Tip of the hat to the article in Bloomberg which recently highlighted a local Los Angeles business man’s captivating cat-and-mouse method of receiving bank statements. According to the DOJ press-release, which can be found at the DOJ website:
According to the information and statement of facts, Sarshar’s relationship managers at Israeli Bank A (RM1) and at Bank Leumi (RM2) visited him frequently in Los Angeles. At his request, neither bank sent him account statements by mail, but rather, RM1 and RM2 provided Sarshar with his account information in person. For example, RM2 loaded electronic copies of Sarshar’s Bank Leumi account statements on a USB drive, which she concealed in a necklace worn during her trips to the United States. To further maintain the secrecy of his accounts, Sarshar’s meetings with RM1 sometimes occurred in Sarshar’s car. RM1 and RM2 also used these visits to Los Angeles to offer Sarshar other bank products, including “back-to-back” loans. Through back-to-back loans, which Bank Leumi made to Sarshar through its branch in the United States and which Sarshar collateralized with funds from his account at Israeli Bank A, Sarshar was able to bring back to the United States approximately $19 million of his offshore assets without creating a paper trail or otherwise disclosing the existence of the offshore accounts to U.S. authorities. At the direction of RM1 and RM2, Sarshar also obtained Israeli and Iranian passports in an effort to avoid being flagged as a U.S. citizen by the compliance departments at both banks. After receiving both new passports and still being flagged as a U.S. citizen by their compliance departments, RM1 and RM2 advised Sarshar to transfer his remaining funds to yet another Israeli bank, which he did in late 2011.
Based on the quote in the Bloomberg article, Sarshar’s own attorney had no issues with recommending he not only plead guilty, but plead early as the case was charged via an Information rather than an indictment (the difference being that information’s are done with a defendant’s consent). Given the overt acts to hide the paper trail, this was probably a wise course of action to mitigate the harm.
It is notable that Bank Leumi is one of the “bad” banks that was already identified by the DOJ (see link here) as involved in helping clients avoid taxes, which renders taxpayers unable to take advantage of some of the lower 27.5% penalty rather than a 50% penalty under disclosure procedures. Based on the plea agreement, Sarshar stipulated to the civil penalty as well.
Daniel Layton, the author of this post, is the principal of Tax Attorney OC.