Asset Search : Lawyer & Attorney : Fred Abrams Law Firm : Financial Fraud, Debt Collection : New York, NY

White-collar crime, (also known as financial crime), includes: money laundering; bankruptcy fraud; tax fraud; insurance fraud; corporate fraud; identity theft; health care fraud; public corruption; mortgage fraud and hedge fund fraud.  As partly suggested by the list of statutes at my post, "An Asset Search, Tax Fraud & Divorce", hiding assets can often lead to multiple white-collar crimes.


Perhaps attorney Stephen Yagman's June 22, 2007 conviction on one count of tax evasion, one count of bankruptcy fraud, and seventeen counts of money laundering, best demonstrates that the foregoing is true.  Between 1994 through 1997, Yagman accumulated a $158,000 tax liability for the underpayment of his personal income tax and also failed to pay some payroll tax owed by his law firm.  To avoid Internal Revenue Service collection proceedings, he hid hundreds of thousands in his girlfriend's bank and brokerage accounts and then concealed the same when he filed for personal and corporate bankruptcy.


Depending on the circumstances, foreign law can also be violated when a divorcing spouse, a debtor in bankruptcy, etc. hide their U.S. assets offshore in a Major Money Laundering Country.  As mentioned at my posts "Following The Money Trail In Zürich" and / or "An Asset Search In Switzerland", this can be true for example in Switzerland, where a bank customer opening an account  must execute a declaration of beneficial ownership of funds via a "Form A".  A Swiss criminal prosecution might be pursued if: a bank customer makes a business of parking assets in Switzerland; provides false declarations of beneficial ownership; and is perceived as a security risk / part of organized crime.


By basing a line of questions on either a foreign law violation or a white-collar crime, a lawyer may be able to impeach a testifying witness at a deposition or trial.  In some cases, a lawyer might also use evidence of a foreign law violation or a white-collar crime to apply for a temporary restraining order, a constructive trust, or an advance of forensic accounting and private investigation fees. 

Copyright 2007 Fred L. Abrams   

Money laundering typically involves disguising the source or true beneficial ownership of funds which are the proceeds of crime.  Because the white-collar crime of money laundering often extends beyond just one nation's borders, over 170 jurisdictions worldwide have adopted the anti-money laundering policies of the Financial Action Task Force.  Some nations also follow the anti-money laundering recommendations and/or policies of the Wolfsberg Group of Banks, the Basel Committee on Banking Supervision,  the Egmont Group, the European Union, or the United Nations.


Money laundering circuits are sometimes used by: individuals protecting assets from lawsuits; spouses hiding marital property during a divorce; tax evaders hiding assets; debtors in bankruptcy concealing assets from creditors; terrorists financing their activities; or other kinds of criminals hiding profits.  Any of the above activities could violate 18 U.S.C. §1956 (Laundering of Monetary Instruments); and / or 18 U.S.C. §1957 (Engaging in monetary transactions in property derived from specified unlawful activity); and / or 18 U.S.C § 1961 (Racketeer Influenced and Corrupt Organizations Act), along with other U.S. laws.


Money laundering is often described as occurring through placement, layering, and integration. Illegally obtained money is first placed into a financial system.  Layering then occurs as laundering links help disguise who the true beneficial owner of the money really is.  As the laundering "link chart" from a financial intelligence unit based in Canada partly demonstrates: bank accounts, shell corporations, and nominees may all be used as laundering links which act as the protective layers of a money laundering circuit.  Many times laundering links are located in a Major Money Laundering Country / tax haven where strong bank secrecy laws make them difficult to detect.  In its final stage, money in a laundering circuit is integrated into the financial system in the U.S. or elsewhere, after it has been washed by a series of transfers between the laundering links.


Although a back-to-back loan is one of the ways money is sometimes washed, some banks like Griffon Bank openly advertise them.  A back-to-back loan is a loan which appears to be arm's-length and for example originate in Amsterdam, but is actually fully collateralized by an earlier cash deposit in say a Curacao bank. Because of strict compartmentalization, (i.e. first the depositing of the money in Curacao and then the loan disbursement in Amsterdam), one can not see the fact that the borrower in Amsterdam is also the lender in Curacao.


Although some of the details below have been changed for privacy reasons, the following accurately depicts how "True Beneficial Owner" used a Liberian shell corporation, offshore bank accounts, and a back-to-back loan to disguise the origin of U.S. funds:                                                        
                
                                                                                                                                       
Copyright 2007 Fred L. Abrams     

According to the Federal Bureau of Investigation, the concealment of assets is "[t]he most committed offense in relationship to bankruptcy fraud investigations. Fraudulent filers understate the value of their assets so they can keep more of what they have amassed."  As the United States Trustee Manual further recognizes, there are often a number of red flags when the white-collar crime of bankruptcy fraud occurs.  There are also many different kinds of common bankruptcy frauds.  For example, was a bankruptcy used as part of a bustout in which a business acquired goods on credit without the intent of ever paying for them?  Have insiders depleted business assets long-term as in the case of a bleedout or has a pyramid scheme/investor fraud occurred?  Did the debtor fail to list assets on bankruptcy schedules in order to cheat creditors out of their fair share of the bankruptcy estate?  Was a sham creditor concocted to file a proof of claim in the bankruptcy?  Could the debtor have fabricated other kinds of debt to make him / herself appear penniless throughout a bankruptcy proceeding?


