Tax Protester Used Offshore Insurance Wrappers and Precious Metals to Attempt to Hide Assets from the IRS

According to DoJ, a Alabama, salesman was sentenced to 24 months in prison on October 27, 2020 for tax evasion. 

According to court documents and statements made in court, Ivan Scott “Scott” Butler was an automobile industry consultant and sold automobile warranties as an independent salesman. 

• In 1993, Butler stopped filing tax returns and attended tax defier meetings and purchased tax defier materials. 
• Starting in 1998, Butler used several Nevada nominee corporations to receive his income and conceal it from the IRS. 
• In or around 1999, Butler moved hundreds of thousands of dollars to bank accounts in Switzerland and hid his assets in offshore insurance policies held in the name of non-U.S. insurance providers, thus disguising his ownership of the funds. 
• Such accounts, which generally are used as investment vehicles, are commonly known as “insurance wrappers.”  
• In 2014, Butler converted some of his insurance wrappers into precious metals, which were shipped to Butler and another individual in the United States. 
• Some of those precious metals were given to friends and family for safekeeping. 

In total, Butler caused a tax loss to the IRS of $1,093,400. On March 6, 2020, Butler pleaded guilty to tax evasion. 

In addition to the term of imprisonment, U.S. District Judge Annemarie Carney Axon ordered Butler to serve three years of supervised release and to pay approximately $1,093,400 in restitution to the United States.

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IRS CONTINUES to Criminally Prosecutes Employers For Failure To Pay Withheld Payroll Taxes - As Promised!

On October 29, 2019 we ORIGINALLY posted The IRS is Now Criminally Prosecuting Employers For Failure To Pay Withheld Payroll Taxes! where we discussed that the IRS is stepping up criminally prosecuting business owners for failing to turn over withheld payroll taxes.

Then on October 12, 2020 we posted The IRS Criminally Prosecutes Yet Another Employer For Failure To Pay Withheld Payroll Taxes!, on June 4, 2020  we posted Another Employer Gets Criminally Prosecuting For Failure To Pay Withheld Payroll Taxes! and on June 29, 2020 we posted More Employers Gets Criminally Prosecuting For Failure To Pay Withheld Payroll Taxes! and now according to DoJ, a federal grand jury returned an indictment, charging a North Carolina couple with federal employment tax and individual income tax violations.

As alleged in the indictment, from 1992 through the present, James Rice was an orthopedic surgeon who owned and operated an orthopedic practice that the indictment refers to as “Sandhills Orthopaedic.” The indictment further alleges that his wife, Susan Rice, worked at Sandhills Orthopaedic and handled the administrative operations, including payroll and employment tax obligations. Susan Rice also purportedly owned and operated a truffle business. 

The Rices Have Been Charged With A Variety Of Tax Offenses, Including Conspiring To Not Pay Any Taxes On Their Business And Personal Income And To Defraud The United States By Failing To Pay Employment Taxes
Owed By Sandhills Orthopaedic. 

Between 2007 and 2014, the Rices allegedly withheld employment taxes from Sandhills Orthopaedic’s employees, but failed to pay over approximately $580,000 in social security and other tax withholdings to the IRS. 

The indictment also alleges that the Rices did not file individual income tax returns for the 2014 through 2016 tax years, despite earning gross income in excess of the filing threshold, and that James Rice did not file corporate tax returns for an entity over which he was president for the 2014 through 2017 tax years. 

If Convicted, The Rices Face A Statutory Maximum Sentence of Five (5) Years In Prison and A $250,000 Fine For
Each Conspiracy, Tax Evasion, and Employment Tax Count.

They also face one (1) year in prison for each of the charges relating to failing to file individual and corporate tax returns. 

They are also subject to additional monetary penalties, supervised release, and restitution. 

An indictment merely alleges that crimes have been committed. The defendants are presumed innocent until proven guilty beyond a reasonable doubt.

Thinking of Borrowing From Your Company's

Payroll Tax Withholdings?

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Court Vacates Enhanced Sentencing For Perjury In $2.7M Tax Fraud Case

According to Law360, aNorth Carolina federal court wrongly applied an obstruction of justice enhancement to the 46-month sentence of a man convicted of tax fraud totaling more than $2.7 million, and he must be resentenced, the Fourth Circuit said Thursday.

The three-judge panel vacated Arthur Joseph Gerard's sentencing in a North Carolina district court for helping a holistic medicine business' conspiracy to hide more than $2.7 million from the Internal Revenue Service. 

The appellate court upheld Gerard's conviction, but found the lower court didn't fully explain how Gerard's testimony satisfied the three elements of perjury that would support the sentence enhancement for obstruction of justice, according to the per curiam opinion.

