HSBC India Customer New Indictment Uncovers More HSBC Details

A Wisconsin neurosurgeon was re- indicted by a U.S. grand jury on new charges that he failed to declare an HSBC Holdings Plc (HSBA) account in India valued in 2009 at $8.7 million.  Arvind Ahuja was indicted again by a federal grand jury in Milwaukee, where he was initially charged June 28 with concealing accounts from the Internal Revenue Service. Federal prosecutors in Milwaukee filed a superseding nine-count indictment to defraud the IRS from 2006 to 2009 against Dr. Ahuja, a neurosurgeon in Greendale, Wisconsin, that fleshed out details of HSBC’s work with Americans born in India and highlighted the role of two unnamed HSBC bankers in New York.

The charges against Ahuja come amid a widening U.S. crackdown on offshore tax evasion that includes grand jury investigations of eight foreign banks. Prosecutors have filed criminal tax charges against more than three dozen former U.S. clients of UBS AG and Credit Suisse Group AG, Switzerland’s two biggest banks, and London-based HSBC, Europe’s biggest bank.  The superseding indictment signals a ramping up of pressure on HSBC and could lead to charges against two unnamed bankers listed in the new filing, based on past procedures.

Dr. Ahuja was indicted in June for tax fraud involving more than $8.7 million hidden in an Indian branch of HSBC. Court papers say that over 2006 through 2009, Ahuja failed to report to the Internal Revenue Service more than $1.2 million in interest income he earned from the account, as well as to disclose the account’s existence to the IRS, as required by U.S. law.

Dr. Ahuja took steps to hide his offshore accounts, according to the indictment made public today. In 2007, an HSBC India banker told a colleague that Ahuja “has requested that he does not want any kind of mail at his US or India address,” according to the indictment. “He wants a HOLD on all his accounts.” If convicted, Ahuja, faces as long as 10 years in prison on the FBAR charges, five years on conspiracy and three years on charges of filing false tax returns.

On April 7, 2011, the U.S. District Court for the Northern District of  California issued an order authorizing the Internal Revenue Service to serve a “John Doe” summons requesting information from HSBC regarding U.S. residents who may be using accounts at HSBC in India to evade federal income taxes. If HSBC produces these records,  which is likely, it may be too late for U.S. taxpayers with undisclosed  HSBC accounts to take advantage of the IRS Voluntary Disclosure Program  for offshore accounts. The IRS says there are 9,000 high net worth Indian US residents who maintain at least $100,000 in their bank accounts in HSBC India but few of them have disclosed details of their accounts.

In light of prosecution and summons, it is imperative that HSBC India accountholders  seriously consider entering the IRS Voluntary Disclosure Practice (VDP) program, which remains in effect after OVDI’s expiration, for protection against civil (and criminal) penalties.

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.

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