Doctor Maintained Multiple Offshore Bank Accounts at UBS and Other Foreign Banks that Concealed More than $30 Million in Income and Assets from the IRS
WASHINGTON â Dr. Patricia Lynn Hough, of Englewood, Fla., was convicted today by a jury in Fort Myers, Fla., of conspiring to defraud the Internal Revenue Service (IRS) by concealing millions of dollars in assets and income in offshore bank accounts at UBS and other foreign banks, and of filing false individual income tax returns which failed to report the existence of those foreign accounts or the income earned in those accounts, the Justice Department and the Internal Revenue Service (IRS) announced today.
According to court documents and court proceedings, Hough owned two Caribbean-based medical schools â The Saba University School of Medicine located in Saba, Netherlands Antilles, and The Medical University of the Americas located in Nevis, West Indies. Hough conspired to defraud the IRS with her husband, Dr. David Fredrick, who is awaiting trial. They carried out the conspiracy by creating and using nominee entities, including a foundation, and undeclared accounts in their names and the names of nominee entities at UBS and other foreign banks to conceal assets and income from the IRS. Both schools and associated real estate were sold on April 3, 2007, for more than $35 million, all of which was deposited into undeclared accounts in the name of the nominee entities. The majority of the sale proceeds were not reported to the IRS on their tax returns and no tax was paid.
The evidence at trial further proved that Hough and her co-conspirator used emails, telephone calls and in-person meetings to instruct Swiss bankers and asset managers to make investments and transfer funds from their undeclared accounts at UBS. The evidence established that Hough and her co-conspirator caused funds from the undeclared accounts in the names of the medical schools to be transferred to undeclared accounts in their individual names or in the names of nominee entities. Hough and her husband then used the funds in their undeclared accounts to purchase an airplane, two homes in North Carolina and a condominium in Sarasota, Fla.
Hough was also convicted of four counts of filing false tax returns for 2005, 2006, 2007 and 2008. The evidence at trial established that Hough filed false tax returns that substantially understated her total income because she failed to report substantial interest and investment income and in 2007 because she failed to report her half of the proceeds from the sale of the medical schools. In addition, Hough failed to report on Schedule B of the tax returns that she had an interest in or signature or other authority over bank, securities or other financial accounts located in foreign countries.
U.S. citizens, resident aliens and legal permanent residents of the United States have an obligation to report to the IRS on Schedule B of a U.S. Individual Income Tax Return, Form 1040, whether they have a financial interest in, or signature authority over, a financial account in a foreign country in a particular year by checking “Yes” or “No” in the appropriate box and identifying the country where the account is maintained. U.S. citizens and residents also have an obligation to report all income earned from foreign bank accounts on their tax returns.
“Today's jury verdict is another example that those who would attempt defraud the IRS by hiding income and assets in offshore accounts risk prosecution and, upon conviction, potentially significant jail time,” said Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division. “In the end, they will still owe taxes due and face severe civil penalties.”
“Dr. Hough's financial transactions were nothing more than a shell game to hide her income,” said Richard Weber, Chief, IRS-Criminal Investigation. “Her earned income was placed into foreign bank accounts to advance her tax fraud. Taxpayers participating in international tax fraud are under the watchful scrutiny of the IRS, and stopping them is one of our highest priorities."
U.S. District Judge John Steele scheduled sentencing for Feb. 10, 2013. The conspiracy count carries a maximum potential penalty of five years in prison and a $250,000 fine. The false return counts each carry a maximum potential penalty of three years in prison and a $250,000 fine.
This case was prosecuted by Trial Attorneys Caryn Finley and Leigh Kessler of the Justice Department’s Tax Division and was investigated by IRS â Criminal Investigation. Tax Division Assistant Attorney General Kathryn Keneally thanks them for their work, and also thanks the U.S. Attorney’s Office for the Middle District of Florida, Fort Myers Division, for their assistance and support in the prosecution.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax.