Friday, December 19, 2014

Court Authorizes IRS to Issue Summonses For Records of U.S. Taxpayers Who Used Sovereign Management & Legal Ltd. to Conceal Offshore Accounts, Assets or Entities

On December 19, 2014 the DoJ announced that U.S. District Judge Vernon S. Broderick entered an order on December 18, 2014 authorizing the IRS to issue summonses requiring:
  1. Federal Express Corporation, doing business as FedEx Express, 
  2. FedEx Ground Package System Inc., aka FedEx Ground, 
  3. DHL Express (DHL), 
  4. United Parcel Service Inc. (UPS), 
  5. Western Union Financial Services Inc., 
  6. the Federal Reserve Bank of New York (the FRBNY), 
  7. Clearing House Payments Company LLC, and 
  8. HSBC Bank USA National Association (HSBC USA) 
to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by using the services of Sovereign Management & Legal Ltd. (Sovereign) to establish, maintain or conceal foreign accounts, assets and entities.

Sovereign is an offshore corporate agent and services provider that forms and administers anonymous corporations and foundations in Panama as well as other offshore entities, DOJ said in a news release.

The information will be used to identify U.S. individuals who used Sovereign's services between 2005 and 2013 to establish, maintain, operate or control:

• foreign financial accounts or other assets;

• foreign corporations, companies, trusts, foundations or other legal entities; or

• foreign or domestic financial accounts in the name of any of these foreign entities.

The John Doe summonses direct these 8 entities to produce records that will assist the IRS in identifying U.S. taxpayers who, from 2005 through 2013, used Sovereign’s services to establish, maintain, operate or control any foreign financial account or other assets; any foreign corporation, company, trust, foundation or other legal entity; or any foreign or domestic financial account in the name of such foreign entity.

“This summons action is but the latest step in the DoJ’s efforts to identify and hold fully accountable U.S. taxpayers who have sidestepped their tax obligations by hiding money overseas,” said Deputy Assistant Attorney General Hubbert.  

“The world is getting smaller for tax cheats, and 
we will work with our partners at the IRS 
to vigorously enforce the nation’s tax laws 
against those who seek to avoid paying their fair share.”

“The IRS remains committed to continuing our priority efforts to stop offshore tax evasion wherever it is found,” said Commissioner Koskinen.  

As a result of a DEA investigation of online narcotics trafficking known as Operation Adam Bomb, the IRS learned that Sovereign was involved in assisting U.S. clients evade their taxes.  During the IRS investigation that led to today’s action, one taxpayer, making a voluntary disclosure of tax non-compliance to avoid prosecution, reported that Sovereign helped the taxpayer form an anonymous corporation in Panama that the taxpayer used to control assets without appearing to own them. 

The IRS investigation also determined that Sovereign uses Federal Express, UPS and DHL to correspond with U.S. clients, and Western Union to transmit funds to and from clients in the United States.  In addition, the IRS learned that the wire services operated by the FRBNY and Clearing House, and the U.S. correspondent bank accounts that HSBC USA holds for Sovereign’s banks in Panama and Hong Kong, are likely to have records of financial transactions between Sovereign and its clients in the United States.  By obtaining information from these entities through John Doe summonses, the IRS expects to be able to identify Sovereign’s U.S. clients who may be avoiding or evading taxes.

To read the full declaration of Dan Reeves click on this Link.

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