Think That Your Asset Manager Has Your Back? Think Again.

Federal authorities have taken another step in attempting to show the American people that they will use any and all laws of the United States to punish those who try to evade federal income taxes through overseas banking schemes. On April 15th, the United States filed a forfeiture action in New York targeting over $12 million that they allege was transferred into the U.S. from a overseas bank account and that the funds were proceeds of a complex tax evasion scheme spread across several nations.

According to the filing in the federal court in Manhattan, the Swiss account that the money was transferred from was set up by Swiss attorney Edgar Paltzer. If you have been following our blog, you will remember that Edger Paltzer recently pleaded guilty to federal charges in New York relating to his role in the construction of tax evasion schemes. As Edgar Paltzer has agreed to cooperate with federal officials, this is at least the second action that has been commenced with his help. In February, tax evasion charges were filed against another former client of Paltzer.

According to Paltzer and the filing, the funds in question were stored in two bank accounts at an unnamed bank in Switzerland. The plan also included the shifting of funds between the Swiss bank accounts and sham entities in the British Virgin Islands, Lichtenstein and Panama. Portions of the funds that are not involved in the proceedings were used to purchase property in the Bahamas.

The power to initiate forfeiture proceedings lies within mail and wire fraud laws of the United States. Because money is usually wired from one account to another in the course of tax evasion schemes, the activity can be considered violate of such wire fraud laws and trigger the government’s ability to seize the funds.

It has not been commonplace for the Justice Department to attempt to seize funds involved in tax evasion cases. Generally, the government will initiate forfeiture proceedings when the crime committed in connection with the funds is especially egregious. Though, this may be an attempt at a show-of-force by the feds to further impress on the American people that tax evasion through overseas schemes will not be tolerated.

If you have assets that are overseas that have not been reported to the IRS or are involved in a plan to avoid U.S. taxes through entities set up outside of the country, we strongly urge you to contact us for an evaluation of your situation. If you believe that your foreign bank, asset manager or any other person is going to have your best interests in mind when the feds come knocking, you should remember the taxpayers affected by Edgar Paltzer’s agreement with the government to cooperate.

You can take the first step to make your situation better. The Offshore Voluntary Disclosure Initiative can help you avoid criminal penalties including federal prison time. But time is of the essence, the terms of the voluntary program are changing and the deal being offered by the federal government won’t be on the table for much longer. Don’t wait to become another Department of Justice press release, contact our office now for an evaluation of your situation.