The Justice Department Tax Division isn’t done with undeclared foreign account investigations just because its Swiss bank program is winding down.
“It’s more like an international bank program than it is a Swiss bank program right now,” according to Richard Zuckerman, principal deputy assistant attorney general in the Tax Division.
At this point, the label “Swiss bank program” has become more of a euphemism than a description because the government’s interest concerns all international accounts, Zuckerman said December 12 at the American Bar Association National Institutes on Criminal Tax Fraud and Tax Controversy in Las Vegas.
The Justice Department’s interest in the completeness of the Swiss bank disclosures has led to some further disclosures, Zuckerman said. He explained that most of those further issues involve category 2 banks — those that traded a formulaic penalty and information on U.S.-related accounts for non-prosecution agreements — that “for one reason or another forgot to disclose certain accounts to us.”
“We are dealing with them as they come up, [listening] to the reasons why those accounts were not disclosed, and then we try to reach a resolution with the banks in connection with the untimely disclosures,” Zuckerman said. The process uses lots of time and personnel, but it is very worthwhile, he said.
Zuckerman said the Tax Division has looked at the Swiss bank information only to find that many taxpayers still don’t want to follow the disclosure rules. “We have a good idea as to the countries . . . where they’re going. And we are pursuing them,” he said.
“Just because the Swiss bank program per se is winding down, it doesn’t mean that if you took your $20 million and headed to another country, that we are not interested,” Zuckerman said.
Nathan J. Hochman of Browne George Ross LLP, a former head of the Tax Division, asked how much of the division’s resources are devoted to international enforcement efforts and whether the division has considered foreign postings like the IRS Criminal Investigation division attachés.
Zuckerman said neither question has come up. “A small number of criminal prosecutors are repetitively involved in the foreign bank issues,” he said, before estimating that the Tax Division devotes 15 to 20 percent of its resources to those cases.
As for foreign postings, he called it an interesting idea, but quipped that while it shouldn’t be hard to find a Tax Division attorney willing to take a post in Paris, it isn’t the place generating the most divisional interest.
Whatever Tax Division Wants
Zuckerman said the Tax Division shares CI’s interest in criminal cases involving sophisticated legal-source tax issues like syndicated conservation easements and microcaptive insurance arrangements. Other tax incentive abuses, such as the biofuel credit cases, are also of interest, he said.
“There are real cases there and there’s a lot of dollars at stake. I think you’ll see them because I know there are cases in those areas that are cooking within the Service. And there are cases that we have that have been indicted; there are cases that are under investigation,” Zuckerman said.
The Tax Division is also on the lookout for more prosecution referrals involving false statements on collection reporting statements that are part of installment agreements or offers in compromise, Zuckerman said.
“Once you decide to come in and strike a deal with the government, you should be honest about it. You shouldn’t be able to come, strike a deal with the government, lie on a [Form] 433 or other interaction with the government, and then figure the government is too busy to be bothered with you,” he added. “It sends the wrong message.”