Former Billionaire Guilty of Tax Evasion

Offshore Account Update

Posted on June 15, 2016 |

In 2010, the Securities and Exchange Commission (SEC) brought charges against a billionaire named Sam Wyly. The SEC charges ended up resulting in a $300 million judgment in 2014. 

Sam Wyly filed for protection from the bankruptcy court after the $300 million judgment. Unfortunately, the problem for Sam Wyly was that his SEC judgment and subsequent filing triggered a tax assessment for failure to pay taxes on the income he happened to have held offshore.

A bankruptcy court judge has now held that the failure of Sam and his brother Charles Wyly to pay required taxes on offshore funds was a form of tax fraud. As a result, the brothers become subject to penalties for tax avoidance. These penalties could be substantial and significant financial loss could result.

The Wylys’ efforts to avoid taxes were very complex and spanned decades.  Ultimately, however, the truth came out and the Wylys are going to be forced to pay the consequences. 

This is not uncommon and anyone with undeclared offshore funds is at very real risk of the IRS coming after them.  Being proactive in addressing tax issues and having a plan in case of accusations of fraud is essential. A New Jersey criminal tax attorney can help.

Complex Tax Fraud Scheme Results in Penalties

The Wylys’ alleged tax fraud scheme was very complicated.  In 1992, the two brothers were on several boards of companies and were provided with stock options for services that they were providing to the companies. When the stock options and other compensation was received, the brothers did not want to pay substantial taxes on the wealth they were acquiring. 

A very complex plan was put into place to avoid taxation.  It included the establishment of 38 offshore corporations, 16 offshore trusts, and 10 Nevada corporations.  The Nevada corporations were owned by a trust that was held offshore and considered a non-grantor trust. A non-grantor trust, unlike a grantor trust, can sometimes make it possible not to pay taxes on trust assets.

The Nevada corporations were also not classified as being owned by the Wylys but instead were legally owned by offshore non-grantor trusts. All of these efforts amounted to a situation described as a sustained 15-year effort to avoid taxes.

The Wylys tried to cast blame onto the professionals who had advised them on the setup they had created.  However, the judge said this explanation was too glib to take seriously. The judge also said it was essential to make clear that wealthy people could not isolate themselves from the consequences of wrongdoing by simply hiring middlemen to do the task of tax avoidance.   

Anyone who is accused of creating a setup to avoid taxes, or who takes part in any tax fraud scheme, should get in touch with Kevin Thorn, an NJ criminal tax lawyer right away.   An attorney can help you understand possible consequences and penalties, as well as defenses that can help you avoid large fines. Call as soon as possible if you suspect you will be accused of tax evasion so your lawyer can get started on protecting your assets from the IRS.

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