Originally published by Jack Townsend.
In Whistleblower 21276-13W v. Commissioner, 144 T.C. No. 15 (2015), here, the Tax Court held that the IRS Whistleblower Office must consider a claim that the whistleblower made after informing Government criminal investigators and the resulting criminal prosecution and guilty plea. That is an interesting and important holding in and of itself. I provide the following synopsis of the opinion provided by the Tax Court:
P-H was arrested for participating in a conspiracy to launder money. To minimize his punishment, P-H informed Government agents, including Internal Revenue Service (IRS) agents, that a foreign business (the Targeted Business) assisted U.S. taxpayers in evading Federal income tax. P-H told the Government agents that the Targeted Business had no presence in the United States and instructed its personnel to stay out of the United States. Although he did not have documentation sufficient to inculpate the Targeted Business, P-H was aware of an individual who did.
Because the individual (X) was outside the United States, P-H and P-W designed a plan to induce him to come to the United States. In executing the plan, P-W met with X and persuaded him to enter the United States. Upon entering the United States, X was arrested. While in custody, X agreed to assist the United States in its pursuit of the Targeted Business. After his release, X tried to back out of his agreement. But after meeting with P-H, X agreed to follow through on his commitment. In part because of X’s assistance, the Targeted Business was indicted, pleaded guilty, and paid the United States approximately $74 million.
Ps filed separate Forms 211, Application for Award for Original Information, with the IRS Whistleblower Office, seeking awards under I.R.C. sec. 7623(b). The forms were filed after the Targeted Business pleaded guilty and paid the United States $74 million.
Upon receipt, the IRS sent Ps’ Forms 211 to its Ogden, Utah, Service Center, where a classifier noted that the forms were filed after the United States collected proceeds from the Targeted Business. On that basis, the Whistleblower Office rejected Ps’ award applications and sent Ps separate award determination letters stating that no proceeds had been collected using the information Ps submitted.
The IRS asserts that the Tax Relief and Health Care Act of 2006, Pub. L. 109-432, div. A, sec. 406(b), 120 Stat. at 2959 (TRHCA sec. 406(b)), provides the Whistleblower Office with exclusive discretion to either investigate the taxpayer or refer the information provided by the whistleblower to an IRS operating division. The IRS further asserts that under TRHCA sec. 406(b) a whistleblower is ineligible for an I.R.C. sec. 7623(b) award if he/she provides the information to an operating division of the IRS before submitting the information, via a Form 211, to the Whistleblower Office.
Held: TRHCA sec. 406(b) does not endow the Whistleblower Office with exclusive authority to investigate the individual or entity that is the subject of an application for an award. The fact that Ps supplied their information to other Federal agencies, including an IRS operating division, before submitting the information to the Whistleblower Office on Form 211 does not, as a matter of law, render Ps ineligible for an award under I.R.C. sec. 7623(b).
Perhaps most interesting for many readers of this blog is that the underlying criminal prosecution and guilty plea appears to involve Wegelin Bank, the Swiss Bank that met its demise for its U.S. tax cheat enabler activities. (See links to Federal Tax Crimes Blogs at end of this blog entry.) Opinions in Whistleblower cases often are written to avoid disclosing who the whistleblower is and hence some of the facts are cryptically stated. Here are some snippets:
[A] a foreign business (the Targeted Business) assisted U.S. taxpayers in evading Federal income tax.
* * * *
[T]he Targeted Business was organized like a general partnership, with no liability protection for its owners. Petitioner husband believed that were the United States to bring criminal charges against the Targeted Business, its partners would settle in order to avoid the loss of business to the Targeted Business, as well as to avoid personal liability.”
* * * *
The Targeted Business was indicted, with a subsequent superseding indictment, for conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret accounts, and the income generated therefrom, from the IRS. The Targeted Business pleaded guilty, as petitioner husband predicted. As part of its guilty plea, the Targeted Business paid the United States approximately $74 million.”
Tax Notes Today has an article Andrew Velarde and William R. Davis, $1.2 Billion Secret Account Whistleblowers are Award Eligible, 2015 TNT 106-3 (6/3/15), no link available. In the article, the following is stated:
Although the decision does not explicitly name Wegelin & Co., referring only to the indictment and guilty plea of the “Targeted Business,” the facts outlined in the opinion match those of the Swiss bank, which previously pleaded guilty to conspiracy to evade taxes. According to a Justice Department release * * * Wegelin hid more than $1.2 billion in secret accounts and paid the U.S. $74 million, facts that the opinion also cites.
The Justice Department release on Wegelin is here. In part here pertinent, it says: “Together with the April 2012 forfeiture of more than $16.2 million from WEGELIN’s U.S. correspondent bank account, this amounts to a total recovery to the United States of approximately $74 million.”
After posting this article, a reader gave me also this link: Leigh Baldwin, Former Wegelin Banker Held By FBI Admitted to Aiding Tax Evasion (BloombergBusiness 3/6/11), here. The facts parallel those in the case.
Finally, I am sure that there are other whistleblowers with respect to foreign banks, particularly Swiss banks. Should be some significant awards over the next few years. And, of course, Bradley Birkenfeld got to the big one. See Birkenfeld Gets $104 Million Whistleblower Award (Federal Tax Crimes Blog 9/11/12), here. For all Federal Tax Crimes Blog posts on Birkenfeld, see here.
For key posts on Wegelin, see
- Wegelin Indicted in SDNY with Money Laundering Forfeiture (Federal Tax Crimes Blog 2/2/12), here.
- Wegelin U.S. Bank Assets Forfeited (Federal Tax Crimes Blog 4/25/12), here.
- Wegelin & Co. Pleads Guity to Conspiracy (Federal Tax Crimes Blog 1/3/13), here.
- Wegelin Sentenced (Federal Tax Crimes Blog 3/5/13), here.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
from Texas Bar Today http://ift.tt/1KNQfhs
via Abogado Aly Website
No comments:
Post a Comment