To curb tax fraud, the IRS continues to search for more than 52,000 Americans depositing funds in Swiss bank accounts.
By Melonie Magruder / Special to The Malibu Times
Following a nationwide crackdown on federal income tax evasion through utilization of Swiss bank accounts, a Malibu resident last week agreed to plead guilty to depositing at least $1 million overseas.
Charged on Aug. 14 with one count of willfully failing to file a Foreign Bank and Financial Accounts report to the Department of the Treasury, John McCarthy of Malibu is expected to plead guilty in the U.S. District Court on Sept. 14. Once he pleads, McCarthy faces a statutory maximum penalty of five years in federal prison and fines totaling $250,000.
Robert Conte, assistant U.S. attorney for the Central District of California, said last week McCarthy’s was the first case in California-and the fourth nationwide-to be to be prosecuted after Switzerland’s largest bank, UBS, agreed to reveal the identities of U.S. customers.
“The task force investigating this case is working hard to ferret out other examples of tax fraud, including reaching out to other international banks,” Conte said by phone. “This is a very substantial case.”
McCarthy’s case stems from a prosecution agreement UBS entered into last February to avoid criminal charges of conspiring to defraud the U.S. by impeding the Internal Revenue Service in its investigation of offshore tax evasion practices. At that time, UBS turned over the names of some 250 of its American clients (including McCarthy) to federal authorities.
But the IRS continues to seek the names of more than 52,000 U.S. residents who deposited money into secret accounts through agreements with both UBS and the Swiss government, Allison Chin, UBS spokesperson, said last week in a telephone interview before denying further comment.
According to documents filed with his plea agreement, McCarthy funneled funds to a UBS account held in the name of a Hong Kong entity, COGS Enterprises, Ltd., of which McCarthy was the beneficial owner.
According to McCarthy’s plea agreement disclosures, his unnamed Swiss lawyer worked with former UBS bankers to help transfer funds into UBS accounts from a bank in the Cayman Islands, advising McCarthy to set up a foundation in Lichtenstein that would serve as an umbrella over a Panamanian or Hong Kong Corporation.
McCarthy admitted that, beginning in 2003 and with the help of UBS bankers and Swiss attorneys, he transferred more than $1 million from his U.S. business account to the COGS account at UBS in Switzerland, thereby avoiding payment of some $200,000 in federal income taxes.
In his plea agreement, McCarthy agreed he is liable for a fraud penalty of 75 percent on any individual income taxes he owes for reporting years 2003 to 2007. Additionally, he agreed to resolve his civil liability for failing to report foreign income from 2003 to 2008 by paying a penalty equal to 50 percent of the highest balance in his COGS account for each of those six years.
Calls to the offices of Mr. McCarthy’s attorney, Steven Toscher, went unanswered, as were e-mails requesting information on McCarthy’s U.S. business.
Efforts to contact Mr. McCarthy were unsuccessful and a telephone number listed to a John McCarthy on Busch Drive has apparently been disconnected.
While it is unclear who was advising McCarthy on his banking transactions, the Justice Department and the IRS announced that Swiss attorney Matthias Rickenbach, who assisted wealthy American clients, and Hansruedi Schumacher, an executive manager at private Swiss bank Neue Zuercher Bank, were both indicted last week for conspiring to defraud the U.S. The men remain in Switzerland.
The actions of UBS representatives are ironic in light of a Corporate Responsibility Committee UBS formed in 2001 whose stated purpose is to “promote a corporate culture that adheres to the highest ethical standards.”
In 2004, UBS appointed a global head of money laundering prevention to work with the anti-corruption organization Transparency International in developing the “Wolfsberg Principals.” This published protocol established “Anti-Money Laundering Principals” used by 12 of the world’s largest banks to help prevent the kind of actions detailed in McCarthy’s prosecution.
The IRS is offering an amnesty program until September 23, 2009, allowing Americans with concealed assets to come forward with information at reduced penalty rates.
“Failure to come forward and to disclose offshore assets exposes these Americans to increased penalties and possible criminal prosecution,” John DiCicco, acting assistant attorney general for the Justice Department Tax Division, said last week in a telephone interview.