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4 Charged with Tax Fraud, Conspiracy in Connection with Leaked Panama Papers

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    In 2015, an anonymous source leaked a massive trove of financial data – approximately 11.5 million documents – from Panamanian firm Mossack Fonseca, revealing controversial offshore banking information about thousands of companies and prominent individuals, including presidents, prime ministers, politicians, professional athletes, movie stars, and entrepreneurs. The leaked documents, which came to be known as the “Panama Papers” – not to be confused with the subsequent Paradise Papers, a similar leak which occurred in 2017 – spurred an in-depth investigation, which has recently yielded new charges, relating to tax fraud and conspiracy, against four individuals, including one U.S. citizen.

    Panama Papers Investigation Leads to Tax Evasion, Conspiracy Charges for 4 Defendants

    Four individuals, including one U.S. citizen, were recently charged with a slew of tax evasion and conspiracy offenses in connection with the leaked Panama Papers of 2015. The individuals being charged are German investment manager Dirk Brauer, who was arrested in France; Massachusetts accountant Richard Gaffey, who was arrested in the United States; German citizen Harald Joachim Von Der Goltz, who was arrested in the United Kingdom; and former Mossack Fonseca employee Ramses Owens, who has not yet been apprehended by law enforcement.

    Gaffey’s inclusion in the group is notable in that, among the more than 360,000 individuals named in the Panama Papers, only a sliver were American citizens. In an article published in May 2016, for instance, USA Today mentioned that “The International Consortium of Investigative Journalists, which produced the Panama Papers, said Monday that at least 36 Americans have been accused of fraudulently using offshore accounts.” By December 2018, that number had increased to approximately 200 individuals, plus approximately 3,500 shareholders in companies with U.S. addresses – still just a fraction of the papers’ contents.

    As our international tax law attorneys posited in a previous article, the relative absence of Americans from the papers may point to the efficacy of federal offshore reporting regulations, namely the FBAR and FATCA requirements, which the IRS has worked to enforce more aggressively in recent years. Of course, regardless of where a taxpayer originates from – or how heavily that country is represented in the Panama Papers – he or she likely faces grave consequences if convicted.

    “They had a playbook to repatriate untaxed money into the U.S. banking system,” said U.S. Attorney Geoffrey Berman. “Now their international tax scheme is over, and these defendants face years in prison for their crimes.” He further explained that each of the men “shuffled millions of dollars through offshore accounts” without reporting the assets – despite the fact that laws like the Bank Secrecy Act (BSA) and Foreign Account Tax Compliance Act (FATCA) require the disclosure of offshore accounts whose aggregate values exceed $10,000 or $50,000, respectively. These requirements apply broadly to U.S. citizens, resident aliens, and in some cases, even non-resident aliens – in addition to domestic trusts, partnerships, and corporations. (For a detailed overview of Form 8938 and FBAR filing requirements, our FBAR tax lawyers would suggest reviewing the FBAR instructions and penalties, or reading our article discussing what to do if you received a FATCA letter from your bank.)

    Alongside Brauer, Owens, who worked as an attorney for Mossack Fonseca prior to the firm’s collapse in March 2018, created and managed “opaque offshore trusts and undeclared bank accounts” for various U.S. taxpayers. According to prosecutors, Brauer and Owens strategically selected countries with tight banking secrecy regulations in order to thwart U.S. investigators’ searches for financial records.

    Owens is also accused, as is co-defendant Gaffey, of falsely reporting that Von Der Goltz’s mother – a resident of Guatemala without U.S. tax liabilities – was the accounts’ only beneficiary. Prosecutors accuse Von Der Goltz, who previously lived in the United States, of hiding offshore accounts from the IRS, i.e. willfully failing to file an FBAR.

    International FBAR Attorneys Handling Offshore Tax Evasion Charges

    “As alleged,” said Berman, “these defendants went to extraordinary lengths to circumvent U.S. tax laws in order to maintain their wealth and the wealth of their clients.” Nonetheless, their crimes were uncovered – and now, the individuals behind them are facing years behind bars, in addition to devastating fines, penalties, and interest charges.

    This case goes to show that – no matter how many documents must be combed through, or how difficult those documents are to obtain – the IRS, Department of Justice, and other government agencies possess both the technology and the determination to successfully identify and pursue noncompliant taxpayers. If you have failed to file an FBAR, file Form 8938, or report foreign income on your personal income tax returns, you are in similar jeopardy. However, working with a knowledgeable and experienced tax defense attorney places you in a better position to resolve the issue, reentering compliance while keeping your penalties to a minimum.  Criminal exposure can be mitigated (avoided through an Amnesty program) as long as you approach the IRS before they approach you through an offshore voluntary disclosure. To discuss a foreign account-related tax issue confidentially in a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online, or call today at (800) 681-1295.

    Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San BernardinoSanta BarbaraPanorama CityOxnardSan DiegoBakersfieldSan Jose, San FranciscoOakland and Sacramento.

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