"While the court found that Gerard's testimony was contradictory and false, the court did not rule on whether the false testimony was material or given willfully," the court said.

Gerard was sentenced in November to 46 months in prison to be followed by three years of supervised release, and was ordered to pay nearly $568,000 in restitution, according to court documents.

On appeal, Gerard had argued that the lower court failed to detail an example where his testimony could be considered perjury that would warrant a sentence enhancement for obstruction of justice, according to court documents. In the lower court's opinion, there was inadequate discussion of why the sentence enhancement was warranted and a failure to "identify any explicit findings regarding perjury," Gerard said in his appeal brief.

Meanwhile, the U.S. government argued that the rationale for the sentence enhancement was properly laid out in the lower court's opinion, clearly identifying several of Gerard's statements as false, according to its brief.

The case is U.S. v. Arthur Joseph Gerard III, case number 19-4858, in the U.S. Court of Appeals for the Fourth Circuit.

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BDO PR CPA Indicted On Wire Fraud Charges In Sting Relating To Act 20 And Act 22 Scheme

According to DoJ, on October 14, 2020, a Federal Grand Jury in the District of Puerto Rico returned an indictment charging Gabriel F. Hernández, with ten counts of wire fraud, in violation of Title 18, United States Code, Section 1343.  The indictment was unsealed after the arrest of the defendant by federal law enforcement officers from IRS-CI.

“As I have said in the past, persons who are involved in committing fraud are encouraged to come forward to authorities – that includes individuals that are fraudulently using Puerto Rico’s tax laws to evade federal taxes,” said U.S. Attorney Muldrow. 

“This Case Should Also Serve As A Warning To Anyone Considering Seeking To Evade Taxes By Illegally Exploiting Federal And Puerto Rico Tax Laws.”

“Federal and Puerto Rican tax laws have been put in place to invigorate the economy and provide financial relief to Puerto Rico.  IRS Criminal Investigation will vigorously pursue any individuals and professionals that fraudulently enrich themselves by abusing government tax incentive programs,” said Tyler R. Hatcher, Special Agent in Charge of the IRS-CI Miami Field Office.

According to allegations in the indictment, Hernández, a CPA who served as Tax Manager and Partner-in-Charge of the Tax Division of a large public accounting, tax, consulting and business advisory firm (BDO), devised a scheme to defraud the Internal Revenue Service of the United States Department of the Treasury. The scheme involved the submission of false information to the government of Puerto Rico in an attempt to fraudulently provide Company A with federal tax relief via the provisions of Act 20.

Act 20, also known as the Export Services Act, offers tax incentives for Puerto Rican companies to export services to other jurisdictions. The tax benefits on income derived from customers outside Puerto Rico in relation to services rendered from Puerto Rico included a fixed income tax rate of 4% for eligible export services, a 100% tax-exemption on dividends from earning and profits, and a 60% tax-exemption on local municipal taxes.

In December 2018, Hernández formed Company A under Puerto Rico law for an undercover special agent of the IRS-CI posing  as a wealthy United States taxpayer from Arizona. 

In December 2019, Hernández caused to be prepared and filed a fraudulent tax-exemption application with the Office of Industrial Development and fraudulently obtained Act 20 tax exemption status
for Company A.

In December 2019, Hernández also determined that Company A would report $500,000 in business earned income in Puerto Rico, which would reduce Company A’s federal taxes. Then in July 2020, Hernández caused a Puerto Rico corporate tax return for Company to be prepared and filed with the Puerto Rico Department of Treasury (Hacienda), falsely claiming that $500,000 was earned in Puerto Rico by Company A.

Hernández also caused the preparation and filing of false 2020-2021 Business Volume Declarations with the Municipality of San Juan based on the false earnings. The defendant unjustly enriched himself and others by receiving fees in exchange for these false and fraudulent acts.

The indictment further alleges that, as part of the scheme, the defendant defrauded the IRS, and unlawfully evaded the assessment and payment of taxes, by engaging in financial transactions devoid of any economic substance (sham transactions). 

The Transactions Were Intended to Create The Illusion of A Consulting Business Earning Income From Services Performed Within Puerto Rico, Rather Than Within
The Mainland United States.

The defendant and others communicated by e-mail and telephone with undercover special agents of the IRS-CI in interstate and foreign commerce as part of the scheme. The defendant and others misrepresented, concealed, and hid, acts done in furtherance of the scheme.

If found guilty, the defendant faces a maximum statutory sentence of up to 20 years in prison and a fine up to $250,000 for charges relating to wire fraud. 

