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Hapoalim Prepares for Settlement with DOJ | FATCA Tax Attorney

On October 6, 2016, Israeli bank Hapoalim Ltd. announced that, in order to cover the costs of a future settlement with the US Department of Justice (DOJ), it will add a $70 million charge to an existing $50 million provision in its third-quarter results. The expected settlement will cover Hapoalim’s role in helping US tax residents to evade their US tax obligations.

In its news release, Hapoalim stated that its representatives held an initial discussion with the DOJ on September 30, 2016, to discuss the future settlement. The bank did not indicate whether $120 million in charges that it booked to date is the actual amount that Hapoalim will pay under its settlement with the DOJ. Rather, the news release emphasizes the uncertainty that still exists with respect to the actual amount.

The issue of the DOJ investigation dates back to the year 2011. In its recent (June 30, 2016) financial statements Hapoalim confirmed that its Swiss subsidiary Bank Hapoalim (Switzerland) Ltd. had been notified by Swiss authorities in 2011 that it was being investigated by the US government as a result of the DOJ’s suspicions that the bank had assisted US clients in evading federal taxes. The Swiss subsidiary could not resolve this issue in 2013 in the DOJ’s Swiss Bank Program due to the fact that it could not be classified as a Category 2 bank.

It is important to remember that the DOJ is not the only institution that is going after Hapoalim. The State of New York is conducting its own review. In its news release, Hapoalim indicated that the $120 million charge is not related to the New York investigation.

While all of this legal uncertainty makes it difficult for Hapoalim to assess its future liability under any deferred prosecution agreement, one can compare its situation with Bank Leumi. In 2014, Bank Leumi Group entered into a Deferred Prosecution Agreement with the DOJ under which it paid $270 million ($157 million of this penalty was allocated to Bank Leumi’s Swiss accounts held by US taxpayers).

If we rely on this precedent, it appears that Hapoalim is greatly underestimating its penalty, because Bank Leumi and Hapoalim are fairly similar in size as well as their actions in soliciting US clients. One also must not forget about the possible future indictments of Hapoalim’s employees (at least in the United States) by the DOJ.

Houston OVDP Tax Attorney

Who is considered to be Houston OVDP tax attorney? Initially, most taxpayers would say that this is a strange question to ask, because the answer is very simple: Houston OVDP tax attorney is an attorney who resides in Houston and specializes in helping U.S. taxpayers disclose their undeclared foreign accounts.

This answer, however, is anachronistic and erroneous, because it does not take into account two important considerations. First, there is no “OVDP” law; OVDP is the IRS Offshore Voluntary Disclosure Program which is administered by the IRS for the purpose of allowing U.S. taxpayers with undeclared offshore assets and offshore income to voluntarily disclose these assets under a mitigated penalty. This means that, in reality, the OVDP “law” is simply a sub-area of international tax law and all “OVPD tax attorneys” are simply international tax attorneys who specialize in IRS OVDPs and are also knowledgeable in other relevant aspects of U.S. international tax law.

Nevertheless, the term Houston OVDP tax attorney is commonly used to describe an international tax attorney who helps his clients with the declaration of undisclosed foreign assets and foreign income.

The second and most important correction is that Houston OVDP tax attorney does not mean that the tax attorney should reside in Houston. OVDP is a federal tax program and can be practiced by an international tax attorney who is licensed in any of the 50 states of the United States. Hence, an international tax attorney who does offshore voluntary disclosures and helps his clients who reside in Houston, Texas, is automatically a Houston OVDP tax attorney.

This means that Houston OVDP tax attorney can actually reside in Minneapolis or any other city. Mr. Sherayzen of Sherayzen Law Office is an example of such a Houston OVDP tax attorney – he resides in Minneapolis but helps his clients throughout the world, including Houston, Texas.

We can now go back and answer my original question: who is considered to be Houston OVDP tax attorney? The answer is as follows: a Houston OVDP tax attorney is an international tax attorney who is licensed to practice in any of the 50 states of the United States, resides anywhere in the United States (Minneapolis, for example) or any other country, and helps his clients in Houston with OVDP disclosures.

Contact Sherayzen Law Office If You Are Looking for A Houston OVDP Tax Attorney

If you are looking for Houston OVDP tax attorney, you should contact Sherayzen Law Office, PLLC, an international tax law firm that specializes in offshore voluntary disclosures and helps its clients in Houston, Texas.

Our professional legal team is highly experienced in the OVDP disclosures; we have helped clients with every major IRS offshore voluntary disclosure program (2009 OVDP, 2011 OVDI, 2012 OVDP and the currently-existing 2014 OVDP), both types of Streamlined Disclosures (Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures), Delinquent International Information Return Submission Procedures and Delinquent FBAR Submission Procedures.

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Cambata Case: IRS Wins Against Former U.S. Citizen on Offshore Income

In the Cambata case, the IRS successfully demonstrated once again that renunciation of U.S. citizenship will not protect a taxpayer from being pursued for unreported income from foreign accounts. On February 3, 2016, Mr. Albert Cambata pleaded guilty to filing a false income tax return with respect to his unreported Swiss account income.