A creditor trying to recover assets from a bankrupt debtor should always ask the foregoing kinds of questions while pursuing all available legal remedies in the bankruptcy court.  Ordinary legal remedies however can often fail against a determined debtor who for instance might take advantage of strong bank secrecy laws by using a nominee as the bank signatory on an offshore bank account.   Even in such a situation, a creditor can still prevail over the debtor.  This is true because once the offshore bank account was located, the creditor could seek a court order directing the nominee to execute and supply an authorization form for  the release of the offshore bank records.  The creditor would then conceivably gain access to the debtor's offshore bank account records by presenting the executed authorization form to the bank.  


It may also be advisable to seek a "Request For Legal Assistance", (i.e. a court ordered asset search prosecuted in a foreign country), where a debtor has hidden assets in an offshore tax haven.  Furthermore, on rare occasions a defrauded creditor might prevail against a bankrupt debtor by filing a civil RICO lawsuit for "lost debt injury" pursuant to Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1105 (2nd Cir 1988).


Sometimes at the time of a bankruptcy, a debtor will cheat his/her creditors by concealing assets in domestic bank accounts or businesses.  Such was the case of Mr. Jimmy Quan, convicted May 23, 2007 of: conspiracy to conceal assets, 18 U.S.C. § 371; bankruptcy fraud, 18 U.S.C. § 157; concealment of assets, 18 U.S.C. § 152(7); making false declarations, 18 U.S.C. § 152(3); and money laundering, 18 U.S.C. § 1956(a)(1)(B)(i).  According to the Department of Justice, Mr. Quan's bankruptcy creditors lost over $5 million because he had: diverted revenue from one of his companies to a business controlled by a family member; diverted revenue from yet another of his companies to businesses controlled by both he and his wife; and also laundered money through his child's personal bank account. 


Finally, every bankruptcy matter should be carefully scrutinized to insure that a creditor receives his/her due.  This is especially important because assets can be concealed in such a wide variety of ways during a bankruptcy.


Copyright 2007 Fred L. Abrams

The white-collar crime of tax fraud is sometimes discovered when a divorce case is filed, a business dispute arises, a bankruptcy occurs, etc.  One statute applicable to many federal tax fraud prosecutions is 26 U.S.C. § 7201.  An example of such a prosecution is the indictment unsealed in the Southern District of Florida on September 10, 2007 in the case of Jorge Alberto Valdes.  There are however a number of other general tax fraud statues which may also be relevant to a tax fraud case.  According to the Internal Revenue Service, the following can be indications of a tax fraud case:

• Deliberately underreporting or omitting income.
• Overstating deductions.
• Keeping multiple sets of books.
• Making false entries in books and records.
• Claiming personal expenses as business expenses.
• Claiming false deductions.
• Hiding or transferring assets or income.
  

As of December 20, 2006, rewards for confidentially reporting the above kinds of tax violations may be increased by the IRS Whistleblower Office to 15%-30% of the total proceeds the IRS collects.   26 U.S.C. § 7623 (b) {5} & {6} however, require that: the tax fraud or underpayment involve taxes, interest, and payments greater than $2 million; the tax violator's annual income exceeds $200,000; and that the confidential tip be submitted to the IRS under the penalty of perjury.  As mentioned by a December 19, 2007 press release, a Form 211 must also be submitted to the IRS in order to qualify as an IRS whistleblower.


Furthermore, if a person can not satisfy all of the above requirements for a 20%-30% whistleblower reward, he or she might still be able to collect another kind of reward.  As explained by Publication 733 and 26 CFR 301.7623-1, the IRS sometimes pays discretionary rewards of up to 15%, (excluding interest), from what it collects because of confidential tips.  Pursuant to 31 CFR 103.62 the U.S. Treasury Secretary may also pay a reward of up to $150,000 where information about Bank Secrecy Act violations leads to the recovery of a civil penalty, criminal fine, or forfeiture over $50,000.  The Director of the FBI has similar authority to pay awards of compensation as mentioned by 28 CFR 8.3.


Finally, there are a number of ways to report a suspected tax fraud.  For example, one can provide a confidential tip to the IRS by submitting a Form 211 or by calling the tax fraud hotline at 1-800-829-0433.  One can also send a letter or Information Referral (Form 3949-A) as outlined in "How Do You Report Suspected Tax Fraud Activity?".  Before providing a confidential tip about a tax fraud, it is however always best to first consult with an attorney.  Perhaps most important is that a person providing such a tip need not proceed before the IRS or other agencies alone and unprotected when reporting a tax fraud or other violations. This is true because one may participate in the Whistleblower or other reward programs while represented by an attorney of his or her own choosing.


Copyright 2007 Fred L. Abrams