In the movie "The Spanish Prisoner," the character Jimmy Dell (wonderfully played by comic-turned-actor Steve Martin) describes the secrecy afforded a Swiss bank account owner.
"You now have a Swiss bank account if anybody asks. Crédit Nationale Du Génève code name 'PADDY.' Lavish awkward gesture; all of 15 Swiss Francs in it. But if you ever want to impress anybody, they can find out you have a Swiss account. But Swiss law prohibits the bank from revealing the balance. Thus are all men made equal."
Things have changed since that scene in the 1997 film. The enactment in March 2010 of the Foreign Account Tax Compliance Act (FATCA) provided the Internal Revenue Service new tools to keep tabs on U.S. taxpayers who have accounts outside the country.
That has led to a steady stream of investigations of those who do not report offshore holdings. Or, in the case of a Florida man, who claim that the funds belong to others.
Decades long tax evasion: That’s what Miami resident Dan Rotta allegedly did. Federal investigators contended that over a 35-year period he hid more than $20 million in assets in dozens of secret accounts at various Swiss banks to keep the money out of the IRS’ reach.
On March 17, Rotta pleaded guilty to the charges.
This week (Wednesday, July 23), he was sentenced to 60 months in prison for his part in the conspiracy to defraud the United States by concealing millions in Swiss accounts and claiming to the IRS that the assets were not his, but instead belonged to foreign nationals.
Legal filings and statements made in court show that between 1985 and 2020, Rotta hid millions in assets in accounts at Swiss banks UBS, Credit Suisse, Bank Bonhôte, and Bank Julius Baer.
The accounts were held in his own name, in the names of sham structures, and, in one instance, a pseudonym, according to legal proceedings.
Officials say that over the years, Rotta, a dual Brazilian and U.S. citizen, earned tens of millions of dollars from these assets, but did not report that income on his tax returns, causing “a substantial loss to the IRS.”
Rotta also employed increasingly elaborate schemes to keep his accounts hidden, according to investigators. That included falsely representing that he was not a U.S. citizen, and leveraging his Brazilian citizenship to claim he was a citizen of and living in that South American nation.
He did, however, use the money fund his lavish lifestyle, according to investigators.
One crime leads to another: Things started unraveling for Rotta in 2008, after it was reported publicly that UBS and its bankers were under criminal investigation for helping U.S. taxpayers evade their taxes.
U.S. officials say Rotta closed his UBS account and moved his funds to Credit Suisse and Bank Bonhôte.
Then in 2011, after the IRS obtained records related to one of Rotta’s Swiss accounts, he nominally changed the documentation of his accounts at Credit Suisse and Bank Bonhôte to make it appear that his co-conspirator, a Brazilian national and resident, owned the assets in the accounts.
However, officials says that despite the documentation change, Rotta continued to control the assets and transferred millions of dollars out of those accounts for his use.
IRS audit turns up heat: Shortly after Rotta changed the account documentation, the IRS audited him.
During the IRS examination, Rotta falsely denied that he owned the assets in the foreign financial accounts. Instead, he claimed that the millions of dollars he withdrew from the accounts were non-taxable loans from foreign nationals.
Investigators says he also often routed transfers from his foreign accounts through nominee accounts and attorney trust fund accounts in the United States.
The IRS did not believe Rotta’s story, and assessed millions of dollars of additional taxes as well as penalties and interest against him. Rotta sought to reverse the assessments by taking the case to Tax Court, as is any taxpayer’s right.
However, investigators say Rotta filed a false tax court petition. In that filing, Rotta, through his attorney, falsely denied having any foreign accounts and attached fictitious loan documents. Officials said the nominee account owners also traveled to the United States to retell the false loan story to IRS attorneys.
In 2017, after Rotta presented the false evidence that the purported loans had been repaid, the IRS reversed the deficiencies and agreed that he owed no additional tax.
However, investigators found that the allege loan repayments actually went back into accounts that he controlled shortly after the IRS dismissed the suit.
OVDP overreach: In 2019, when Rotta learned the IRS would receive additional account records from Switzerland that contradicted his claims, Rotta applied to participate in the IRS’ voluntary disclosure program.
Through the agency’s various offshore voluntary disclosure programs (OVDP) over the years, taxpayers who failed to comply with their foreign account tax and reporting obligations could make timely, accurate, and complete disclosures of the funds. They also then paid what they owed, and were able in many cases to limit their potential criminal tax exposure.
However, investigators say Rotta made false statements in his OVDP submission, including falsely claiming that the assets in the Swiss accounts mostly belonged to others, and that any funds provided to him were non-taxable gifts.
Prison term handed down: U.S. District Judge Rodney Smith for the Southern District of Florida last week sentenced Rotta to 60 months, or five years if you prefer that counting method, to federal prison for his roles in the decades of tax fraud schemes.
In addition, the judge ordered Rotta to serve three years of supervised release.
As for the $20 million, the court will determine restitution at a later date.
Officials with the Justice Department’s Tax Division and U.S. Attorney’s office in south Florida worked the case, along with special agents from IRS Criminal Investigation’s Washington, D.C.-based International Tax & Financial Crimes specialty group, a team dedicated to uncovering international tax crimes.
Tax Felon Friday: This conclusion to at least one part of such an extended global tax evasion conspiracy definitely earns its inclusion on the ol' blogs' special Tax Felon Friday page.
That’s a good place to start if you want to catch up on all sorts of other tax miscreants. The page includes posts on those just charged and/or indicted by law enforcement officials as well as reports of those convicted of or who confessed to tax crimes and were sentenced.
If you want even more tax crime posts, notably those that were published long before I gave them a special end-of-week feature, you can peruse, what else, the tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.
And if you want a good movie, I recommend the aforementioned “The Spanish Prisoner.” Despite the name and the mention of Swiss bank accounts, it’s not an esoteric subtitled foreign film. And no, taxes don't play a role in the plot.
Rather, it’s a neo-noir confidence game that ostensibly follows corporate espionage involving a never-revealed secret process. The inventor of the purportedly lucrative process is tempted to betray the company when higher ups try to take it from him. As the blurb says, “Dastardly intrigue ensues.”
If the players matter to you, writer-director David Mamet gathered an intriguing cast. Joining Steve Martin in one of his early serious roles are independent film veteran Ben Gazzara, Felicity Huffman (before her Varsity Blues college admissions legal troubles), and Mamet regular Ricky Jay.
You also might find these items of interest:
- Justice Dept. budget cuts will eliminate special tax unit
- IRS-CI chief likens tax law enforcement unit’s recent successes to takedown of Al Capone
- Former billion-dollar defense contractor pleads guilty to tax crimes with global connections
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