A New Jersey businessman who cooperated with prosecutors avoided prison after admitting he conspired with…
Another HSBC Customer Likely Going to Jail
Last week a New Jersey client of HSBC Holdings Plc (HSBA) pleaded guilty to charges that he hid as much as $4.7 million through Swiss and Indian accounts not declared to the U.S. Internal Revenue Service.
Sanjay Sethi, 52, who owns SanVision Technology Inc., conspired with HSBC bankers in New York, London and Geneva to hide assets from the IRS, he admitted yesterday in federal court in Newark, New Jersey. Sethi will pay a $2.37 million penalty for failing to file reports required for foreign accounts. The penalty is huge in light of the amount of unreported assets and income.
“Sethi and his co-conspirators used nominee and shell companies formed in tax-haven jurisdictions and elsewhere to conceal the defendant’s ownership and control of assets and income from the IRS,” according to his official charging document.
HSBC’s Geneva-based private bank is one of at least 11 Swiss firms under investigation by U.S. prosecutors investigating offshore tax evasion. HSBC’s Swiss unit gave lists of employees to aid the U.S. probe, a spokesman said in April. Last month, London-based HSBC, Europe’s largest bank, agreed to pay $1.92 billion to settle U.S. probes of money laundering in the biggest such accord ever. HSBC is likely to have shared customers names with the Justice Department’s Tax Division. As a result, many more investigations, indictments and guilty pleas are expected in the future.
Since 2009, at least 50 U.S. clients of offshore banks and more than two dozen bankers, lawyers and advisers have been charged in a crackdown on offshore tax evasion by the U.S.
Sethi, of Watchung, New Jersey, is one of several HSBC clients charged with opening undeclared accounts through the bank’s NRI division, which were marketed to U.S. citizens of Indian descent.
New Jersey businessman Vaibhav Dahake pleaded guilty in April 2011 to conspiring with five HSBC bankers to hide his Indian accounts from the IRS. His plea came four days after a U.S. judge in California allowed the IRS to serve a so-called John Doe summons on HSBC for information about Americans who may have banked in India to hide accounts from U.S. tax authorities.
Last August, federal jurors convicted a Milwaukee neurosurgeon, Arvind Ahuja, of filing a false tax return and failing to file a Report of Foreign Bank and Financial Accounts, or FBAR, related to HSBC accounts in India.
Last year, Ashvin Desai, the owner of a medical device company, was indicted in federal court in San Jose, California, on charges that he filed a false tax return and failed to file FBARs related to HSBC accounts in India. He awaits trial.
This case is being prosecuted many of the same Justice Department’s Tax Division Trial Attorneys as the other cases. The Justice Department’s Tax Division seems to be replicating its 2009 prosecutorial successes against UBS Swiss bank customers again with HSBC India account holders.
The IRS has said 33,000 U.S. taxpayers with offshore accounts have avoided prosecution since 2009 by entering a limited amnesty program, paying back taxes and identifying those who helped them hide their accounts from authorities.
Hundreds of taxpayers in the program gave prosecutors information that has helped build criminal cases against bankers and advisers.
Sethi became a lawful permanent resident of the U.S. in March 1989 and a U.S. citizen in June 2004. In 1992, he created SanVision, which provides software development, database management and other information technology services for banking and insurance clients, court records show.
He used a Swiss charitable trust and a Cayman Islands corporation to hide the proceeds of real estate transactions in India, according to his charging document known as a criminal information.
Sethi also used a British Virgin Islands corporation to hide his ownership of an undeclared Swiss account for “unreported business receipts and reimbursements for actual business expenses” of SanVision, he admitted.
He admitted conspiring with U.S. Banker A, a senior vice president in New York of a cross-border banking group within the private banking division; U.K. Banker A, a “high-ranking executive” in London and head of a cross-border banking group focusing on clients with ties to south Asia; and Swiss Banker A, a financial adviser based in Geneva.
The traditional offshore private-banking model built on secrecy is disappearing, HSBC Holdings Chief Executive Officer Stuart Gulliver told investors in May.
Sethi admitted that from 2001 until 2009, he had undeclared accounts in Switzerland and India. His highest balance of $4.7 million was in 2007, when he sold a house in Watchung for $2.2 million, according to his information.
Sethi faces as many as five years in prison, and U.S. District Judge Jose Linares set his sentencing for April 18. Prosecutors said the total tax loss to the government was between $80,000 and $200,000. The case is U.S. v. Sethi, U.S. District Court, District of New Jersey (Newark).
The Sethi case should persuade offshore accountholders who cannot decide whether to disclose past foreign account noncompliance to the IRS via the IRS Offshore Voluntary Disclosure Program (OVDP), for protection against civil (and criminal) penalties. In light of recent cases, quiet or no disclosures are not viable options for such individuals. Our law office, which represents many taxpayers throughout the U.S. and around the world with undisclosed offshore accounts, believes that the recent cases and large penalties should encourage more U.S. taxpayers with undisclosed offshore accounts, especially held at HSBC, to come forward before the government contacts them.
Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.