Tag Archives: OVDI

What do you Think of the Penalties in These Three Cases of Unreported FBARs ?

Ty Warner

Ty Warner
Ty Warner, founder/owner of the Beanie Babies line, was sentenced in July 2015 for tax evasion.The panel of three U.S. District Court judges gave him 2 years of probation and 500 hours of community service. The sentencing guidelines ranged from 46 months up to a maximum of 57 months. He agreed to pay back taxes and interest of $16 million as well as a $53.5 million penalty (the full FBAR penalty of 50% of the balance of the highest account-$107,000,000). According to Melissa Harris (author of this article that appeared in the Chicago Tribune, July 15, 2015) Warner’s sentence was “a punishment that reduces evading millions in taxes to a speeding ticket,” and that the sentence “flies in the face of both reason and justice”.

Warner had an estimated net worth of $2.5 billion, and was the 209th richest American.   According to Janet Novak of Forbes:

He admitted that around Jan. 31, 1996, he flew to Zurich and deposited about $80 million at UBS AG, instructing that no account statements be sent to him in the U.S., and that he kept the account secret until November 2007. During that period he failed to report at least $24.4 million in interest income on the account to the Internal Revenue Service, evading at least $5.6 million in taxes. He also failed to file with the Treasury the required annual “FBAR” report on his foreign accounts

What beggars belief is that Mr. Warner never provided any explanation for:

  • why he opened the account
  • the origin of the funds
  • audits of his books & records show the funds did not come from his company
  • his personal domestic accounts showed no signs of the origin of the funds

In fact the evidence suggested that the funds may have been pre-tax payments of some sort. To this day, the extent of his willful tax evasion is in reality, unknown.

So why did Mr. Warner get off so lightly? Was it because his lawyer Mark Matthews used the Olenicoff Defense?
Was it because his creation, the Beanie Babies line of stuffed toys, was just too cute for anyone to believe he was guilty of such evasion?

Peter Henning a Wayne State University Law School Professor and co-author of ‘Securities Crimes ”said in an interview, “I don’t want to say anything goes,….Clearly you can’t consider race or wealth. But you are looking at character. That is something judges can take into account. The question is how much should it weigh into the decision?”

This is where Mr. Warner hit the jackpot. He received 70 letters of support from friends, employees and recipients of his charity, actions which had nothing to do with the charges and only someone with money could do.

U.S. District Judge Charles Kocoras (of the panel) based his sentence on:

…..a reading of 70 letters, Kocoras found that “Mr. Warner’s private acts of kindness, generosity and benevolence” were “overwhelming,” with many occurring before he was under investigation and, in Kocoras’ words, motivated by “the purest of intentions.” Most were done “quietly and privately.” The judge concluded: “Never have I had a defendant in any case — white-collar crime or otherwise — demonstrate the level of humanity and concern for the welfare of others as has Mr. Warner.”

So a man guilty of many years of tax evasion, who did not even account for the origin of the account nor any records of it, received an incredibly light sentence based upon support from his family, friends and beneficiaries of his kindness. Where is the law here?
 

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“Boy, I Sure Wouldn’t Want To Have To Fill Out That Form”

Thanks to Badger for posting in What’s New Part 2 of the Interview with Bill Yates, former Associate Chief Counsel (International) with IRS

The interview relates to residence-based taxation, but also deals with OVDI and FATCA.

My favorite comment from the story is this:

“I’ll tell you one thing. I’ll never forget what someone said after one of our many, endless Form 8938 drafting sessions.”

 “Boy, I sure wouldn’t want to have to fill out this form.”

That sums it all up, doesn’t it?

On FATCA, Mr. Yates says

I thought it was bad policy. We shouldn’t be pushing U.S. citizens towards expatriation.

He recognizes FATCA is hitting U.S. taxpayers living overseas with unforeseen consequences, such as having their foreign bank account(s) closed.

When asked if he thinks FATCA was a mistake, he replies:

It doesn’t matter what I think, now. FATCA is inevitable.

On OVDI, he gives an example of an Accidental American born in a US hospital to Canadian parents. He insists this was not and should not be the target of OVDI. But,

Believe me no one at the IRS Field level is going to speak up about the inconsistencies inherent in OVDI as far as “accidental citizens”

One more confirmation to stay away from OVDI!

Here is the Part 1 of the Interview with Bill Yates, which was earlier posted under What’s New.

 

 

 

Taxpayer Advocate Report Is Out

IRS 2012 Taxpayer Advocate Report is out.  It’s not flattering to IRS.

Perhaps the nicest thing Nina Olsen has to say is the most apparent:

The most serious problem facing taxpayers – and the IRS – is the complexity of the Internal Revenue Code (the “tax code”).

Mind you, she seems to be talking about taxpayers in US with that statement.  The report does not even touch on FATCA or citizenship-based taxation, which was disappointing.

The complexity of the IRS Tax Code within US is nothing compared to the complexity for those outside the US–including for those of us who don’t even consider ourselves to be “US persons.” Continue reading