Tax Return Preparers Indicted for Assisting in Income Tax Evasion
In a Superseding Indictment, available here,
filed June 14, 2012 in the United States District Court for the Central District of California, three of the managers (David Kalai, Nadav Kalai, and David Almog) of a tax return preparation service, United Revenue Service ("URS") were indicted. The Department of Justice has issued a press release, available here, announcing the indictment.
As the press release details, URS had 12 offices located throughout the United States. David Kalai worked primarily at URS’s former headquarters in Newport Beach, Calif., and later at URS’s location in Costa Mesa, Calif. Nadav Kalai worked out of URS’s headquarters in Bethesda, Md., as well as URS locations in Newport Beach and Costa Mesa, Calif. David Almog was the branch manager of the New York office of URS and supervised tax return preparers for URS’s East Coast locations.
The superseding indictment alleges that the defendants prepared false individual income tax returns which did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts. In order to conceal the clients’ ownership and control of assets and conceal the clients’ income from the IRS, the defendants incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two unnamed Israeli banks. The first unnamed Israeli bank is a large financial institution headquartered in Tel-Aviv, Israel, with more than 300 branches across 18 countries worldwide. The second unnamed bank is a mid-size financial institution also headquartered in Tel-Aviv, with a presence on four continents.
As further alleged in the superseding indictment, the defendants incorporated offshore companies in Belize and elsewhere to act as named account holders on the secret accounts at the Israeli banks. The defendants then facilitated the transfer of client funds to the secret accounts and prepared and filed tax returns that falsely reported the money sent offshore as a false investment loss or a false business expense. The defendants also failed to disclose the existence of, and the clients’ financial interest in, and authority over, the clients’ secret accounts and caused the clients to fail to file FBARs with the Department of the Treasury. (The FBAR form is available here. The charge is 18 USC 371, commonly referred to as a "Klien Conspiracy," available here.)
This indictment appears to be just the beginning of the Justice Departments attempts to prosecute not only those who have undeclared foreign bank accounts and under- (or un-) reported income to the IRS, but those who have assisted the taxpayers with improperly reducing (or avoiding altogether) their income tax liability to the IRS. This also appears to be one of the first prosecutions that has implicated Israeli banks. It has been widely reported that the Department of Justice has been investigating banks outside of Switzerland for aiding U.S. taxpayers in evading taxes.
In criminal tax litigation, defendants must engage a trial team that can navigate both criminal law and tax law. As federal prosecutions become increasingly sophisticated, the defense needs to keep pace with the prosecution and bring to the defense table the full array of skill sets needed to properly defend a federal indictment. The attorneys at Fuerst Ittleman have extensive tax and criminal litigation experience. The firm regularly handles matters involving civil tax litigation, criminal defense, and criminal tax defense (at the trial and appellate levels, including U.S. Supreme Court litigation). You can contact an attorney via telephone by calling us at 305.350.5690 or via email at contact@fidjlaw.com