• An indictment is a charging document containing allegations. 
• All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

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2nd Circ. Affirms UK Lawyer's Conviction of Aiding Clients in US Tax Evasion

On  November 26, 2018 we posted Decade Of Dodging US Taxes Gets UK Lawyer 20 Months in Prison where we discussed that English lawyer Michael Little was set to 20 months in prison on November 20, 2018 for helping the children of a deceased investor dodge taxes on their $14 million inheritance over a decade and for failing to pay his own taxes, ruling also that the former Royal Marine lied as he testified in his own defense.

U.S. District Judge P. Kevin Castel ordered Little, 68, to report to federal prison on Feb. 19. The sentence came in well below a request by prosecutors for a prison term in the range of 10 to 12 years as contemplated by official guidelines.

“Evasion Unpunished Breeds More Evasion,” The Judge Said, Saying Little’s Tax-Dodging Was Born f Greed And Arrogance But Adding He Was Unlikely To Offend Again

Upon Leaving Custody.

Judge Castel held off on the government’s request to order Little to pay roughly $4.4 million of restitution. Little contests the amount, and the matter will be briefed in coming weeks.

Now according to Law360, the Second Circuit ruled on September 30, 2020 upholding a lower court, the sufficient evidence existed to convict a U.K. attorney on charges he helped the children of a dead investor avoid taxes on their $14 million inheritance, 

The attorney, Michael Little, failed to support his argument on appeal that the lower court's jury instructions didn't match the charges in his indictment, a panel of judges ruled.

Little was sentenced to 20 months of incarceration and a one-year term of supervised release. He was also ordered to pay $4.4 million in restitution to the U.S. government.

Little appealed on various grounds. He argued that the jury instructions were so different from his original indictment that they violated his Fifth Amendment rights by amending the indictment.

The indictment had described Little's crime as assisting in the preparation of fraudulent Forms 1040 or Forms 706, the estate tax return. The court instructed the jury to determine whether Little had prepared fraudulent Forms 3520, which reports receipt of foreign gifts.

The Second Circuit disagreed. To prevail on a constructive amendment claim, defendants must show that the terms of an indictment are altered by the presentation of evidence and jury instructions, the court said. They must modify "essential elements" of the offense to the point that a defendant is indicted on one offense and convicted of another, the court said. The statute criminalizing aid in filing a false 1040 also criminalizes filing a false 3520, it said.

Little also argued his indictment charged him with failing to file a foreign bank account report for at least one bank in the Channel Islands, but the jury instructions referred to a second foreign account in the U.K. The court rejected that argument as well, finding the "essential element" of the offense was the same.

As for his failure to file FBARs, Little said evidence that he willfully failed to file the reports was insufficient. He had merely misunderstood a complex tax code, the attorney argued.

The court, however, said Little was an experienced attorney with a quarter-century of experience conducting international financial transactions. A reasonable juror could conclude his failure to comply with the law was willful, the decision said.

While agreeing with the lower court on most the merits of the case, the appeals court struck down part of the lower court's order of restitution. The trial court lacked the authority to order restitution immediately upon judgment, the Second Circuit said, citing U.S. v. Adams . 

The U.S. and U.K. governments also agreed that the U.S. had the authority to tax Little's income only for the years 2005 through 2008. The court vacated the finding that Little owed $134,000 and ordered the lower court to recalculate the amount.

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IRS Clamping Down on Financial Crimes According to 2019 Annual Report To Address Nearly $10 Billion In Tax Fraud in 2018!

In its IRS Criminal Investigation Annual Report for 2019 the IRS Criminal Investigation division found nearly $10 billion in tax fraud in fiscal year 2018, four times more than last year thanks to its focus on using data analytics. 

The unit identified $9.7 billion in tax fraud in 2018, up from $2.5 billion in 2017. The team also found $10.4 billion in other financial crimes, a steep hike from the $1.1 billion identified in fiscal year 2017. 

Bloomberg BNA  reports that Don Fort, chief of the Criminal Investigation division, said in a statement “We prioritized the use of data in our investigations in fiscal 2018.” “The future for CI must involve leveraging the vast amount of data we have to help drive case selection and make us more efficient in the critical work that we do. Data analytics is a powerful tool for identifying areas of tax non-compliance.” 

The number of special agents working on the CI team fell below 2,100 by the end of the unit’s 2018 fiscal year because of retirements and hiring freezes, leading CI to look at everything from bank records to the dark web to help investigate cases, according to the statement. 

The figures are also a testament to the Department of Justice’s crackdown on U.S. taxpayers hiding money in Swiss banks, because a “huge amount of money” is now entering the system, said Neiman, who worked at the DOJ’s tax and criminal divisions and in investigations into Switzerland’s largest bank, UBS Group AG. 

