Asset Search, White Collar Crime : Lawyer & Attorney Fred Abrams : Tax Fraud, Financial Fraud

While "Roger" and I were walking near Bahnhofstrasse Street, Zürich, Roger suddenly stopped and had us duck into a corner shop. Once inside the shop Roger appeared to be looking for a particular item displayed in the shop's front window, although he was really scrutinizing the outside street.  He explained afterwards how it was necessary to check if we were being followed: "But first you must choose a side street or a main street where there are not many pedestrians or traffic, not a busy thoroughfare. You take mental pictures of everyone you think could be potential followers or surveillance cars as you continue along, before entering a store with windows which will permit you to survey the street".


Roger had a knack for locating offshore financial information because of his former work as an intelligence officer. He and I were in Zürich on our way to meet my local Swiss counsel.  We were following the money trail of a husband who pretended in his divorce case to have a negative net worth. Roger had brought details of the husband's offshore finances with him, which demonstrated that the husband had hidden millions by money laundering through Switzerland.  Roger was about to share this information with me for the first time, at our meeting with the Swiss counsel.


In some cases, offshore financial information discovered during an asset search suggests that a foreign criminal law has been violated.  Sometimes in Switzerland for example, one can be criminally prosecuted for lying about the beneficial ownership of a bank account as mentioned in the attached  Swiss law memo and in "An Asset Search In Switzerland".  The concealment  of a bank account's beneficial ownership however, more often indicates a violation of U.S. criminal law through a tax fraud or money laundering.


The very existence of an offshore bank account may also persuade a domestic court to issue Letters Rogatory / Legal Assistance Requests.  As more fully described by my posts "An Asset Search In Switzerland" and "Asset Search Tips for Divorce & Child Support Cases", Letters Rogatory are sometimes necessary in order to elicit evidence about hidden assets from foreign bank or other witnesses.


Copyright 2007 Fred L. Abrams

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Parking assets offshore in one jurisdiction and then exercising control over them through another, sometimes indicates money laundering.  One example of how multiple jurisdictions were used to facilitate money laundering, is the case of  U.S.A. v. Proceeds of Crime Transferred to Certain Domestic Financial Accounts, Index # 07-CV-21791, U.S. District Court for the Southern District of Florida.  As mentioned by a July 16, 2007 press release, the Government commenced  the U.S.A. case in order to forfeit $110 million which had been part of a tainted $400 million court award in Italy.  According to both the foregoing press release and Reuters, the $400 million was tainted because the Italian Court awarded it after an interested party, (Mr. Angelo "Nino" Rovelli), had bribed its judges.


As an amended complaint in U.S.A alleged, Mr. Rovelli's wife Primarosa Battistella, had used Swiss bank accounts and three prominent lawyers, (Attilio Pacifico, Giovanni Acampora and Cesare Previti), to pay the bribes.  After Mr. Rovelli died in 1990, Ms. Battistella finally inherited the tainted $400 million in January 1994.  According to the amended complaint, she then had her accountant Mr. Pierfrancesco Munari, launder a substantial amount of it.  Mr. Munari had allegedly placed the tainted money in financial institutions and /or business entities which acted as laundering links in: the United States; the British Virgin Islands; the Cayman Islands; Guernsey; Jersey; Switzerland; Luxembourg; Liechtenstein; Singapore; the Cook Islands and Costa Rica. 


Some of the money laundered by Mr. Munari had allegedly been hidden in Florida via nineteen financial accounts. The government therefore asserted in U.S.A., that forfeiture was appropriate pursuant to the following:

• 18 U.S.C. §981 (a) (1) (A), (B) & (C)-- Asset forfeiture because of money laundering;

• 18 U.S.C. §984-- Asset forfeiture of identical property within one year of a laundering offense, etc;

• 18 U.S.C. §1956-- Money Laundering;
  

• 18 U.S.C. §1957-- Money Laundering of property from specified unlawful activity;
  

• 18 U.S.C. §2314-- Interstate or foreign transfer of property obtained by fraud;

• 28 U.S.C. §1345-- U.S. District Court jurisdiction where the Government is plaintiff;

• 28 U.S.C. §1355 (a)-- U.S. District Court jurisdiction over forfeiture proceedings;   
  

• Italian Criminal Code Articles 319ter and 321, Bribery in judicial acts.

