hvactec
VIP Member
July 27, 2010
The Justice Department and Internal Revenue Service are moving beyond UBS -- and that's bad news for the rest of the international banking industry.
The newest target of U.S. authorities appears to be HSBC, the London-based bank prominent in Asia.
"It appears that it is indeed the next bank in what is likely a series of banks that will be targeted by the IRS," said Miami tax litigator David Garvin. "Since June of this year, there has been at a minimum 15 or more clients of HSBC who have already received letters from the United States government and are being investigated for tax evasion."
Other HSBC clients are seeking legal consultations, concerned they will be caught up in another tax-evasion dragnet, lawyers said.
There is an estimated $700 billion in untaxed wealth in Asia, Garvin said. The owners are required to report taxes in the country where the businesses are domiciled as well as their home country. The IRS plans to beef up its overseas operations with 800 new agents, most of them heading to the Pacific Rim.
Not surprisingly, there is a South Florida component, as there was in the UBS case. A tax case against two HSBC customers is set for trial Sept. 7 in Fort Lauderdale federal court.
The HSBC probe shows how the U.S. is expanding its crackdown on offshore tax evasion beyond Switzerland and UBS. The largest Swiss bank paid a $780 million fine for hiding assets of U.S. taxpayers, often in Caribbean accounts.
About 15,000 taxpayers filed for amnesty under an IRS program to disclose offshore holdings to keep from being prosecuted, and 16 UBS clients have been charged with tax crimes.
But South Florida tax attorneys say it's unlikely there will be such a large fine for HSBC, which is cooperating with authorities. While UBS refused to release the names of its U.S. customers, HSBC is releasing not only names but customer service audiotapes.
"HSBC has more leeway in cooperating, and it may not be breaking any laws of any particular jurisdiction by cooperating with the Department of Justice," said attorney Martin Press, a partner at Gunster in Fort Lauderdale.
But it hasn't been all strawberries and cream between the bank and investigators.
"The IRS appears to be suspicious that HSBC tipped their customers to what was about to happen," Garvin said. "It let their better customers do what actors term 'exit stage right.'"
A lot of tax attorneys said many of those already targeted are just confused about reporting income in two countries.
Kevin Packman, a partner at Holland & Knight in Miami, said the Justice Department is lumping in those who simply did not know the international reporting rules on income tax with the true tax scofflaws.
"I look at this stuff as low-hanging fruit. The size of the account should not matter. Whether it's $1 million or $15 million, the focus should be on intent and willfulness," he said. "I have people who failed to report accounts with $100,000, and they are being treated the same way as those who intentionally evaded tax."
Packman said an HSBC client who got a "subject letter" from the Justice Department already came forward under the voluntary UBS amnesty to disclose his HSBC holdings.
"It's troubling that one side did not know what the other side was doing," he said. "I was certainly stupefied. You'd think they would be working in conjunction."
He declined to discuss the specifics of the case.
For those who wanted to hide foreign assets, HSBC could be the perfect vehicle. It prides itself on its brick-and-mortar operation with branches throughout the world.
The bank founded in Hong Kong in 1865 is doing everything it can to avoid becoming the next UBS by cooperating with U.S. authorities.
While UBS said it cooperated with U.S. authorities, it cited Swiss bank secrecy law when withholding the identities of U.S. account holders and didn't produce an indicted executive.
"HSBC is interesting because they have taped a number of their customers who are just patently discussing during the taped conversation the best ways to open accounts with HSBC and avoid the reporting requirements to the IRS," Garvin said.
One of the first signs the bank was targeted was when father-son developers Mauricio Cohen Assor and Leon Cohen Levy were charged in April with pocketing $33 million in a New York hotel deal in 2000 without paying taxes.
read full story HSBC Trying to Avoid Becoming Next UBS - Legal News
The Justice Department and Internal Revenue Service are moving beyond UBS -- and that's bad news for the rest of the international banking industry.
The newest target of U.S. authorities appears to be HSBC, the London-based bank prominent in Asia.
"It appears that it is indeed the next bank in what is likely a series of banks that will be targeted by the IRS," said Miami tax litigator David Garvin. "Since June of this year, there has been at a minimum 15 or more clients of HSBC who have already received letters from the United States government and are being investigated for tax evasion."
Other HSBC clients are seeking legal consultations, concerned they will be caught up in another tax-evasion dragnet, lawyers said.
There is an estimated $700 billion in untaxed wealth in Asia, Garvin said. The owners are required to report taxes in the country where the businesses are domiciled as well as their home country. The IRS plans to beef up its overseas operations with 800 new agents, most of them heading to the Pacific Rim.
Not surprisingly, there is a South Florida component, as there was in the UBS case. A tax case against two HSBC customers is set for trial Sept. 7 in Fort Lauderdale federal court.
The HSBC probe shows how the U.S. is expanding its crackdown on offshore tax evasion beyond Switzerland and UBS. The largest Swiss bank paid a $780 million fine for hiding assets of U.S. taxpayers, often in Caribbean accounts.
About 15,000 taxpayers filed for amnesty under an IRS program to disclose offshore holdings to keep from being prosecuted, and 16 UBS clients have been charged with tax crimes.
But South Florida tax attorneys say it's unlikely there will be such a large fine for HSBC, which is cooperating with authorities. While UBS refused to release the names of its U.S. customers, HSBC is releasing not only names but customer service audiotapes.
"HSBC has more leeway in cooperating, and it may not be breaking any laws of any particular jurisdiction by cooperating with the Department of Justice," said attorney Martin Press, a partner at Gunster in Fort Lauderdale.
But it hasn't been all strawberries and cream between the bank and investigators.
"The IRS appears to be suspicious that HSBC tipped their customers to what was about to happen," Garvin said. "It let their better customers do what actors term 'exit stage right.'"
A lot of tax attorneys said many of those already targeted are just confused about reporting income in two countries.
Kevin Packman, a partner at Holland & Knight in Miami, said the Justice Department is lumping in those who simply did not know the international reporting rules on income tax with the true tax scofflaws.
"I look at this stuff as low-hanging fruit. The size of the account should not matter. Whether it's $1 million or $15 million, the focus should be on intent and willfulness," he said. "I have people who failed to report accounts with $100,000, and they are being treated the same way as those who intentionally evaded tax."
Packman said an HSBC client who got a "subject letter" from the Justice Department already came forward under the voluntary UBS amnesty to disclose his HSBC holdings.
"It's troubling that one side did not know what the other side was doing," he said. "I was certainly stupefied. You'd think they would be working in conjunction."
He declined to discuss the specifics of the case.
For those who wanted to hide foreign assets, HSBC could be the perfect vehicle. It prides itself on its brick-and-mortar operation with branches throughout the world.
The bank founded in Hong Kong in 1865 is doing everything it can to avoid becoming the next UBS by cooperating with U.S. authorities.
While UBS said it cooperated with U.S. authorities, it cited Swiss bank secrecy law when withholding the identities of U.S. account holders and didn't produce an indicted executive.
"HSBC is interesting because they have taped a number of their customers who are just patently discussing during the taped conversation the best ways to open accounts with HSBC and avoid the reporting requirements to the IRS," Garvin said.
One of the first signs the bank was targeted was when father-son developers Mauricio Cohen Assor and Leon Cohen Levy were charged in April with pocketing $33 million in a New York hotel deal in 2000 without paying taxes.
read full story HSBC Trying to Avoid Becoming Next UBS - Legal News
