DOJ Indictment for Large-Scale Foreign Asset/Income Tax Scheme

DOJ Indictment for Large-Scale Foreign Asset/Income Tax Scheme

DOJ Alleges Large-Scale Foreign Asset/Income Tax Scheme

Recently, a 30-count indictment was unsealed in which the U.S. Government alleges taxpayer evaded taxes on more than $350 million in income.

As provided by the DOJ

Defendant Reaped $350 Million but Pretended It Belonged to his French Wife

• • • “WASHINGTON – A 30-count indictment was unsealed today in U.S. District Court charging Douglas Edelman, 72, a former defense contractor, and Delphine Le Dain, 58, his wife, with a decades-long scheme to defraud the United States and evade taxes on more than $350 million in income Edelman made as a defense contractor during the United States’ post-9/11 military efforts in Afghanistan and the Middle East. Edelman was arrested today in Ibiza, Spain, based on the U.S. criminal charges. The United States will seek Edelman’s extradition to stand trial in the United States.

    • The indictment was announced by U.S. Attorney Matthew M. Graves for the District of Columbia and Acting Deputy Assistant U.S. Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.

    •  According to the indictment, between 2003 and 2020, Edelman allegedly was the 50% owner of Mina Corp. and Red Star Enterprises (Mina/Red Star), a defense contracting business that received more than $7 billion from contracts with the U.S. Department of Defense to provide jet fuel to U.S. troops in Afghanistan and the Middle East. Working with Le Dain and several other co-conspirators, Edelman allegedly engaged in a years-long scheme to conceal his profits from Mina/Red Star, including by concealing his income in undisclosed foreign bank accounts, creating false documents, and making false statements that Le Dain who, as a French citizen residing abroad, did not have U.S. tax obligations, founded and owned Mina/Red Star. Le Dain allegedly signed some of false documents, including those that purported to “gift” Edelman money for certain personal expenses.  

    • The indictment further alleges that to carry off his scheme, Edelman conveyed this false story of Le Dain’s ownership to various arms of the U.S. government, including to a Subcommittee of the U.S. House of Representatives during a 2010 Congressional investigation, to the Department of Defense during contract negotiations, to the Internal Revenue Service in a 2015 application to the Offshore Voluntary Disclosure Program, and to the Department of Justice in a 2018 presentation. 

    • Until approximately 2015, Edelman allegedly did not file any U.S. individual tax returns and did not pay any tax on the tens of millions of dollars he was allegedly making each year from Mina/Red Star. In 2015, Edelman allegedly filed false returns for tax years 2007 to 2014 claiming that his business interests, income, and assets belonged to Le Dain. From 2015 to 2020, Edelman allegedly filed false tax returns claiming that his only income was as a consultant, and that he had no interests in any foreign businesses. 

    • The indictment further alleges that Edelman directed his profits from Mina/Red Star into banks known at the time to shield account holder identities from U.S. authorities, in countries such as Switzerland, the Bahamas, Singapore, and the United Arab Emirates.  He allegedly held the accounts in the name of non-U.S. entities created in countries such as Panama, Belize, and the British Virgin Islands. Edelman allegedly always controlled the money in these accounts and used it to fund his other business ventures around the world, including a business selling internet services to U.S. troops and contractors at Kandahar Air Base in Afghanistan, a Mexican fuel infrastructure project, and a music television franchise in Eastern Europe. Edelman allegedly also used the money to buy a ski chalet in Austria, a house in Spain, a townhouse in London, and multiple yachts—all of which were purchased in the name of nominees.

    • Edelman and Le Dain are charged with conspiring to defraud the United States and 15 counts of tax evasion. Edelman also is charged with two counts of making false statements to the United States, and 12 counts of willfully violating his foreign bank account reporting obligations, as part of a pattern of unlawful activity.

    • If convicted, Edelman and Le Dain face up to five years in prison for the conspiracy count, as well as five years in federal prison for each tax evasion count. Edelman also faces up to five years in prison for each false statement count and 10 years in federal prison for each count of willfully violating foreign bank account reporting while engaged in a pattern of unlawful activity involving more than $100,000 per year. They each face a period of supervised release, restitution, and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.”

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

This resource may help taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.