HSBC Client Sentences Handed Down

Hot off the heels of an IRS announcement about a new amnesty plan for taxpayers with offshore accounts, a federal judge brought down the hammer on a tax evasion case involving those same kind of accounts. Mauricio Cohen and Leon Cohen-Levy (father and son, in case you wondered about the similar names) were sentenced to ten years in prison for tax evasion. The duo were clients of HSBC (which is having its own issues right now).

Cohen and Cohen-Levy were convicted in a federal court of failing to report nearly $50 million of income. The IRS claimed that the pair used a series of shell corporations and offshore accounts to hide more than $150 million in assets.

According to court documents, the Cohens’ crimes included failing to pay taxes on the sale of a New York hotel over 10 years ago which generated proceeds of $33 million. Most of the money was eventually routed through bank accounts belonging to tax haven shell companies based in the Bahamas, Panama and other locations, and the income was never reported on U.S. tax returns by the Cohens or any of their related businesses or entities, prosecutors said in documents presented in the case.

Interestingly, Cohen and Cohen-Levy are not U.S. citizens. That’s worth a mention since there is a distinction between U.S. citizens and U.S. taxpayers. You need not be a U.S. citizen to be a U.S. taxpayer.

The IRS maintained that Cohen and Cohen-Levy were U.S. taxpayers and the owners of a NY hotel (under the Flatotel brand) that was sold for $33 million. That income was not reported to the IRS and was, instead, funneled to a Swiss account at HSBC, along with other income.

The IRS also accused the pair of hiding other assets to avoid tax, including two homes, a yacht and several cars. Among the cars were said to be a Rolls-Royce Phantom (which, according to the Rolls-Royce website is “built to order”), a Porsche Carrera GT (a sports car that can reach a zippy 100 MPH in just 7 seconds) and a Ferrari Testarossa (featured on “Miami Vice”). Despite such luxuries, the two reportedly told IRS that they owned less than $15,000 in assets.

After the sentencing, the IRS continued to fire warning shots, saying:

The IRS is vigorously pursuing unreported income in hidden offshore accounts. We urge citizens to consider whether tax fraud is worth the price of going to jail.

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