Department of Justice Seal Department of Justice
FOR IMMEDIATE RELEASE
WEDNESDAY, APRIL 9, 2014
WWW.USDOJ.GOV
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(202) 514-2007
TDD (202) 514-1888

JUSTICE DEPARTMENT HIGHLIGHTS TAX DIVISION'S ENFORCEMENT RESULTS

Success Demonstrated in Critical Enforcement Areas Including Fraud, Abusive Tax Shelters, Offshore Evasion and Identity Theft as 2014 Filing Deadline Approaches

WASHINGTON – With the annual tax filing deadline approaching on April 15, today the Justice Department announced highlights of its work during the past year to enforce the nation's tax laws. The Tax Division has worked with the Internal Revenue Service (IRS) to carry out their combined tax enforcement missions in critical areas, including prosecuting tax fraud and evasion, halting the spread of abusive tax shelters, tracking down tax cheats who use offshore accounts and combating stolen identity refund fraud. Previously, the division announced that it has shut down more than 60 fraudulent tax preparers over the past 12 months.

The division's primary purpose is to enforce the nation's tax laws fully, fairly and consistently through both criminal and civil litigation. Some of the division's accomplishments from the past fiscal year (FY 2013) include:

"The taxes paid by honest taxpayers pay for important government functions, from support for our military to the operation of our national parks," said Assistant Attorney General Kathryn Keneally. "Those who would cheat their neighbors and fellow citizens should know that we are committed to enforcing the tax laws. The department will continue to use all available law enforcement tools to recover tax revenue and to punish tax offenders."

"The IRS and Justice Department continue to make important progress on issues ranging from identity theft and offshore evasion to fraudulent return preparers and abusive tax shelters," said IRS Commissioner John Koskinen. "As the April 15 deadline approaches, taxpayers should remember that we are working year-round to ensure that everyone plays by the rules and follows the law. The hard work of the Justice Department and the IRS can be seen in the long list of criminal and civil tax enforcement actions across the country during the past year."

Prosecuting Tax Offenses

The division has supervisory authority over all criminal conduct involving federal tax laws. The division has always maintained the investigation and prosecution of tax crimes as a central focus, including tax evasion, failure to file returns, submission of false tax returns and other conduct designed to violate federal tax laws. Division attorneys are also particularly adept at prosecuting tax defiers, individuals who purposefully refuse to comply with tax laws and use frivolous arguments to support their positions.

Some of the division's criminal tax prosecution highlights from the past 12 months include:

Stopping the Spread of Tax Shelters

The division also plays a critical role in the government's efforts to combat abusive tax shelters. According to U.S. Treasury estimates, abusive tax shelters for large corporations and high-income individuals cost the government billions of dollars annually. In recent years, the division's civil litigators at both the trial and appellate levels have won important victories in cases involving tax shelters with names such as STARS, Son of BOSS, FOCus, BLIPS, OPIS, DAD and SILO/LILO.

Some of the division's successes over the past 12 months include:

Investigating Offshore Evasion

The division continues to play a leading role in investigations and prosecutions involving the use of foreign tax havens and remains committed to investigating offshore tax evasion around the globe. The division's current offshore program began in 2008, with the investigation of UBS, which resulted in the 2009 UBS deferred prosecution agreement. In January 2013, the U.S. Attorney's Office in the Southern District of New York secured the guilty plea of Wegelin Bank, the oldest private bank in Switzerland and the first foreign bank to plead guilty to felony tax charges. In July 2013, Liechtensteinische Landesbank AG, a bank based in Vaduz, Liechtenstein, entered into a non-prosecution agreement and agreed to pay more than $23.8 million stemming from its offshore banking activities and turned over more than 200 account files of U.S. taxpayers who held undeclared accounts at the bank.

Since 2009, the department has publicly charged 74 account holders and 38 bankers and advisors with violations arising from offshore banking activities. So far, 61 account holders have pleaded guilty, seven were convicted at trial and five await trial. Six bankers and financial advisors have pleaded guilty and several are fugitives. In October 2013, Raoul Weil, formerly the third highest banking official at UBS and the subject of a 2008 indictment for his role in assisting U.S. clients to evade taxes, was arrested in Italy, waived extradition and is now awaiting trial.

Additional highlights from the division and the U.S. Attorneys' Offices include:

The department is also successfully using a variety of law enforcement tools to gather information for use in future enforcement efforts. In two separate actions in 2013, the U.S. District Court in the Southern District of New York authorized the IRS to issue "John Doe" summonses to several U.S. banks that hold correspondent bank accounts for Wegelin & Co., Zurcher Kantonalbank and The Bank of N.T. Butterfield & Son Limited through which the foreign banks move money into and out of the United States. The division secured a similar order from the U.S. District Court in the Northern District of California relating to a U.S. account used by Canadian Imperial Bank of Commerce FirstCarribean International Bank. Together, the summonses will allow the U.S. government to determine the identity of U.S. taxpayers who may hold accounts in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland and the United Kingdom.

The department also announced a program on Aug. 29, 2013, that encouraged Swiss banks to cooperate in the department's ongoing investigations of the use of foreign bank accounts to commit tax evasion. The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the Program) allows Swiss banks not currently under investigation to come forward to provide cooperation and pay steep penalties in return for the possibility of a non-prosecution agreement or deferred prosecution agreement. The Program expressly excluded banks that were previously authorized for investigation in connection with their Swiss banking activity, 14 at the time of the announcement, and expressly excludes all individuals. The department has received over 100 letters of intent to participate in the Program from Swiss entities. Every Swiss bank that cooperates under the Program represents an opportunity to obtain valuable law enforcement information.

Combating Identity Theft

The division, in conjunction with the IRS and U.S. Attorneys nationwide, has made the investigation and prosecution of individuals who engage in stolen identity refund fraud (SIRF) a high priority. The division is targeting individuals involved in all stages of these schemes, including those who illegally obtain Social Security numbers and other personal identifying information, those who file the false returns with the IRS, those who facilitate cashing the checks or otherwise obtaining the refunds and those who mastermind or promote these scams.

Some highlights of the division's success in this area include:

Return Preparer Fraud

Corrupt accountants and fraudulent tax return preparers present a serious law enforcement concern. Some accountants and return preparers dupe unwitting clients into filing fraudulent returns, while others serve as willing enablers by providing a veneer of legitimacy for clients predisposed to cheat. The division's civil injunction program, now more than 10 years old, continues to be an effective way to shut down fraudulent return preparers and illegal tax-scheme promoters – especially during filing season – thereby reducing the harm to the public while potential criminal investigations are ongoing. In February, the division announced recent successes in its civil injunction program including more than 60 injunctions entered against both large-scale tax return preparation franchises and smaller, independent return preparers and promoters across the country.

Some of the division's successes include:

Hiding income offshore, identity theft, and return preparer fraud are all part of the IRS's "Dirty Dozen Tax Scams." More information about the Tax Division's civil and criminal enforcement efforts in these and other areas is available on the Justice Department website. For more on the Dirty Dozen Tax Scams, see the IRS website and the IRS YouTube Channel.

 

 

 

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