DOJ Seeks 10-Year FBAR Sentence for Tax Amnesty Fraud

US Seeks 10-Year Criminal FBAR Sentence for Tax Amnesty Fraud

A Criminal FBAR Sentence for Tax Amnesty Fraud Explained

The majority of the time, when a U.S. person fails to file their annual FBAR (aka FinCEN Form 114) — in order to report foreign bank and financial accounts — it is a civil violation and not a criminal violation. At worst, taxpayers are subject to willfulness penalties — and while this may result in significant monetary fines and penalties, it does not lead to any incarceration. And, even though FBAR violations can turn criminal, the U.S. government typically is not out for blood. But, based on the recent sentencing memo submitted by the US government in the criminal FBAR case of Gyetvay, if the US government believes that the violation is aggravated by the facts and circumstances surrounding the non-compliance it could lead to them seeking a significantly longer sentence than they typically would for FBAR violations. Let’s walk through the government sentencing memorandum submitted in the case of Gyetvay, to get an idea of why the IRS has become so aggressive in its sentencing request.

The Taxpayer was an Accountant

• • • “Gyetvay is an accountant and experienced business professional who, over the course ofa decade, utilized a series of secret Swiss bank accounts to criminally hide his income and over $93 million of assets from the Internal Revenue Service; willfully failed to file timely tax returns; filed false tax returns that fraudulently omitted tens of millions of dollars of income; willfully failed to file FBARs; and lied repeatedly to his United States-based tax preparers. Finally, after all of that conduct, Gyetvay made blatantly false statements to the IRS by claiming in his sworn Streamlined Procedures certification that his previous failure to file tax returns and FBARs was attributable to “non-willful” conduct.

    • Following his 1981 graduation from Arizona State University with a degree in accounting, Gyetvay has spent virtually his whole professional career providing sophisticated consulting and accounting-related services for large energy companies throughout the world.”

Govt. Alleges False Non-Willful Streamlined Application

• • • “The reason behind Gyetvay’s false Streamlined Procedures filing was the same as what animated his other tax and FBAR crimes: unadulterated greed. Indeed, just as his prior false tax reporting and utilization of Swiss accounts were designed to evade paying the IRS the full measure of taxes he owed, his false Streamline Procedures filing was designed to evade the tax and FBAR penalties he otherwise would have been required to pay had he entered the IRS’s other offshore reporting initiative—the Offshore Voluntary Disclosure Program (“OVDP”)—or had the IRS detected his conduct and assessed civil penalties against him.”

The U.S. Dislikes Swiss Bank Accounts

• • • “Although Gyetvay deposited the $9 million of cash from the exercise of the Call Option into the Opotiki account at Coutts, he originally planned to utilize a separate Swiss account to hold those funds. GX 68c. More specifically, in or about December 2007, Gyetvay caused a second account to be opened at Coutts, again with the help of MWM’s Allan Cooper, who caused the incorporation of a nominee foreign company named Felicis Commercial Corp. (“Felicis”) in the British Virgin Islands. Coutts’ Know Your Customer (“KYC”) documentation for the Felicis account reported that the expected size of the account was approximately 9 million “USD,” and the intended use of the account as follows: “The account will be used to hold funds received when the BO exercises a call option in SWGI Growth Fund, which he holds.”

Failure to File FBAR

• • • “For the calendar year 2014, Gyetvay failed to comply with the FBAR requirement because the FBAR he personally prepared and filed in June 2015 willfully omitted the Opotiki account—despite the fact that the Opotiki account had a high balance of $8,558,452 during 2014 calendar year. GX 55 (amended FBAR for 2014). This conduct formed the basis of Gyetvay’s conviction on Count Thirteen. Notably, Gyetvay also falsely claimed on that FBAR that he had only “signatory” authority over the Felicis account, when, in truth, he had an ownership interest.”

Misrepresentations to the IRS

• • • “The proof at trial demonstrated that Gyetvay filed tax returns for 2005 through 2008 that were not only years late but were also materially false in various ways. In 2008, Gyetvay hired a specialized group at PWC to prepare his years-late 2005 tax return. This group at PWC specialized in preparing tax returns for clients who lived and worked abroad. Gyetvay failed to disclose his Swiss bank account to the PWC accountants, despite it being a required disclosure on Schedule B attached to the return. He also willfully failed to file an FBAR, even though the PWC accountants provided him with a blank form and separately reminded him of the requirement in an email. Gyetvay failed to file his 2005 return until August 2008.

    • In mid-2010, Gyetvay hired an Atlanta-based accountant, Alex Knight, to preparehis 2006-2009 tax returns.2 To start the return preparation process, Knight sent Gyetvay annual tax organizers to understand his income and tax obligations for 2006-2008.Gyetvay repeatedly lied on these organizers and separately provided false information in response to questions Knight and his colleague posed to Gyetvay. For example, Gyetvay repeatedly—and falsely—understated his wage income from Novatek. He also falsely reported to Knight that he did not exercise any call options in 2007 when he in fact did— and which, as detailed above, resulted in over $43 million of income.”

Sentencing Guidelines

• • • “One of the paramount factors that the Court must consider in imposing sentence under Section 3553(a) is the need for the sentence to “afford adequate deterrence to criminal conduct.” 18 U.S.C. § 3553(a)(2)(B). General deterrence is vitally important in cases like this because it is essential to reducing the ever-increasing amount of money lost each year through tax fraud. According to the IRS, “the underreporting of business income by individual taxpayers—income of sole proprietors, farmers and those earning rental, royalty, partnership, and S Corporation income—is a major contributor” to the “Gross Tax Gap (the amount of ‘true’ tax that is not paid voluntarily or timely),” which the IRS estimates at approximately $441 billion annually.

    • On the facts of this case, involving a defendant who engaged in a breathtaking taxfraud borne not of necessity but unmitigated greed, a 121-month sentence is entirely appropriate and eminently just. In the parlance of the Guidelines, such a sentence would be sufficient but not greater than necessary to comply with the statutory imperatives of the sentencing statutes.”

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. 

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.