But the combined $20 million discovered in fiscal 2018 is “just the tip of the iceberg,” according to Betty J. Williams, managing shareholder of Law Office of Williams & Associates, P.C. in Sacramento, Calif. 

“Just As Quickly as Criminals Become More Crafty in the Way They Commit Crimes, The Criminal Investigation Division is Trying To Keep Up With How To Detect Those Crimes.
And While They’re Catching More Criminals,
There Are More Criminals To Catch,” said Williams

The evolution of financial crime mirrors the evolution of money movement in general, said CI Chief, Don Fort. Criminals stay current with the trends and adopt their methods to match the public’s tendencies. 

The Speed At Which Money Moves Today Is Almost Instantaneous And The Convenience That Comes With That Opens The Door For Criminals To Exploit The Latest Technological Advancements. 

Years ago, we had time on our side and we could allow things to play out without losing a trace of a criminal or their proceeds. Now, money disappears in the blink of an eye. 

All that is needed is a smartphone to move money from one location to another, anywhere in the world. The internet and the dark web have facilitated this change and law enforcement has had to make adjustments to keep up. 

CI has made significant investments in training our new employees and experienced employees and this investment is unmatched within the IRS. We instituted Master Your Craft training for special agents while introducing new specialized training for our professional staff as well. You can expect these investments to continue.

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83 Yr Old 'Panama Papers' Tax Dodger Sentenced To 4 Years in Prison

We previously posted On February 19, 2020, Former U.S. Taxpayer Pleads Guilty in Panama Papers Investigation, where we discussed that a former U.S. resident and taxpayer who was charged along with three others in connection with a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (Mossack Fonseca), a Panamanian-based global law firm, and its related entities, pleaded guilty on February 18, 2020 to wire and tax fraud, money laundering, false statements and other charges. 

Harald Joachim von der Goltz, aka “H.J von der Goltz,” “Johan von der Goltz,” “Jochen von der Goltz,” “Tica,” and “Tika,” 82, a citizen of Germany and Guatemala who last resided in Needham, Massachusetts, and Key Biscayne, Florida, pleaded guilty to one count of conspiracy to commit tax evasion, one count of wire fraud, one count of money laundering conspiracy, four counts of willful failure to file reports of foreign bank and financial accounts (Financial Crimes Enforcement Network Reports 114) and two counts of false statements. 

A Manhattan federal judge on September 21, 2020 sentenced Harald Joachim von der Goltz to Four (4) Years In Prison for his long-standing efforts to evade U.S. taxes, which were exposed by the "Panama Papers" document leak from the Mossack Fonseca law firm.

U.S. District Judge Richard M. Berman also fined him $30,000 and ordered him to pay $3.4 million in restitution to the U.S. after the 83-year-old admitted in February to nine criminal counts, including tax evasion from 2000 to 2016, fraud and making false statements.

"These are very serious offenses," said Judge Berman, noting that von der Goltz began breaking the law in his 60s. "The crimes occurred here over a very long period of time. We can't lose sight of that."

"I am Here Before you Humbled and Disgraced with a
Broken Heart," said von der Goltz.

He also faces a potentially significant IRS penalty of about $2.5 million. "The simple truth is I broke the law."

But prosecutor Nathan Rehn said von der Goltz should not derive any "advantage" at sentencing for an "egregious" crime as a result of his advanced age, because he turned up his nose at an IRS amnesty offer and kept lying before he was arrested in the U.K. and extradited to the U.S. in 2018.

Judge Berman's sentence came in below official guidelines that called for one in the range of nine years. Prosecutors had said a sentence of that length wasn't necessary, but asked for a significant period of incarceration.

Toward the end of the 2½-hour sentencing, which was conducted via videoconference, Judge Berman said the sentence came in "remarkably below" guidelines, but a home confinement sentence was not possible.

Having Then Been Given An Opportunity To Say A Final Word, Von Der Goltz Called The Prison Term "Devastating.
I Do Think I'll Die In Jail," He Said.

"At least I was able to have 83 years of the things that I did in life that I'm proud of. I'm sorry it ended up this way. But it is what it is."

Unless the defense prevails on a request to delay his surrender, von der Goltz will report to custody in 60 days, Judge Berman said.

In a statement, acting Manhattan U.S. Attorney Audrey Strauss said von der Goltz was "abetted by the specialized criminal services of the law firm Mossack Fonseca" to rip off the IRS.

Have a Criminal Tax Problem?

 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.
 

 

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or Toll Free at 888-8TaxAid (888 882-9243)