If you have undisclosed foreign accounts you have an important decision to make. That decision being – when do you start disclosing your foreign bank accounts and foreign income and how should you disclose?
Many people thought that forever they can keep their foreign accounts a secret – not just from their creditors and spouses but also from the IRS.
Well thanks to a man called Bradley Charles Birkenfeld, no longer can these foreign accounts be a secret.
Birkenfeld, an American citizen who grew up in Boston and was educated at the American Graduate School of Business in Switzerland, was an up-and-coming banker rising through the ranks of Switzerland’s greatest bank, UBS. Working at UBS in Geneva, Switzerland, as a private banker offering wealth management services, his principal job responsibility over his 5-year tenure at UBS was to solicit wealthy Americans to move their assets to the bank, enabling them to hide their funds due to Switzerland’s strict banking secrecy laws and thus avoid paying U.S. taxes.
Birkenfeld was living the high life with UBS going to UBS sponsored events like art shows and yacht races in the United States to attract wealthy people as potential clients. The events gave its Switzerland-based bankers, who essentially behaved as salesmen offering the product of a Swiss tax haven, a chance to network with the rich in order to cement deals, which was illegal under U.S. banking laws.
One of Birkenfeld’s wealthiest clients was billionaire California real estate developer, Igor Olenicoff. Birkenfeld arranged for him to transfer $200 million to UBS and for Olenicoff to have these funds accessible via credit cards supplied to him by UBS. Birkenfeld then introduced Olenicoff to other bankers at UBS who helped him create off-shore companies to hid his assets and evade taxes.
Olenicoff subsequently pleaded guilty to tax evasion and paid a $52 million fine, but avoided a jail sentence. Apparently the U.S. Department Of Justice (DOJ) had their sites on a bigger target – that being Birkenfeld.
In 2005 Birkenfeld resigned from UBS. That is when he approached DOJ and informed the DOJ of UBS’ business practices.
At the same time, Birkenfeld wanted to take advantage of a new federal whistleblower law, the Tax Relief and Health Care Act of 2006, that could pay him up to 30% of any tax revenue recouped by the IRS as a result of Birkenfeld’s information.
Birkenfeld also wanted immunity from prosecution for his part in UBS’s transactions.
Essentially Birkenfeld wanted to have his cake and eat it too!
When Birkenfeld saw that the DOJ was not meeting his demands, he contacted the Securities and Exchange Commission (SEC), the IRS, and the U.S. Senate.
You would think with all of this information Birkenfeld would receive praise and gratitude by the Federal government. Instead, in May 2008, Birkenfeld was arrested in Boston when he deplaned from Switzerland. He was arraigned at the U.S. District Court, Southern District of Florida. The DOJ prosecutor in the case justified the prosecution of Birkenfeld by claiming he failed to be forthcoming about his clients, specifically, Igor Olenicoff. Eventually Birkenfeld agreed to plead guilty to a single count of conspiracy to defraud the United States. Birkenfeld was sentenced by a U.S. District Judge to 40 months in prison and paying a $30,000 fine.
Since Birkenfeld blew the whistle on the UBS tax evasion scandal, in 2007 UBS avoided prosecution by agreeing to pay a fine of $780 million to the U.S. government.
Additionally, UBS paid $200 million for settlement with the SEC to avoid a trial on UBS’ alleged conduct that the company facilitated the ability of certain U.S. clients to maintain undisclosed accounts in Switzerland and other foreign countries, which enabled those clients to avoid paying taxes related to the assets in those accounts.
Finally to avoid additional fines, UBS agreed to provide the names of all Americans who had offshore accounts with UBS.
In the wake of the UBS scandal, the erosion of Switzerland’s fabled bank secrecy culminated when Switzerland officially signed on October 15, 2013 a treaty called the Convention on Mutual Administrative Assistance in Tax Matters. By Switzerland signing the treaty, they no longer could be a tax haven for offshore assets. The U.S. had won its war against Switzerland!
This then set the stage for the IRS’ worldwide campaign to break into foreign financial institutions and uncover U.S. accountholders.
So what ended up becoming of Birkenfeld? Birkenfeld was able to get his sentence commuted and ended up serving about 32 months. In September 2012, the IRS Whistleblower Office awarded Birkenfeld $104 million as a whistleblower. After serving a 32 month jail sentence – that equates to daily compensation of about $105,000.00.
If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (OVDI). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.
Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and elsewhere in California qualify you for OVDI.
Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.
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