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Former UBS Client Sentenced To Prison For Hiding Offshore Bank Accounts From IRS



Another former UBS client has bit the dust. The Department of Justice recently announced that Gregg A. Kaminsky, an internet entrepreneur who served as CEO of Circlenet LLC, based in Atlanta, Georgia was sentenced for willfully failing to file a Foreign Bank Account Report. Unlike Raoul Weil and a few others who have held the government to its burden, Mr. Kaminsky chose not to fight, but instead to lay down his sword and enter a guilty plea.

Between 2000 and 2009, Mr. Kaminsky owned and controlled a foreign bank account with Union Bank of Switzerland AG (“UBS”), Switzerland’s largest bank and one of the largest wealth managers in the world. By 2006, Mr. Kaminsky’s UBS account reached a high watermark amount of roughly $1.1 million. During this time, Mr. Kaminsky transferred funds (via wire) from his UBS account in Switzerland to other foreign bank accounts that he controlled in Thailand and Hong Kong. Mr. Kaminsky also deposited income from two different U.S. companies directly into his UBS account in Switzerland.

Mr. Kaminsky committed a big “no-no”. In fact, if you ever want to become target “numero uno” in the IRS’s crusade to stamp out international tax evasion, you need only follow Mr. Kamensky’s example — his case provides a blueprint for doing so. At no time did Mr. Kaminsky disclose his UBS account or other foreign financial accounts to the U. S. Treasury Department. As a result, several hundred thousand dollars in income, interest, and dividends went unreported.

As if that was not bad enough, Mr. Kaminsky withheld his UBS account and associated income from Free Applications for Federal Student Aid (FAFSA) that he filed with the U.S. Department of Education. As a way of background, Mr. Kaminsky had enrolled in the prestigious Executive MBA program at Emory University and applied for federal financial aid to fund his tuition. At the time of the FAFSA applications, Mr. Kaminsky’s UBS account had a high balance of over $ 500,000 (USD), which would have made him ineligible for federal student loan assistance.

Back in 2008, the U.S. Department of Justice obtained court approval to compel UBS to disclose the names of its U.S. clients who were suspected of using their UBS accounts to hide assets overseas, thereby evading U.S. taxes.  The request and the order authorizing it were widely reported by the media. In the wake of this announcement, the U.S., UBS, and Switzerland were working behind the scenes to negotiate a settlement. A settlement was reached and UBS began disclosing the names of its U.S. account holders to the IRS.

What Mr. Kaminsky did next ranks among one of the most egregious badges of fraud when it comes to offshore tax evasion. In the wake of this breaking news, he closed his UBS account and transferred the balance to an account that he controlled at HSBC Bank in Hong Kong. Mr. Kaminsky made a half-hearted attempt to get right with Uncle Sam. For the very first time, he filed FBARs for his Swiss and Hong Kong accounts, as well as amended individual income tax returns for 2007 and 2008. While Mr. Kaminsky’s amended returns (and subsequently filed returns for 2009 thru 2012) accurately disclosed his previously unreported UBS income, they still omitted a significant amount of income — to the tune of $ 150,000 — which represented earnings from Mr. Kaminsky’s business activities in the virtual world, “Second Life.”

Including his virtual world income, Kaminsky failed to report over $400,000 in income to the IRS between 2000 and 2012, fleecing the IRS out of approximately $125,000.

Notwithstanding, Mr. Kaminsky still got off pretty light. While he was sentenced to prison, the judge only imposed four months in prison followed by two years of supervised release, two months of home confinement, and 200 hours of community service. Mr. Kaminsky was also ordered to pay restitution in the amount of $91,983 to the IRS. By far, the hardest part of the plea agreement for Mr. Kaminsky to swallow must have been the FBAR civil penalty — a whopping $250,635.20, which is equivalent to fifty percent of the balance in Mr. Kaminsky’s HSBC account in Hong Kong as of June 30, 2009.

This is a perfect time for a refresher course on FBAR-reporting. Citizens and residents of the United States who have a financial interest in, or signature authority over, a financial account in a foreign country with an aggregate value of more than $10,000 at any time during a calendar year are required to file with the U.S. Department of Treasury a “Report of Foreign Bank and Financial Accounts,” commonly referred to as the “FBAR.”  The FBAR for the applicable year must be filed by June 30 of the following year.

Original Post By:  Michael DeBlis

As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.

Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.

   

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