Criminal Penalties for Not Filing FBARS

Offshore Account Update

Posted on March 13, 2015 |

A 77-year-old CEO of an international pulp mill company faces up to five years of incarceration for failing to report offshore accounts. The CEO, George Landegger, was chairman of Parsons & Whittemore. From the early 2000’s through 2010, he kept money in offshore Swiss bank accounts. Despite the legal requirements that U.S. citizens file an annual Report of Foreign Bank Accounts (FBAR) declaring offshore investments, Landegger kept his Swiss accounts secret. 

The Internal Revenue Service found these accounts and Landegger was prosecuted for criminal tax evasion. He entered into a guilty plea that requires making back tax payments of $71,000 as well as paying civil penalties in excess of $4.2 million. The judge will sentence him for his criminal tax evasion in May of 2015. 

Landegger is one of many investors who has faced large fines and prison time for not filing FBARs. Anyone with undeclared offshore accounts needs to recognize the significant legal risk they face as U.S. authorities aggressively go after those who aren’t paying their taxes.  Now is the time to contact a skilled tax attorney for advice about your legal options if you have money offshore you have not told the government about.

Neglecting to File FBARs Can Result in Aggressive Prosecution

George Landegger had as much as $8.4 million in Swiss accounts at various times throughout the 2000’s.  He was supposed to file annual FBARS alerting the URS to this money but he never did. Instead, with the help of Swiss bankers, he reportedly took multiple steps to try to ensure that these accounts would remain secret.

Corporate Crime Reporter indicates that Landegger was advised by a Swiss bank representative to consult with a Zurich-based attorney in 2005 for help hiding the accounts. The lawyer helped Landegger to create a sham trust called Onicuppac, which is simply Cappucino spelled backwards. This sham trust was, on paper, the owner of Landegger’s offshore accounts.

Several years later, Landegger attended a meeting with executives of his Swiss bank who had become nervous about the secret accounts they’d helped create.  Another Swiss bank, UBS AG, was under investigation by U.S. authorities and an aggressive push was being made by the Internal Revenue Service and the Justice Department to fight tax evasion. The IRS and DOJ were coming after not just individual investors, but also banks and bankers who helped keep offshore accounts secret.

Because of the risks, the bank executives discussed with Landegger the possibility that he come forward and voluntarily declare his accounts. The IRS created an Offshore Voluntary Disclosure Program (OVDP) and if Landegger had decided to participate, he may have been eligible to limit the consequences of coming forward to belatedly report offshore accounts. Eligible participants who participate in OVDP are protected from criminal charges and penalties for failure to file FBARs are capped.

Landegger did not want to participate in any voluntary disclosure programs, so instead a plan was created to move his money into accounts in Hong Kong and Canada.  Efforts were made between 2009 and 2010 to empty the Swiss accounts.

The IRS, however, found out what was going on and Landegger has now been charged with a crime for which he could go to jail and for which he has already agreed to pay an enormous civil fine. Had he been an eligible participant in OVDP years ago, these consequences could perhaps have been avoided.

The IRS is very aggressively coming after people who have not filed FBARs. If you have undeclared offshore accounts, you need to act before it is too late. Contact New Jersey tax attorney Kevin Thorn to learn about your options for voluntary disclosure. 

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