Tax Lawyer's Blog

Bloomberg.com reports that the IRS is seeking disclosure of the names of Americans who held offshore bank accounts with indicted financier R. Allen Stanford:

The IRS seeks documents to identify U.S. residents who as Stanford Group Co. clients used offshore accounts to conceal income, according to court papers filed yesterday by the agency.

“There is a reasonable basis for believing that this group or class of persons has failed or may have failed to comply with provisions of the internal revenue laws,” IRS Agent Daniel Reeves said in a federal court filing in Dallas.

The IRS is investigating Stanford clients as part of its “Offshore Compliance Initiative:”

The petition seeks a court order to obtain Stanford Group’s business records from Ralph Janvey, the Dallas lawyer appointed to run Stanford’s companies after the SEC sued.

“The IRS has evidence volunteered from a U.S. taxpayer that account statements and form 1099s from Stanford-controlled entities did not include interest or income generated from SIB accounts or certificates of deposit,” the department said yesterday in a statement, referring to Stanford International Bank (SIB).

The John Doe summons sought by IRS counsel is similar to the one issued in the UBS case and seeks the production of all Stanford Group accounting and banking records for 2002 through 2008.

Here’s the DOJ press release.

Attorney John Little, who was appointed by the Court to collectively represent investors in the case, said he doesn’t have a problem with the IRS seeking to obtain the summoned information:

“At the moment, the service doesn’t really know how many U.S. investors had SIB CDs, nor does it know what sort of interest those investors received,” he said in an e-mail.

“The materials, particularly the declaration of the investigator, suggest to me that the service recognizes that the Stanford entities made an effort to keep the CD investors from learning about their IRS reporting obligations,” Little said. “If that is so, I would hope the IRS factors that into any decision it might make to address failures to report by U.S. investors.”

The SEC has a lawsuit pending against Stanford International Bank Ltd.

Voluntary Disclosure Advice:

Stanford investors who failed to report their offshore income on their 2002 through 2008 income tax returns should contact their tax lawyers immediately to discuss what, if anything, can be done (before the names are disclosed) to avoid criminal prosecution and limit penalties. Taxpayers who come forward voluntarily before the IRS has begun a criminal or civil investigation will almost always get preferential treatment, which usually includes the avoidance of criminal prosecution and the reduction or limitation of penalties.

Do not pursue voluntarily disclosure without first obtaining the advice of a tax lawyer experienced in handling these types of cases.

External Links:

• The IRS case:  In the Matter of the Tax Liabilities of John Does, United States clients of Stanford Group Company or Stanford Trust Company Ltd., 09cv2290, U.S. District Court, Northern District of Texas (Dallas). 
• The SEC case: Securities and Exchange Commission v. Stanford International Bank Ltd., 09cv298, U.S. District Court, Northern District of Texas (Dallas). 
• The criminal case: U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). 

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