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Federal Prosecutors Appeal Probation Sentence in Offshore Tax Evasion Case

Federal Prosecutors Appeal Probation Sentence in Offshore Tax Evasion Case

A panel of three federal judges is now considering whether an American businessman should get prison time for tax evasion related to about $24 million in unreported income earned from two Swiss bank accounts. Last year, the man pleaded guilty to one count of tax evasion and received a probation sentence. A Chicago judge also ordered him to serve 500 hours of community service at local area schools. In a rare sentencing appeal, federal prosecutors asked the nation’s Seventh Circuit to instead remand the businessman to a federal penitentiary. If the panel of judges agrees, the businessman faces one year to 57 months behind bars.


According to prosecutors, the man avoided paying more than $5.5 million in federal income taxes by hiding up to $107 million overseas for more than 10 years. Although about half of individuals who are convicted of similar crimes receive a probation sentence, prosecutors stated they sought appellate review of the businessman’s sentence in an effort to deter other would-be tax evaders.



The case reportedly arose after the United States government conducted a five-year investigation into American taxpayers who failed to pay income tax on foreign financial accounts. Prior to his indictment, the businessman apparently attempted to enter the Internal Revenue Service’s Offshore Voluntary Disclosure Program (OVDP). Prior to trial, the businessman filed amended tax returns for 1999 through 2008 and paid approximately $14 million in back taxes and interest. The man also incurred a civil penalty of about $53 million.


The OVDP was established in 2009 to allow a U.S. taxpayer who previously failed to report overseas assets to come into compliance with the nation’s federal income tax laws. Since the OVDP went into effect, the IRS has collected more than $6.5 billion in unpaid taxes from about 45,000 foreign financial account holders through the program. In addition to facing possible criminal penalties, taxpayers who choose not to disclose overseas financial assets with a banking institution that has been publicly identified as being under examination by the U.S. or that is cooperating with a U.S. government investigation are subject to a penalty of up to one-half of the foreign account’s highest value.


Southern California residents who have an undisclosed ownership interest in an offshore financial account should consider using the OVDP to become compliant with our nation’s federal income tax laws. If you have questions about your international tax law obligations, international tax attorney William Hartsock may be able to help. Mr. Hartsock is a certified tax law specialist with over three decades of experience advising clients in San Diego about international tax law matters. To discuss your situation with a knowledgeable tax lawyer, please call William Hartsock at (858) 481-4844 or contact him online.


Additional Resources:

Prosecutors in Warner tax evasion case grilled by appeals court judges, by Becky Yerak, Chicago Tribune


Beanie Baby Maker Ty Warner Tax Sentence Appealed by U.S., by David Voreacos and Andrew Harris, Bloomberg



Photo Credit: keyseeker, MorgueFile

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