After the judge in U.S.A. froze / restrained numerous financial accounts in July 2007, Ms. Battistella and other Rovelli family members eventually executed a settlement agreement consenting to the forfeiture of thirteen accounts.  As Mr. Munari's own settlement agreement further demonstrates, he too consented to forfeit an additional four accounts.  Although on November 21, 2007 the Court issued a Final Judgment of Forfeiture regarding the total of seventeen financial accounts, there may still be some unresolved issues.  According to Forbes.Com, a grand jury has been convened in Florida to examine whether Mr. Munari's money laundering scheme criminally involved: Wachovia; Citigroup; Merrill Lynch; Morgan Stanley; Lazard and others. 


Copyright 2007-2008 Fred L. Abrams

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As my post  "Divorce, Child Support & Reporting Tax Fraud" mentioned, divorcing spouses sometimes tip the IRS about a suspected tax fraud.  Mrs. Benjamin for example, tipped the IRS because she thought that her divorcing husband had underreported revenue from his commercial maintenance and landscaping business.  She specifically provided the IRS with the business documents Mr. Benjamin had produced during the pre-trial discovery phase of their divorce case.  These documents included payment summary records from Mr. Benjamin's customers like Wal-Mart.  As part of her tip to the IRS, Mrs. Benjamin also turned over joint tax returns which Mr. Benjamin had supposedly filed for the years 1998 and 1999. 


A records check at the IRS however demonstrated that the 1998 and 1999 joint tax returns had never actually been filed by Mr. Benjamin.  The IRS also learned that from 1997 through 2001, Mr. Benjamin had neither paid income tax nor filed state or federal income tax returns.  IRS Special Agents then received false information from Mr. Benjamin when they interviewed him at his home on June 26, 2002.  The IRS also reviewed Mr. Benjamin's bank accounts and conferred with Wal-Mart along with Mr. Benjamin's other customers.  As a consequence of its asset search and tax fraud investigation, the IRS finally determined that Mr. Benjamin's total gross receipts or sales between 1998 and 2001 had actually been about $1,139,470.18; and that Mr. Benjamin had a $129,396.91 tax liability.
 

The IRS further recognized that Mr. Benjamin had hidden assets and income by: pocketing cash payments from customers; paying personal expenses from a business bank account; and cashing customers' checks instead of depositing them into his bank account.  During its investigation, the IRS additionally discovered that Mr. Benjamin had defrauded Wal-Mart through a false invoicing scheme.  By seeking payment for services he had never performed, (and faxing Wal-Mart twenty-two phony invoices between February 2001 and January 2002), Mr. Benjamin had duped Wal-Mart out of $417,583.


The IRS criminal investigation started by Mrs. Benjamin's tax fraud tip eventually led to Mr. Benjamin's fifty eight count indictment on July 27, 2005 in U.S.A. v. Benjamin, Index # 05-Cr-00348, U.S. District Court, District of Colorado.  Pursuant to his January 5, 2006 plea agreement, Mr. Benjamin pleaded guilty to violating 26 U.S.C. § 7201 (tax evasion) and 18 U.S.C. § 1343 (wire fraud).  Because of his white-collar crimes, Mr. Benjamin was sentenced on June 16, 2006 to serve two years in prison followed by three years of supervised release.  As Mr. Benjamin's sentence and criminal judgment both mentioned, he was also directed to pay a $200 special assessment and to start making restitution payments to Wal-Mart after his release from prison.


Copyright 2007 Fred L. Abrams

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According to a press release, Mr. Walter Anderson's tax fraud resulted in the "largest personal income tax evasion case brought by the Department of Justice".  Pursuant to his September 8, 2006 plea agreement, telecommunications entrepreneur Walter Anderson pleaded guilty to violating two counts of 26 U.S.C. § 7201 (Attempt to evade or defeat tax), and one count of Title 22 District of Columbia Code § 3221 {a}, (Fraud in the first degree).  The Court sentenced Mr. Anderson on March 27, 2007 to nine years of prison for his failure to report about $365 million in income between 1995 and 1999; and also ordered him to pay the District of Columbia restitution in the amount of $22,809,032.


