Fort Lauderdale Tax Law Blog

The FBI and IRS arrested eight defendants today, including three former NFL players, with obtaining and cashing fraudulently obtained tax refund checks.  The agents set up a fake storefront that allegedly was in the check cashing business. Per the various complaints, the FBI operated the financial services store in North Miami and they cashed more than $500,000 worth of tax refunds.   

From Jay Weaver at the Miami Herald:

Two ex-National Football League players and a former Miami high school star have been arrested by the FBI on federal charges in connection with an alleged scheme to steal people's identities and file false tax returns in others' names to collect thousands of dollars in refunds, according to authorities.

The two ex-NFL players charged with defrauding the federal government and ID theft are: William Joseph, a University of Miami defensive tackle drafted in the first round by the New York Giants in 2003, and Michael Bennett, a University of Wisconsin running back also drafted in the first round by the Minnesota Vikings in 2001.

The third defendant, Louis Gachelin, is the half-brother of Denver Broncos star Elvis Dumervil. Gachelin was a standout at Miami Jackson High and Syracuse University as a defensive lineman and signed as a free agent with the New England Patriots in 2004. But he never made the final roster. Gachelin played in 2005 for NFL Europe's Frankfurt Galaxy.

Joseph and Gachelin grew up in Miami; Bennett was born in Milwaukee.

All three were questioned after their arrests Monday by FBI agents at the bureau's North Miami Beach regional office. They were then transferred to the Federal Detention Center in downtown Miami for court appearances Tuesday afternoon before U.S. Magistrate Judge Robert Dube, according to the clerk's office. Details of the alleged scheme are expected to be disclosed in a criminal complaint to be released later Tuesday.

Renunciation is on the rise.  Reuters has an intersting article on the uptick in Americans handing in their passport and saying goodbye to United States citizenship.  

Not surprisingly, there can be significant tax consequences for renouncing your citizenship.   A virtual sale of all assets takes place in certain instances and before your renunciation can be accepted, you have to be tax compliant.   

According to the article, folks are renounciating, in part, because of the new Foreign Account Tax Compliance Act (FATCA), which will require foreign banks to make 1099 type reporting for United States clients.   FATCA is very controversial and it will make it very difficult for Americans living overseas to open a bank account anywhere in the world without consenting to certain tax reporting.  

Renounciation seems to be very popular among dual citizens living in Canada who find themselves having to comply with US tax reporting requirements without ever living or working in the United States.   

As reported in the national media, the Swiss courts threw a monkey wrench into the government's efforts to crack down on offshore tax evasion by rejecting the Department of Justice's Mutual Lateral Assistant Treaty (MLAT) request for certain account information.   As discussed in my prior blog entry, the ruling impacts the disclosure of certain accounts held in the name of domiciliary companies which contained United States securities and in which a US person is the beneficial owner.      

What does this ruling really mean for the US law enforcement efforts?  

I think in the short term it is a set back for the Department of Justice as many are left wondering whether Swiss bank privacy will survive the US government's latest attack.   However, I think the Swiss court ruling will now arm the more aggressive prosecutors with ammunition to push harder.  

Prosecutors must balance enforcing the laws of the United States with maintaining relationships with foreign countries.   In fact, within the Department of Justice there is an Office of International Affairs whose responsibility is to ensure that US international law enforcement efforts do not offend our international friends.  The treaty request for certain Credit Suisse data appears to have been made as an effort to strike this balance by allowing the Swiss to internally decide whether they could produce certain account data.

Now that the treaty request has been rejected, the Department of Justice may attempt to gather the information through more unilateral action, like a John Doe Summons or a Bank of Nova Scotia Subpoena.  If these unilateral actions are taken, the jurisdiction to determine what accounts, if any, are to be turned over would shift from Switzerland to the United States.   Click here for a discussion on John Doe Summonses and Bank of Nova Scotia Subpoenas.   

To sum up, I think this decision will give the hawks within the Department of Justice ammunition to try and convince others that they need to be more aggressive in dealing with the Swiss banks.  If the DOJ gets more aggressive, the efforts to combat offshore tax evasion may heat up.   Stay tuned.

Check out Jack Townsend's thoughts on the issue here.  

Here we go again: 

In a surprise ruling yesterday, a Swiss Court refused to green light the disclosure of a Credit Suisse client's account data to the United States.   Citing the distinction between "tax evasion" and "tax fraud," the Court held back the data which was made pursuant to a Mutual Lateral Assistance Treaty (MLAT).   

Bloomberg is reporting on the story here.  NY Times reports here. 

I think this is a big blow to the United States.   It appears the ruling affects all Credit Suisse accounts held in the name of a domiciliary company (i.e. BVI company, Liechtenstein Foundation) with a US beneficial owner with US securities and with which the Form W-9 is not associated.  

The Swiss have ratified a new treaty with the United States that would have allowed for the transfer of data, but the treaty has yet to be ratified by the US Senate.   

The opinion can be found here.  

Americans with overseas accounts can still come take advantage of the IRS Voluntary Disclosure Program until their name is known to the IRS.