Lessons From a Tax Fraud Conviction? Or Another Lesson on Voluntary Disclosures

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March 27, 2014
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March 27, 2014

Lessons From a Tax Fraud Conviction? Or Another Lesson on Voluntary Disclosures

Date: 03/01/12

Topic: Foreign Accounts

Recently, a California resident, William Nurick, was found guilty for engaging in tax fraud. For Irvine, Calif. residents, it’s a very local story because it was the IRS’s Criminal Investigation Division (“CID”) in Laguna Nigel, Calif. that investigated the case.

His fraud was committed 10 years ago, and the IRS’s CID patiently waited until the evidence came full circle before they obtained a conviction against him.

Between 1994 and 2002, Nurick concealed the receipt of nearly $1.1 million from an account known as the Genesis Fund, which apparently involved foreign currency trading. Nurick used eight different financial entities to disguise his ownership over his monies, real property, and other financial assets.

The trial court uncovered evidence that Nurick filed an amended return for his 1995 taxes, which had an approximate $100,000 tax liability. But, to avoid paying his liability, he attempted to conceal monies by transferring them from one offshore account to a friend’s offshore account. Nurick also provided the IRS with a false “Offer in Compromise,” an agreement alleging that the IRS permitted him to pay a mere tenth of his tax liability, and also understated his income, omitting the receipt of $200,000 that were eventually placed in his Costa Rica bank account.

Well, it’s no surprise, his plans backfired. Nurick was sentenced to spend 60 months in prison and to pay a sum of roughly $300,000. The complaint, filed in the U.S. District Court situated in Los Angeles, alleged (1) conspiracy, (2) mail fraud, (3) wire fraud, (4) money laundering, and (5) engaging in unlawful monetary transactions. The full complained may conveniently be accessed here:

http://www.justice.gov/tax/GenesisIndictment.pdf

For someone who has committed tax evasion, even long in the past, the IRS’s patience–that it will prosecute in its own time–is a scary prospect.

What’s the lesson is to be learned from this? Possibly, it’s this: Mr. Nurick might have been better off had he made a “voluntary disclosure” of his fraud to the IRS; doing so would most likely have eliminated his jail time. For more on voluntary disclosures,

The fines are bad, the jail time is worse, and to top it off, the government makes it all public. The IRS decided to make an example of him, listing his case on IRS website on its “Examples of Abusive Tax Schemes – Fiscal Year 2012″ page: http://www.irs.gov/uac/Examples-of-Abusive-Tax-Schemes-Fiscal-Year-2012

And the Department of Justice (DOJ) explained the story more fully here: http://www.justice.gov/opa/pr/2011/September/11-tax-1190.html