Audrey Strauss, the United States Attorney for the Southern District of New York, David A. Hubbert, Acting Assistant Attorney General for the Justice Department’s Tax Division, and Charles P. Rettig, Commissioner of the Internal Revenue Service (“IRS”), announced that U.S. District Judge Gregory H. Woods entered an order yesterday authorizing the IRS to issue summonses requiring multiple couriers and financial institutions to produce information about U.S. taxpayers who may have used the services of Panama Offshore Legal Services (“POLS”) and its associates (together, the “POLS Group”) to evade federal income taxes. Specifically, the IRS summonses seek to trace courier deliveries and electronic fund transfers between the POLS Group and its clients, in order to identify the POLS Group’s U.S. taxpayer clients who have used the POLS Group’s services to create or control foreign assets and entities to avoid compliance with their U.S. tax obligations.
Manhattan U.S. Attorney Audrey Strauss said: “This action underscores our Office’s commitment to hold accountable those who use offshore service providers to avoid U.S. taxes. In issuing these John Doe summonses, we continue our joint efforts with the IRS to investigate tax evaders who use foreign financial accounts and sham foreign entities to hide their assets.”
Acting Assistant Attorney General David A. Hubbert said: “The Department of Justice, working alongside the IRS, is dedicated to unearthing the use of foreign bank accounts to evade U.S. taxes. We will use the many tools available to us, including John Doe summonses like the ones authorized today, to ensure that taxpayers are fully meeting their responsibilities.”
IRS Commissioner Charles P. Rettig said: “These court-ordered summonses should put on notice every individual and business seeking to avoid paying their fair share of taxes by hiding assets in offshore accounts and companies. These records will empower the IRS and the Department of Justice to find those attempting to skirt their tax obligations and ensure their compliance with the U.S. tax laws.”
Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also disclose certain foreign financial accounts and assets. According to the allegations set forth in the documents filed in support of the petition to authorize the John Doe summonses, and other information in the public record:
POLS is a Panamanian law firm that advertises services, including to U.S.-based clients, to assist in concealing ownership of offshore entities and accounts. Among other services, POLS and its associates offer assistance with forming corporations and foundations and creating offshore financial accounts, for purposes of asset protection. POLS highlights secrecy as a key advantage of its entity formation services, promising its clients “100% anonymity, privacy and confidentiality.” Other members of the POLS Group similarly advertise that they can assist clients with concealing assets and avoiding taxes. For example, one POLS Group member assures clients that “a carefully designed corporate strategy allows you to care for your loved ones free from probate, inheritance taxes, and other legal and tax problems.” The IRS has learned of at least one identified U.S. taxpayer who used POLS’s services to create an unreported offshore entity and account in Panama, through the IRS’s Offshore Voluntary Disclosure Program (“OVDP”). The OVDP allows U.S. taxpayers to voluntarily disclose foreign accounts or entities used to evade tax in exchange for fixed penalties.
In this action, the Court granted the IRS permission to serve what are known as “John Doe” summonses on 10 entities: Federal Express Corporation; FedEx Ground Package System, Inc.; DHL Express; United Parcel Service, Inc.; the Federal Reserve Bank of New York; The Clearing House Payments Company LLC; HSBC Bank USA, N.A.; Citibank, N.A.; Wells Fargo Bank, N.A.; and Bank of America, N.A. There is no allegation in this action that the summons recipients have engaged in any wrongdoing. Rather, the IRS uses John Doe summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown. The John Doe summonses direct these couriers and financial entities to produce records that will enable the IRS to identify U.S. taxpayers who have used the POLS Group’s services, along with other documents relating to the POLS Group’s business.
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