New York Federal Courts Authorize IRS to Summon Records of Offshore Bank Accounts

December 18, 2013 — Created in 2006, the IRS Whistleblower Office encourages conscientious whistleblowers to notify the IRS about the tax cheats who harm every honest U.S. taxpayer. Under the Tax Relief and Health Care Act of 2006, the Office is authorized to pay government informants 15 to 30 percent of the government’s recovery based on a tipster’s information about tax fraud. The reward may be paid in cases involving businesses regardless of the amount recovered. For cases of tax fraud by private individuals, whistleblower rewards are also available when certain circumstances exist.

Five Banks Ordered to Produce Records for John Doe Accounts at ZKB, Butterfield and Affiliates

Two federal courts in New York have authorized the IRS to issue summonses requiring a number of banks to disclose information concerning U.S. taxpayers who may have used their hidden interests in foreign bank accounts to evade payment of federal taxes. Citibank NA (Citibank) and the Bank of New York Mellon (Mellon) were ordered to come forward with customer accounts at Zurcher Kantonalbank and its affiliates (ZKB) in Switzerland. Five banks were similarly ordered to produce information involving undisclosed customer accounts at The Bank of N.T. Butterfield & Son Limited and its affiliates (Butterfield) in the United Kingdom, Hong Kong, Switzerland, Malta, Caymen Islands, the Bahamas and Barbados:

  • HSBC Bank USA NA
  • JPMorgan Chase Bank NA
  • Bank of America NA
  • Mellon and
  • Citibank

The federal judges gave the IRS permission to serve “John Doe” summonses on the banks to uncover information about potential tax fraud by people whose identities are unknown to the IRS. The IRS’s actions highlight its commitment to uncover taxpayers seeking to hide their assets abroad in an effort to avoid paying federal taxes.

Under the IRS Offshore Voluntary Disclosure program, U.S. taxpayers are permitted to resolve their tax liabilities through voluntary disclosure of hidden accounts. This initiative has brought to light 371 accounts at ZKB and 81 accounts at Butterfield that had not been previously disclosed to the IRS. In addition, many U.S. taxpayers have admitted that they failed to report income earned on the offshore accounts. According to the U.S. Department of Justice, the IRS believes that other U.S. taxpayers have similarly violated federal tax law through the use of foreign accounts with ZKB, Butterfield, and their affiliates. In December 2012, three ZKB employees were indicted for their role in a conspiracy with U.S. taxpayers to hide over $420 million from the IRS in secret accounts in Switzerland.

Waters & Kraus: Helping Whistleblowers Fight Tax Fraud

Tipsters in tax fraud cases generally rely on a whistleblower lawyer to research the relevant tax issues, locate experts and advance the expenses needed to retain them, prepare IRS disclosure forms and act as liaison. Schemes in which wealthy individuals, like the ones targeted in this investigation, use offshore accounts to hide income are just one type of tax fraud.

With a nationwide presence and extensive experience in whistleblower litigation, Waters & Kraus provides informants in tax evasion cases with aggressive legal counsel. Our qui tam lawyers know how to protect and advance your interests. To learn more about Waters & Kraus, or to have one of our experienced attorneys review your potential case, email us or call 855.784.0268.

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