Facts Related to Mr. Cambata’s Unreported Swiss account income

According to court documents, in 2006, Mr. Albert Cambata established Dragonflyer Ltd., a Hong Kong corporate entity, with the assistance of a Swiss banker and a Swiss attorney. Days later, he opened a financial account at Swiss Bank 1 in the name of Dragonflyer. Although he was not listed on the opening documents as a director or an authorized signatory, Mr. Cambata was identified on another bank document (which the IRS obtained most likely through the Swiss Bank program) as the beneficial owner of the Dragonflyer account. That same year, Mr. Cambata received $12 million from Hummingbird Holdings Ltd., a Belizean company. The $12 million originated from a Panamanian aviation management company called Cambata Aviation S.A. and was deposited to the Dragonflyer bank account at Swiss Bank 1 in November 2006.

On his 2007 and 2008 federal income tax returns, Mr. Cambata failed to report interest income earned on his Swiss financial account in the amounts of $77,298 and $206,408, respectively. In April 2008, Mr. Cambata caused the Swiss attorney to request that Swiss Bank 1 send five million Euros from the Swiss financial account to an account Mr. Cambata controlled at the Monaco branch of Swiss Bank 3. In June 2008, Cambata closed his financial account with Swiss Bank 1 in the name of Dragonflyer and moved the funds to an account he controlled at the Singapore branch of Swiss Bank 2.

In 2012, Mr. Cambata, who has lived in Switzerland since 2007, went to the U.S. Embassy in Bratislava, Slovakia, to renounce his U.S. citizenship and informed the U.S. Department of State that he had acquired the nationality of St. Kitts and Nevis by virtue of naturalization.

Link between the Cambata Case and Swiss Bank Program

It appears that the IRS was able to focus on Mr. Cambata due to information provided by one of the Swiss Bank that participated in the Swiss Bank Program. This led to the IRS investigation that unraveled the whole scheme constructed by Mr. Cambata. Additional information might have been provided to the IRS by one of the Category 1 banks as part of a Deferred Prosecution Agreement.

This affirms what the IRS has stated in the past about its determination to continue to pursue older fraud cases based on the information it already obtained from the Swiss banks. “IRS Criminal Investigation will continue to pursue those who do not pay the taxes they owe to the United States,” said Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office. “Today’s plea is a reminder that we are committed to following the money trail across the globe and will not be deterred by the use of sophisticated international financial transactions that hide the real ownership of income taxable by the United States.”

The Global Reach of the IRS Investigations Grows

Mr. Cambata’s accounts were spread out among the local branches of Swiss banks in Monaco, Singapore and Switzerland. The funds originated from companies based in Belize and Panama (the information regarding these companies was probably obtained through John Doe summons issued in 2015).

It becomes obvious from this case that our earlier warnings about the spread of the IRS investigations beyond Switzerland were correct. The IRS now reaches far beyond Switzerland and focuses more and more on jurisdictions like Belize, Cayman Islands, Cook Islands, Monaco, Panama, Singapore and other favorite offshore jurisdictions. The Cambata case is a grave warning to U.S. taxpayers who still operate in offshore jurisdictions to hide assets from the U.S. government.

The Cambata Case is a Warning to Taxpayers Who Pursued Quiet Disclosure to Cover-Up Past Tax Noncompliance

One of the most curious aspects about the Cambata case is that the IRS never imposed any FBAR penalties or tax return penalties with respect to the later years. While it is not clear from the documents, it appears that Mr. Cambata probably did a quiet disclosure in the year 2009 and has properly filed his FBARs and tax returns ever since.

The FBAR statute of limitations probably did not allow the IRS to impose the FBAR penalties, but the IRS still ignored the quiet disclosure and pursued criminal penalties for the 2006 and 2007 fraudulent tax returns (in addition to restitution of $84,849 – presumable the tax Mr. Cambata would have owed had he filed his 2006 and 2007 returns correctly).

Therefore, U.S. taxpayers who filed quiet disclosure should heed one of the main lessons of the Cambata case – quiet disclosure will not protect you from the IRS criminal prosecution.

The Cambata Case is also a Warning to Taxpayers Who Renounced U.S. Citizenship to Hide Past Tax Noncompliance

The Cambata case also dispels another myth common to U.S. taxpayers: renouncing citizenship somehow prevents the IRS criminal prosecution for past noncompliance. On the contrary, U.S. taxpayers who renounce citizenship may draw the IRS attention because they have to certify that they are fully compliant with the tax laws of the United States.

If the IRS is able to prove that these taxpayers are not fully tax-compliant, then, as the Cambata case clearly demonstrates, the IRS can pursue criminal penalties against former U.S. citizens. It is possible that one of the chief purposes of the IRS in this case was to scare other U.S. citizens who renounced their citizenship to hide their past tax noncompliance.

Contact Sherayzen Law Office for Legal Help with Your Foreign Accounts

If you have undisclosed foreign accounts, you should contact Sherayzen Law Office as soon as possible. Whether your case involves complex beneficial ownership structures or you own your foreign accounts personally, our highly experienced team of tax professionals can help you!

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