The superseding indictment filed on September 30, 2005 essentially alleged that Mr. Anderson had hidden his undeclared revenue through offshore shell companies and bearer shares, (i.e. negotiable stocks filled out in the name of the "bearer", for which no register of ownership is kept).  According to the specific allegations in his indictment, Mr. Anderson had hired Arias, Fabrega & Fabrega Trust Co. (BVI) to first secretly incorporate a nominee shell company for him known as Gold & Appel Transfer, S.A.  He then used Gold & Appel in connection with his ownership of other shell companies, as partly demonstrated by the attached stock certificate from Aurora Telecommunications Limited.  For example, by owning the bearer shares of a shell company called Iceberg Transport, S.A., (which in turn owned the stock of Gold & Appel), Mr. Anderson concealed the hundreds of millions he beneficially owned via Gold & Appel.


Given the hundreds of millions hidden by Mr. Anderson, I thought about the tax gap. The tax gap is the difference between the overall amount of tax revenue the Internal Revenue Service receives compared to what it estimates it is actually owed. The latest figures published in "Reducing The Federal Tax Gap" dated August 2, 2007, indicate that the tax gap was estimated to be $345 billion in 2001.  That amount however has since been reduced to $290 billion because of Internal Revenue Service enforcement efforts and its receipt of late payments.  I then wondered how many there were that still remained, who were just like Walter Anderson.


Copyright 2007 Fred L. Abrams

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With more than 90 national chapters / chapters-in-formation since its founding in 1993, Transparency International is a lead group in the fight against the global white-collar crime of public corruption.  Transparency International publishes an annual "Corruption Perception Index" which ranks countries on a scale of "1" to "10" based on the perceptions of businessman and analysts.   A country ranked as a "10" would be considered to be "highly clean"; while a rank of  "1" would indicate a "highly corrupt" country.   For example, Transparency International's 2007 Corruption Perception Index ranked Myanmar and Somalia at the very bottom of its list with a score of only "1.4".  Denmark, Finland, and New Zealand however had the highest score of "9.4".  Meanwhile, the United States was assigned a score of "7.2".

 
The Transparency International website additionally explains that corruption is "the abuse of entrusted power for private gain. It hurts everyone whose life, livelihood or happiness depends on the integrity of people in a position of authority."  Its website also describes the two distinct kinds of corruption, "according to rule" and "against the rule".   When a bribe is paid for services the bribe recipient is required by law to provide, then "according to rule" corruption has occurred.  "Against the rule" corruption has occurred when a bribe is paid for services the bribe recipient is prohibited from providing.


As has been widely reported, a corruption case was recently brought against Bernard Kerik, who formerly led the largest police department in America as New York City's 40th Police Commissioner.  According to both the U.S. Attorney and Mr. Kerik's sixteen count indictment, Mr. Kerik was the secret beneficiary of $250,000 in apartment renovations paid for by the principals of construction and waste management companies who sought contracts from New York City.  In consideration of said renovation payments, Kerik allegedly lobbied officials to award the sought after contracts.  Some of these payments are claimed to have been made even after Kerik had been sworn in as the Police Commissioner.  According to a government tax fraud chart, the U.S. Attorney has further alleged that Mr. Kerik also committed tax frauds involving at least $667,222.


As a review of Mr. Kerik's indictment reveals, Mr. Kerik is essentially charged with committing the following white-collar crimes:

• 18 U.S.C. §1014, False statements on a loan application.
• 18 U.S.C. §1001, False statements to the federal government.
• 18 U.S.C. §1341, Mail fraud.
  
• 18 U.S.C. §1343, Wire fraud.
• 18 U.S.C. §1349, Conspiracy.
  
• 26 U.S.C. § 7212 (a), Attempts to interfere with administration of internal revenue laws.
• 26 U.S.C. §7206 (1), Perjury / false statements in a tax return.
• 26 U.S.C. §7206 (2), Aiding the making of false statements in a tax return.

Copyright 2007 Fred L. Abrams

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