Yesterday, a federal grand jury in San Jose, California, indicted Ashvin Desai of San Jose on three counts of tax evasion on $1.3 million in unreported interest income, two counts of willfully aiding the preparation of materially false tax returns and three counts of failing to file Reports of Foreign Bank and Financial Accounts (FBARs), the Justice Department and Internal Revenue Service (IRS) announced.
According to the indictment, Desai, the owner of a medical device company, his wife and his two adult children maintained millions of dollars in undeclared bank accounts in India at The Hongkong and Shanghai Banking Corporation Ltd. (HSBC). During 2009, Desai maintained approximately $8.8 million in his undeclared accounts at HSBC in India. Desai attempted to evade his income taxes for tax years 2007-2009 by filing false tax returns that failed to report $1,306,810 of interest income, and that falsely reported that he did not have an interest in, or signature authority over, bank accounts located in a foreign country. Desai also prepared false tax returns for his children for tax year 2009 that failed to report approximately $189,000 of interest income paid by HSBC in India, and that falsely reported that the children did not have an interest in bank accounts located in a foreign country.
The indictment further alleges that during 2009 Desai closed an account he maintained at HSBC in England and directed that the funds from that account be transferred to a bank account maintained at HSBC in Dubai in the name of one of his children, and that, for tax years 2007-2009, Desai failed to file FBARs to report his foreign bank accounts to the Department of Treasury.
As alleged in the indictment, U.S. citizens have an obligation to report to the IRS on Schedule B of their Form 1040, whether they had a financial interest in, or signature authority over, a financial account in a foreign country in a particular year by checking “Yes” or “No” in the appropriate box and identifying the country where the account was maintained. They further have an obligation to report all income earned from foreign financial accounts on the tax return and to pay the taxes due on that income. Separately, U.S. citizens with a financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year, must also file an FBAR form with the Treasury disclosing such an account by June 30 of the following
Each tax evasion charge carries a maximum penalty of five years in prison and a $250,000 fine. The false tax return charges each carry a maximum penalty of thre years in prison and a $250,000 fine. The failure to file an FBAR charges each carry a maximum penalty of 10 years in prison and a $500,000 fine. Desai is just one of several HSBC India clients involved. Prosecutors have already charged individuals in New Jersey, New York and Wisconsin with tax evasion this year.
In April a U.S. district court approved a proposed order from the DOJ allowing the IRS to serve a John Doe summons to HSBC US to turn over records on U.S. taxpayers with interest in account with HSBC India.
Vic Abajian, a former IRS trial attorney, continues to assist taxpayers with foreign account and asset issues before the IRS and Franchise Tax Board. He currently represents several clients with HSBC accounts within the IRS offshore voluntary disclosure initiate (OVDI) and those that are involved in civil audits. He also represents several clients who have received grand jury subpoenas requesting information related to offshore bank accounts. Please contact Los Angeles Tax Attorney Vic at 818-396-5059 to arrange a consultation.