How Do You Know When You’re In Trouble With the Government? When The Name Of Your Trust is “Cappuccino” Spelled Backwards

How Do You Know When You’re In Trouble With the Government? When The Name Of Your Trust is “Cappuccino” Spelled Backwards

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The U.S. Attorney’s Office for the Southern District of New York issued a press release on January 20, 2015 announcing the guilty plea of a CEO for hiding over $ 8.4 million in offshore Swiss bank accounts. George Landegger, the Chairman and CEO of an international pulp mill company, pled guilty to willfully failing to file FBARs for accounts that he maintained at a Swiss bank located in Zurich, Switzerland.

Landegger owned these accounts for nearly ten years, from the early 2000s up until 2010. During that time, his undeclared assets reached a high value of over $8.4 million.

What got Mr. Landegger into this “hot mess?” At the most primitive level, Mr. Landegger failed to report numerous Swiss bank accounts that he held for nearly ten years. But like they say, “the devil is in the details,” details which the U.S. Attorney’s press release was kind enough to provide.

According to information filed with the court, Mr. Landegger engaged in tax “hanky panky” of the sort described below:

(1) In order to conceal his ownership of his undisclosed accounts, Mr. Landegger took the advice of a Swiss banker and formed a sham entity to hold his undeclared accounts at the Swiss Bank. The sham trust, which was organized under the laws of Lichtenstein, was named “Onicuppac.” Ironically, it is the word “Cappucino” in reverse.

(2) Back in April 2009, Landegger and two others, one of whom was a Swiss Bank Representative, met in Switzerland to discuss the future of his undeclared accounts, in the wake of breaking news that the U.S. government had begun investigating UBS AG, another Swiss bank, for its role in helping U.S. taxpayers to hide their offshore accounts. During this meeting, the three discussed the possibility of Landegger disclosing his undeclared accounts to the IRS, through the Offshore Voluntary Disclosure Program (the “OVDP”). Landegger refused, instead deciding to liquidate the accounts and transfer the assets out of Switzerland, which he wasted no time in doing. With the assistance of the Swiss Bank Representative and others at the Swiss Bank, Mr. Landegger closed his undeclared accounts at the Swiss Bank and transferred the unreported assets to two new accounts: one in Canada, which he disclosed and the second in Hong Kong. The Hong Kong account was maintained by someone other than Landegger.

(3) Between 2007 and 2010, the high value of Mr. Landegger’s undeclared assets exceeded $8.4 million. From the early 2000s through 2010, Mr. Landegger failed to file FBARs with the IRS, as he was required to.

Members of law enforcement wasted no time in commenting. Manhattan U.S. Attorney Preet Bharara made the following statement:

“As he admitted, George Landegger maintained secret Swiss bank accounts he repeatedly failed to declare to the IRS, and he took steps to conceal his ownership of the accounts. The benefits of citizenship or residency in the United States come with certain obligations, including, as George Landegger well knew, the legal requirement to report foreign bank accounts. He will now pay for his illegal conduct.”

And IRS Acting Special Agent-in-Charge Thomas E. Bishop said:

“The Internal Revenue Service has made uncovering hidden offshore accounts and income a top priority and, working with the Department of Justice, we continue to demonstrate our success in doing so. The prosecutions of individuals who decide to keep their foreign assets concealed and of those who advise and assist them serve as clear warnings to anyone who doubts the U.S. Government’s resolve.”

As a result of his plea, Mr. Landegger faces a maximum sentence of five years in prison. In addition, as part of the plea, Landegger agreed to pay a civil penalty of more than $4.2 million and back taxes in excess of $71,000. Mr. Landegger will return to Manhattan federal court for sentencing on May 12, 2015.

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