to the affidavit in support of the criminal complaint filed in U.S. District Court in Brooklyn, Rogers filed approximately 200 federal income tax returns from 2004 through 2010 using the identification information of others. The complaint alleges that Rogers sought approximately $4,393,356 in fraudulent refunds over the six year period. There is no indication how much Rogers may have actually received, or whose identities he allegedly used to obtain the funds.
In addition to the traditional IRS functions, the IRS also has a Criminal Investigations (CI) Unit. The CI Unit employees approximately 2,700 special agents whose sole purpose is to investigate tax fraud, money laundering, and Bank Secrecy Act violations. The investigations of money laundering and BSA violations tend to overlap with the Department of Justice (DOJ) and the Financial Crimes Enforcement Network (FinCEN); however, the CI Unit is the only federal department that investigates criminal violations of the tax code.
The CI Unit focuses on several areas of financial crimes, including bankruptcy fraud, corporate tax fraud, employment tax evasion, and other crimes as related to filing false tax returns. The U.S. government clearly has a heightened interest in the financial sector, particularly in this economic climate. It is important to remember that mistakes contained on a tax return are not necessarily criminal violations. The CI Unit is more concerned with willful, or intentional, violations of tax fraud and evasion.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Switzerland’s Oldest Bank Indicted on U.S. Tax Charges
The US Attorney’s Office for the Southern District of New York recently announced the first ever indictment of a Swiss bank. The indictment, returned by the grand jury and unsealed on February 2, 2012, alleges that Wegelin & Co. conspired with US taxpayers and others to hide from the Internal Revenue Service (IRS) more than $1.2 billion in secret assets and the income these accounts generated.
Concurrent with this indictment, the US government seized more than $16 million from Wegelin’s correspondent bank account in the United States, in accordance with a civil forfeiture complaint and seizure warrant. Wegelin is charged in a superseding indictment with Michael Berlinka, Urs Frei and Roger Keller, three client advisers at the bank who were previously charged with the same conspiracy.
The government alleges that the defendant’s conspiracy in this case corresponds with Swiss banking giant UBS’ announcement on or about July 17, 2008 that it was closing its US cross-border banking business. UBS thereafter began notifying clients that they could continue to maintain undeclared accounts at Wegelin and certain other Swiss private banks. It was at this time that Wegelin’s executive committee, including its managing partners affirmatively decided to capture the illegal US cross-border banking business lost by UBS by opening new undeclared accounts for US taxpayer clients fleeing UBS.
The defendants in this case are currently only charged with conspiracy. However, their alleged conduct in the indictment could open them up to various other offenses. For example, the indictment alleges the transmission of a long list of checks and wire transfers from Wegelin to US taxpayers for the purpose of repatriating funds from these undeclared accounts. This list of transactions shows that most of the amounts transferred were under the $10,000 reporting requirement and sent to the same recipient over relatively short periods of time. Such behavior, if proven to have been undertaken to evade reporting requirements, is known as structuring, or “smurfing,” and is prohibited under the anti-structuring statute. The indictment also alleges that Wegelin instructed clients to carry cash and to avoid taking more than $10,000 with them on international flights, all to allegedly avoid reporting requirements. According to the statute, each such transaction can be charged as a separate and distinct offense. Therefore, defense counsel will have to take into consideration the possibility of a multi-count superseding indictment against the defendants when negotiating with prosecutors.
Another interesting observation for defense counsel to consider is the fact that the US taxpayer clients are identified as co-conspirators but have not yet been named as defendants themselves. These unindicted co-conspirators might have provided the US government with information about Wegelin’s alleged wrongdoing in exchange for proffer letters or non-prosecution agreements. Alternatively, the government may have merely agreed to delay the return of any such indictments to see how cooperative or useful these co-conspirators prove to be against Wegelin. When weighing the multitude of factors impacting the defendants’ decisions to accept plea agreements, defense counsel should recognize that all such witnesses will be particularly susceptible to cross-examination should this case go to trial.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
