Amato Case: 5-Years in Prison for Secret Russian Bank Accounts | FBAR News

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Failure to file FBARs for secret Russian bank accounts and income tax evasion led to the imposition of a five-year prison sentence on a New Jersey chiropractor. This is the essence of the new IRS victory in the Amato case. Let’s explore this case in more detail, because the case demonstrates the long reach of the FBAR requirement even in unusual jurisdictions, like Russia.

The Amato Case: Factual Background

Mr. Amato is a US citizen. He was a chiropractor who resided and worked in New Jersey. He practiced medicine through two corporate entities: Chiropractic Care Consultations, Inc. (“Chiropractic Care”) and Accident Recovery Physical Therapy, Inc. (“Accident Recovery”).

It appears that, between January 1, 2013 and December 7, 2016, Mr. Amato over-billed at least six insurance companies. In many cases, he was simply billing for services that he never actually rendered. For these crimes, he was separately charged by the US Department of Justice. On April 9, 2018, in his guilty plea, Mr. Amato admitted that his over-billings were over $1 million.

In order to hide these illegal proceeds, sometime between January 1, 2013 and December 7, 2016, Mr. Amato opened bank accounts in Russia and wired over $1.5 million to these accounts.

On September 14, 2015, Mr. Amato filed his 2014 tax return, stating that he had no taxable income and he owed no taxes. In reality, his 2014 taxable income was about $561,258.

At about the same time, Mr. Amato also deposited checks from his businesses into accounts owned by his minor children. He never disclosed these checks as part of his earnings on his US tax returns. Additionally, there were more funds deposited in his corporate accounts which he also never disclosed on his personal and corporate tax returns.

The Amato Case: IRS investigation and Criminal Prosecution

It appears that the 2014 return was the trigger and huge contributing factor to the commencement of the subsequent IRS investigation of Mr. Amato’s dealings. In 2018, the US Department of Justice (the “DOJ”) filed criminal charges against Mr. Amato with respect to two different types of violations.

The first charge was tax evasion pursuant to 26 USC 7201. It was directly tied to his 2014 tax return, stating that Mr. Amato knowing and willfully attempted to evade his income taxes due.

The second charge was made under 31 USC 5314 & 5322(b) – these are FBAR criminal penalties. Again, the DOJ chose to focus only on 2014 FBAR.

The Amato Case: Tax Evasion and FBAR Criminal Sentence

As part of his deal with the DOJ, Mr. Amato pleaded guilty to both counts. On May 7, 2019, as a result of his failure to pay a large amount in taxes and failure to file FBARs, the New Jersey federal court sentenced him to five years in prison.

Contact Sherayzen Law Office for Professional Help With the Reporting of Your Undisclosed Foreign Bank and Financial Accounts

The Amato case is one more reminder of the legal dangers that US taxpayers with undisclosed foreign accounts face. You do not want to be in Mr. Amato’s position.

This is why you need to contact Sherayzen Law Office for professional help with the reporting of your undisclosed foreign bank and financial accounts. We have helped hundreds of US taxpayers with the voluntary disclosure of their foreign assets and foreign income, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

Manafort FBAR Violations Indictment | International Tax Lawyer & Attorney

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On October 30, 2017, Mr. Paul Manafort was charged with FBAR violations among other charges. Manafort FBAR violations charges were filed as a result of an ongoing investigation led by special counsel Robert Mueller.

While the investigation should have been searching for possible ties between Mr. Manafort and the Russian government, it found something completely different. Instead of finding any ties to the Russians, it found that Mr. Manafort was lobbying on behalf of the Ukrainian government (currently the archenemy of Russia and involved in a civil war with its eastern provinces) without registering as a foreign agent.

Moreover, it has led to the IRS Criminal Investigation with respect to Mr. Manafort’s FBAR noncompliance. Let’s explore this part of the investigation in more detail.

Manafort FBAR Violations Indictment: Alleged Facts

According to the indictment, Manafort failed to report his interest in over a dozen foreign entities, primarily in Cyprus, and used those entities to hide millions of dollars in foreign bank accounts from the U.S. government. Over $75 million allegedly flowed through the accounts, but only a portion of it was accessed. Manafort was accused of using over $18 million of proceeds on personal expenses.

The government further alleges that, during 2008-2014, Mr. Manafort falsely stated on his tax returns that he did not have an authority over any foreign bank accounts (I believe the reference here is to Part III of Schedule B, Form 1040).

