U.S. Court Convicts British Attorney of Tax Evasion, Filing to Fail Return and FBAR in Swiss Bank Fraud Scheme

A press release issued by the Department of Justice (DOJ) announced a guilty verdict for British tax attorney Michael Little, 67, of Hampshire, England, who was convicted on April 10, 2018 on charges of tax evasion. The case arose partially from Little’s role in helping members of an American family, the Seggermans – whose patriarch, Harry Seggerman, established Fidelity Pacific Fund – conceal approximately $14 million in offshore income from the Internal Revenue Service (IRS) by banking with Swiss institutions. In addition to aiding American taxpayers with foreign income tax evasion, Little, a lawful permanent resident (LPR) of the U.S., was also charged with failure to file income tax returns, failure to file a Foreign Bank Account Report (FBAR), and conspiring against the United States. Though sentencing will not take place until September 6, when Little is scheduled to appear before U.S. District Judge P. Kevin Castel, the statistics on criminal tax case outcomes are not in his favor – as is true of any taxpayer who tries to circumvent U.S. tax law and gets prosecuted for it.

U.K. Tax Lawyer Charged in $14M Foreign Bank Fraud Case

The DOJ’s press release recounts a laundry list of tax charges in Little’s sprawling case. The charges – and associated maximum sentences – are enumerated below, per count. Readers are encouraged to follow the links for in-depth information about each of these offenses.

  1. Aiding or assisting false returns, or “fraud and false statements” (26 U.S. Code § 7206) – Up to three years in prison
  2. Tax obstruction, or “attempts to interfere with administration of Internal Revenue laws” (26 U.S. Code § 7212) – Up to three years in prison
  3. Conspiracy to commit offense or to defraud United States (18 U.S. Code § 371) – Up to five years in prison
  4. Failure to file an FBAR, or FinCEN Form 114 – Up to five years in prison
  5. Willful failure to file return, tax years 2005 through 2010 (26 U.S. Code § 7203) – Up to one year in prison per tax year

Little’s legal troubles began when Harry Seggerman died in 2001, leaving to his family an inheritance of roughly $14 million. These funds were distributed across foreign accounts, the existence of which should, under federal tax laws like the Bank Secrecy Act (BSA), have been disclosed to the IRS.

The issue was that, rather than advising Seggerman’s widow and adult children as to the proper procedures for disclosing such funds – procedures which generally entail filing an FBAR and submitting Form 8938 (Statement of Specified Foreign Financial Assets) to the IRS – Little took the opposite path, instead advising “the various family members on steps they could take to continue hiding these assets from the IRS,” alongside another attorney.

“In particular,” the press release noted, “Little discussed with the family members various methods by which they could bring the money into the United States from the Swiss accounts while evading detection by the IRS.” These methods included attempting to mask the transfers by conducting high-cost transactions, such as sales of jewelry or artwork, and repatriating funds in “little chunks” via traveler’s checks. (For their own roles in furtherance of the scheme, various members of the Seggerman family pleaded guilty to tax evasion charges, and, like Little, now await sentencing.) Of course, as our international tax attorneys cautioned readers in a previous article, sending money to a U.S. bank from abroad can trigger a wire transfer audit of the accounts involved in the transaction.

In addition to helping the Seggermans commit offshore tax evasion, Little, who has been a U.S. green-card holder or LPR since 1972, also failed to report his own income, triggering further penalties. By failing to file multiple federal tax returns, Little repeatedly avoided his personal income tax liabilities, while by failing to file an FBAR, he concealed taxable foreign income from the IRS. The failures to file a return occurred from the years 2005 to 2010, while the missing FBARs were associated with tax years 2007 through 2010.

Though Little resides in the United Kingdom, his LPR status obligates him, like many “Accidental Americans” and taxpayers overseas, to report worldwide income surpassing certain thresholds ($10,000 for FBAR requirements, $50,000 for FATCA/Form 8938 requirements). The willful failure to do so constitutes tax fraud, which is punishable not only by the prison sentences noted above, but also by cumbersome civil penalties, which can add thousands or millions of dollars to the taxpayer’s final bill.

This is not the first time U.S. taxpayers have used Swiss banks to conceal taxable income from the prying eyes of the IRS, as regular readers of our tax blog are well aware. But while the U.S. government’s Swiss Bank Program is endingas is the Offshore Voluntary Disclosure Program (OVDP), which allows taxpayers to disclose, with relative safety, their relationships with such banks – the IRS’ focus on international tax evasion hasn’t softened. On the contrary, the IRS is continuing to make foreign tax evasion a top enforcement priority – and this time around, the web threatens to ensnare not only expats, LPRs, and citizens abroad, but also the thousands of taxpayers who use foreign cryptocurrency exchanges/wallets, which U.S. Treasury Secretary Steve Mnuchin recently compared to Swiss bank accounts.

FBAR Representation and Criminal Tax Defense for U.S. Expats and Citizens Abroad

Regardless of where you reside, you must report global income to the IRS once certain thresholds have been surpassed – including any funds that are stored in foreign checking or savings accounts. As Little’s case should make painfully clear, failure to comply with this requirement can give rise to investigation, prosecution, and potentially, conviction. If you are concerned about meeting your responsibilities to report foreign income, you should speak with an international FBAR attorney – before it becomes necessary to speak with a tax evasion lawyer instead.

For a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online, or call our tax firm at (800) 681-1295. Our tax lawyers for expats and citizens abroad serve the residents of California, the United States, Switzerland, the United Kingdom, and beyond.

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 in San BernardinoSanta BarbaraPanorama City, and Oxnard! You can find information on all of our offices here.

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