Florida father and son convicted of tax fraud

A federal jury in Florida has convicted a father and son of tax fraud and evasion, citing $33 million in proceeds from the sale of their hotel brand hidden in a Swiss account and other proof of a lifestyle that didn't match their modest stated income.

Prosecutors accused Mauricio Cohen Assor, 77, and his son, Leon Cohen Levy, 46, of concealing vast wealth “through a web of lies, forged documents, and false statements.” Attorneys for the defendants denied that the men hid ownership of $46 million in Miami beach homes, $45 million in investments, and $55 million in cars. He claimed that the men never knowingly broke the law, and said prosecutors presented an “Alice in Wonderland” case that broke from reality.

Both men now face up to 11 years in prison. Tax lawyers have been following this case closely as it is the first trial for offshore tax evasion since the Justice Department began a crackdown in March 2009, the New York Times reports.

Judge sends to prison four involved in aiding tax evasion

A federal judge sentenced to prison today four men found guilty of helping dozens of clients, including actor Wesley Snipes, evade over $1 billion in taxes. All four of the company’s promoters were found guilty of both conspiracy to defraud the government and mail fraud.

One of the four, Eddie Ray Kahn, was sentenced to 20 years in prison on top of the 10-year sentence he is currently serving following his conviction in the 2008 Snipes case. Prosecutors said Kahn founded and ran a group called the American Rights Litigators/Guiding Light of God Ministries that worked to sell “tax defiance schemes” and misrepresented the legality of its efforts.

The Washington Post article on today’s sentencing quotes John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division, who said that “those who promote illegal tax defiance face prosecution and lengthy prison terms.”

Court of Appeals upholds conviction in tax shelter case

The conviction of ex-KPMG LLP senior manager John Larson was upheld by a U.S. appeals court, which confirmed that the prosecution’s evidence supported the finding that tax shelters sold by Larson were “marketed solely as tax evasion schemes.”

This ruling follows from the U.S.’s initial accusation of 17 ex-KPMG executives and two others of selling shelters that cost the treasury $2 billion in lost revenue. The judge in that 2007 case dismissed charges against all but four defendants and assigned Larson a $6 million-dollar fine. The most recent decision of the appeals court has ordered that this fine be recalculated as $3 million, the legal limit given that Larson’s calculation of harm and loss was made without a jury finding.

Larson has been sentenced to 10 years in prison. In 2007, KPMG paid a $456 million fine for its sale of illegal tax shelters, and charges against it were dismissed.

IRS to drop suit following Swiss assurance to disclosure names of suspected tax evaders

The Internal Revenue Services has said that it will drop a lawsuit against UBS, the world’s largest private bank, following confirmation from Switzerland that it is on track to produce details for the remaining 2,450 of 4,450 American clients suspected of using UBS accounts for tax evasion. The IRS has received 2,000 thus far.

Although this provides some respite for UBS and the Swiss banking system, the impending disclosures themselves could bring more litigation against those professionals that may have facilitated tax evasion.

William M. Sharp, a tax lawyer who represents a number of former UBS clients, told the New York Times that some Americans among the 4,450 names had hidden accounts of more than $100 million. While it has not happened yet, the IRS has indicated that if all 4,450 names are received by this fall, it may withdraw the John Doe summons, a separate request for 52,000 UBS client names.

Two reports indicate possible redirection of IRS efforts to prevent fraud in the tax-exempt sector

A report released today by the Treasury Department’s Inspector General for Tax Administration outlines some of the difficulties that the IRS has had in prosecuting criminal tax fraud in the tax-exempt sector and provides statistics supporting an overall decline in such cases in the last 3 years.

The findings of the report also suggest that investigations into tax-exempt organizations have been less successful than other investigations, yielding only 35% convictions or guilty pleas (the average for all investigations is 53%). Victor Song, chief of the Criminal Investigation Division, took issue with that statistic and responded saying that 81.8% is the conviction rate for tax-exempt cases if measured only by those that see trial.

Another report released separately today urges the IRS to act more aggressively with section 527 tax-exempt political organizations that file late or incomplete forms. The report estimates that $5.3 million could be collected by pursuing those applicable penalties.

Small businesses join forces in opposition to tax evasion

A new grass-roots campaign against tax avoidance will be announced Tuesday; it will boast the support of hundreds of representatives and investors in small businesses and will be formed of a coalition of non-profit groups that believe tax avoidance is bad for U.S. business.

“The campaign is unusual because it is the first time that small businesses have organized to combat offshore tax avoidance and evasion in a significant way,” reports Lynnley Browning of The New York Times. The campaign is backed by Democratic senator Carl Levin, who has investigated offshore tax havens and their wealthy patrons.

The report to be released argues that American multinational corporations avoid at least $37 billion in federal taxes annually, and calls for new laws to prevent offshore finagling of taxable earnings as well as the repeal of certain rules that currently facilitate such tax evasion.

France aims to use leaked data to prosecute tax evaders

Details surrounding the acquisition and transfer of client information from HSBC’s Swiss private-banking arm have placed a Franco-Italian computer engineer and colleague at the center of a dispute between Switzerland and France. While Switzerland objects to the use of data that it claims was stolen, France intends to use the data to prosecute potential tax cheats and has even shared the information with other countries.

Although some evidence indicates that the computer engineer and colleague were attempting to sell the client banking information, France insists that it did not pay for the data and rather attained it lawfully. The data was in fact acquired by French authorities acting at the request of a Swiss prosecutor to conduct a search.

Regardless of the details of the data’s acquisition, the release of client information and the ensuing international dispute over legitimacy has, as The Wall Street Journal writes, “rocked the banking world.” Tax evaders in Italy, Spain, and the U.K. may soon face prosecution as a result of this data leak.