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Failing to File FBARs Can Lead to Jail Time

Offshore Account Update

Posted on March 13, 2015 |

Anyone with money offshore must file an annual Report of Foreign Bank and Financial Accounts (FBAR).  George Landegger, chairman of the international pulp mill company Parsons & Whittemore, failed to file these FBARs for accounts he had offshore at Swiss banks. Landegger had undisclosed accounts from the early 2000’s until 2010 and at one point, the balance reached more than $8.4 million. 

According to Corporate Crime Reporter, Landegger now faces very serious penalties for not declaring his offshore funds.  Landegger has entered into a plea deal and agreed to pay $71,000 in back taxes as well as $4.2 million in civil penalties.

He could also be sentenced to as long as five years’ incarceration when the judge sentences him this upcoming May.  Landegger’s story has become one of many cautionary tales as U.S. authorities have aggressively gone after U.S. citizens who don’t report offshore accounts. Anyone who has money offshore and who has not filed FBARs should strongly consider speaking to a Boston tax attorney before they wind up facing jail time.

If You Don’t File FBARs, You Can End Up in Jail

Landegger not only failed to file FBARs, but reports indicate that he also took additional steps to try to hide his offshore accounts from the IRS. For example, in 2005, on the advice of his Swiss bankers, Landegger met with a Zurich-based lawyer and created a sham trust called Onicuppac, or cappucino spelled backwards. This trust was, on paper, the owner of Landegger’s undeclared Swiss bank accounts.

Landegger is one of many with offshore accounts and the Internal Revenue Service, Department of Justice and other authorities throughout the U.S. have been aggressively trying to find out exactly which U.S. citizens have money in foreign accounts. Investigations into banks, bankers and investors have resulted in numerous plea deals and have led to banks turning over information on their clients.

Landegger’s bankers became nervous about the crackdowns by U.S. authorities after another Swiss bank, UBS AG was the target of an investigation for allegedly helping taxpayers to maintain undeclared offshore accounts. 

A meeting was scheduled in 2009 and there was a discussion about whether Landegger should take advantage of the Offshore Voluntary Disclosure Program (OVDP) that the IRS had set up.  OVDP encourages people who have not filed FBARs to voluntarily come forward and belatedly report accounts to the IRS. In exchange for voluntary disclosure, penalties are capped and eligible OVDP participants don’t face criminal prosecution.

Landegger did not want to disclose his offshore funds to the IRS, so instead plans were made to move money out of the Swiss accounts into accounts in Canada and Hong Kong. Efforts were made to do this up through 2010.

The IRS, of course, eventually found Landegger and he faced criminal prosecution to which he pled guilty.  Other investors, as well as banks and bankers, have also admitted responsibility for their role in tax evasion schemes and many have paid large fines. Landegger is one of many investors who may be used as an example to deter people from parking money offshore and not reporting it.

U.S. authorities are going to continue their push to come after U.S. citizens with money offshore, and by the time a person is investigated, it is too late to participate in a voluntary disclosure program. To protect yourself, consider talking to Boston tax attorney Kevin Thorn today to learn about your options if you have foreign accounts and haven’t filed FBARs. 

For a consultation, contact Kevin E. Thorn, Managing Partner, at ket@thornlawgroup.com or (617) 692-2989

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