Furthermore, the government claims that Mr. Manafort lied, in writing, to Mr. Manafort’s tax return preparer in order to conceal his authority over the undisclosed foreign accounts. It is obvious that this accusation is meant to preempt the reasonable cause reliance defense against FBAR penalties.

The indictment includes seven counts of willful FBAR violations under 31 U.S.C. section 5322. It is possible that Mr. Manafort may try to throw out some of the counts on the basis of the FBAR Statute of Limitations, but not all facts of the case are known at this point to estimate the success of this defense.

Manafort FBAR Violations Indictment: No Tax Evasion Charges

It is very strange, but the indictment does not contain a separate tax evasion charge, which requires the approval of the DOJ’s Tax Division. This omission is even more puzzling in light of the fact that the government alleges in its indictment that Mr. Manafort did not pay taxes on any income related to undisclosed foreign accounts. The government even specifically states that he purchased properties in Virginia and took out loans for the purpose of having access to untaxed income.

Manafort FBAR Violations Indictment: How Was $18 Million Calculated

The Manafort case is very good in one aspect: it allows us to see the government methodology for identifying potential willful FBAR violations. The main tool in this case was the government’s analysis of Mr. Manafort’s lifestyle.

The government alleged that, between 2008 and 2014, Mr. Manafort made domestic expenses of close to $18 million dollars which the government believes came from undisclosed foreign bank accounts and should be directly tied to Mr. Manafort FBAR violations. Most of this money was spent on improving real estate as well as purchases at antique shops, car dealerships and so on.

Manafort FBAR Violations Indictment: A Political Case With Important Lessons

It is important to remember that, at this point, these are merely government allegations and Mr. Manafort is presumed to be innocent until found otherwise by a court of law or a jury. While it is too early to state whether the government can prove its allegations and the case does have a very strong political background, it is still important to study the lessons of this case with respect to the government’s ability to pursue FBAR violations. The government’s methodology in this case is somewhat unusual, and all international tax lawyers should follow this case closely to see how the courts react to the government’s strategy.

FBAR Litigation to Skyrocket in 2017 & 2018 | FBAR Lawyer & Attorney

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After the implementation of FATCA in 2014, Sherayzen Law Office made a prediction that there would be a major increase in FBAR litigation a few years later once the IRS is able to process data obtained through FATCA and the Swiss Bank Program. This prediction is now becoming a reality as the US Department of Justice (“DOJ”) is filing lawsuits related to FBAR penalties in unprecedented numbers.

When Should the Taxpayers Expect to See Increase in FBAR Litigation?

The process has already started. The DOJ is already filing new FBAR litigation cases and it is working closely with the IRS to prepare a large number of additional FBAR cases.

In fact, the second half of 2017 and the first half of 2018 will be the period when the number of FBAR litigation cases will skyrocket, achieving a new historical high. Most of these lawsuits will likely be criminal while others will be civil, including attempts to collect FBAR penalties.

Will Non-Willful FBAR Penalty Cases Be Affected by the Increase in FBAR Litigation?

Yes, taxpayers who were assessed non-willful FBAR penalties will also be affected. We expect, however, that the majority of the new cases will be those concerning willful and even criminal FBAR penalties.

Can a Non-Willful FBAR Penalty Case Turn Into Willful FBAR Penalty Case as a Result of FBAR Litigation?

Such a possibility exists, especially in cases where the IRS imposed non-willful penalties without having sufficient information to assess willful penalties. Since the DOJ will try to argue that the cases should be tried de novo, it is possible that new information obtained during the discovery stage of a case may result in sufficient evidence for the DOJ to argue that willful FBAR penalties should be imposed.

Therefore, it is important to bring in an international tax attorney as early as possible into your case to assess the possibility of the DOJ turning a non-willful case into a willful one.

Can the Recent Increase in FBAR Penalties Influence a Taxpayer’s Exposure as a Result of FBAR Litigation?

Recently, the FBAR penalties experienced a significant increase as a result of the Congress-mandated adjustment to inflation. The increase should not affect any penalties assessed prior to November 2, 2015. The FBAR Penalties imposed after that date are likely to be affected by FBAR Litigation, because the DOJ may sue for the adjusted amount of penalties.

What Should I do If the DOJ Files Compliant Against Me in a US District Court?

If you receive a compliant from the DOJ (acting on behalf of the United States of America), contact Sherayzen Law Office as soon as possible for professional help. Mr. Sherayzen is an experienced international tax lawyer who can help you determine on how to best deal with the DOJ lawsuit, assess your chances of success and help you with the litigation of the case.

Contact Us Today to Schedule Your Confidential Consultation.