Saturday, March 26, 2011

The Department of Justice Tax Division’s top litigation priority is the concerted civil and criminal effort to combat the serious problem of non-compliance with our tax laws by U.S. taxpayers using secret offshore bank accounts – a problem that a2008 Senate report concluded costs the U.S. Treasury at least $100 billion annually. As part of a deferred prosecution agreement the Tax Division negotiated in 2009 with UBS AG, Switzerland’s largest bank, as well as a2009 agreement negotiated among the US, UBS, and the Swiss governmentto settle a civil summons enforcement proceeding brought by the Tax Division, the IRS is receiving, from UBS and from the Swiss, account information about thousands of the most significant tax cheats among the U.S. taxpayers who maintain secret Swiss bank accounts. The prosecution results so far have been encouraging: To date, approximately 150 grand jury investigations of UBS clients have been initiated, of which 26 cases have been charged, with 5 awaiting trial and 21 guilty pleas have been entered. A number of facilitators who helped clients hide assets offshore have been indicted, resulting in four clients and one adviser being charged and convicted, and another eight bankers, lawyers and financial advisers being charged and awaiting trial. In addition, grand jury investigations have been opened into eight additional offshore banks across the world But the outcome cannot be measured in litigation results alone. This enforcement effort has dealt fabled Swiss bank secrecy a devastating blow and provided tools that should yield information on thousands of additional U.S. offshore account holders who have undisclosed accounts at UBS and other banks. Moreover, the publicity surrounding the Tax Division’s enforcement action and the subsequent settlement has already produced dramatic behavior changes. The IRS credits these two agreements with prompting an unprecedented number of taxpayers – nearly 18,000 in the 18-month period concluding in February 2011, in contrast to the fewer than 100 typical in previous years – to “come in from the cold” and voluntarily disclose to the IRS their previously hidden foreign accounts and also to agree to pay hundreds of millions of dollars to the U.S. Treasury. The continuing prosecutions of foreign-account holders and their facilitators created a favorable atmosphere for the IRS to roll out a second voluntary disclosure program on February 8, 2011. Also, buoyed by our success in the United States, a number of European countries have pressed Switzerland to provide similar account information for their nationals. By strategically timing its voluntary disclosure programs in tandem with the Tax Division’s civil and criminal litigation efforts, the IRS has been able to obtain significant additional information about those who have helped to facilitate tax fraud -- information that is extremely important to tax administration and is expected to lead to additional criminal investigations. Although hard to measure, the fact that foreign bank secrecy is no longer “secret” should improve voluntary compliance by dissuading many other taxpayers from attempting to maintain hidden offshore accounts in the first instance. Put simply, the word is out that placing assets in foreign accounts no longer provides the protection from disclosure it once did. OR IMMEDIATE RELEASE TUESDAY, MARCH 8, 2011 WWW.USDOJ.GOV TAX (202) 514-2007 TDD (202) 514-1888 FORMER OHIO MAN PLEADS GUILTY TO FAILING TO REPORT HIS FOREIGN BANK ACCOUNT AT UBS IN SWITZERLAND Admits to Second Account at Credit Suisse WASHINGTON - Edward Gurary, formerly of Orange Village, Ohio, pleaded guilty today in federal court in the Northern District of Ohio to filing false personal income tax returns for the years 2004 through 2008, the Justice Department and Internal Revenue Service (IRS) announced. Gurary’s guilty plea was accepted by U.S. District Judge Dan Polster in Cleveland. According to court documents, Gurary, 45, has resided in Switzerland since 2010, but lived in Orange Village during the prosecution years. Gurary admitted that from approximately 2002 through 2008, he owned and controlled a financial account at UBS AG which was in the name of a Bahamian entity called Demko Ltd. and which contained balances ranging from $490,000 to $947,000. Gurary controlled transactions in the Demko account by sending faxes using a code name “Vanda” to UBS from an OfficeMax store in the Cleveland area rather than his home or business. UBS would in turn send his requests for authorizations to officers of Demko in the Bahamas in order to make it appear that Demko owned and controlled the account. During the prosecution years, interest was paid by UBS into the Demko account, in amounts ranging from $3,400 to more than $21,000, all of which Gurary admitted he failed to report on his tax returns. According to court documents, Gurary also admitted that for three of the years (2004, 2006 and 2007) he not only failed to report the interest income from his UBS account, but he also falsely stated on his Schedule B attached to his income tax return that he did not have signature or other authority over a foreign financial account. Gurary further admitted that in addition to the account at UBS in Switzerland he also had a foreign financial account with significant assets at Credit Suisse AG. Further, because Gurary did not file any Report of Foreign Bank or Financial Account (FBAR) form or otherwise disclose to the IRS his Demko account at UBS or his Credit Suisse account, he is subject to significant penalties. An FBAR form is a form separate from an income tax return that the law requires taxpayers to file with the IRS every June to disclose additional information about foreign financial accounts over which a taxpayer has signature or other control over, and which had an aggregate value exceeding $10,000 at any time during the year. Gurary agreed to pay a penalty amount of 50 percent of the highest aggregate amount in the two accounts between the years 2002 and 2009, which according to his plea agreement was at least $473,000. At the plea hearing, Gurary tendered a check in the amount of $300,000 made payable to the government and he has agreed to surrender the $200,000 cash bond he already paid on the date of his sentencing. Gurary faces a maximum of three years in prison and a fine of $250,000. Judge Polster scheduled sentencing for June 1, 2011. The announcement was made by Bruce M. Salad, Acting Deputy Assistant Attorney General for Offshore Matters of the Justice Department’s Tax Division; Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio; and Jose A. Gonzalez, Special Agent in Charge, IRS-Criminal Investigation, Cincinnati. The case is being prosecuted by Assistant U.S. Attorney John M. Siegel and Tax Division Trial Attorney Richard M. Rolwing, following an investigation by the IRS-Criminal Investigation, Cleveland. Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at 888-712-7690

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