Friday, June 15, 2012
Three Tax Return Preparers Charged with Helping Clients Evade Taxes by Hiding Millions in Secret Accounts at Two Israeli Banks Defendants Operated Return Preparation Businesses Located in 12 Locations Throughout the U.S., Including California, New York and Maryland
David Kalai, Nadav Kalai and David Almog were indicted by a federal grand jury in the Central District of California and charged with conspiring to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced today. The superseding indictment, which was returned late yesterday, was unsealed following the defendants’ arrests.
According to the superseding indictment, David Kalai and Nadav Kalai were principals of United Revenue Service Inc. (URS), a tax preparation business with 12 offices located throughout the United States. David Kalai worked primarily at URS’s former headquarters in Newport Beach, Calif., and later at URS’s location in Costa Mesa, Calif. Nadav Kalai, who is David Kalai’s son, worked out of URS’s headquarters in Bethesda, Md., as well as URS locations in Newport Beach and Costa Mesa, Calif. David Almog was the branch manager of the New York office of URS and supervised tax return preparers for URS’s East Coast locations.
As alleged in the superseding indictment, U.S. citizens, resident aliens and legal permanent residents have an obligation to report to the IRS on Schedule B of the U.S. Individual Income Tax Return, 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 the foreign financial account on the tax returns. Separately, U.S. citizens, resident aliens and permanent legal residents with a foreign financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year, must also file a Report of Foreign Bank and Financial Accounts (FBAR) with the Treasury disclosing such an account by June 30 of the following year.
The superseding indictment alleges that the co-conspirators prepared false individual income tax returns which did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts. In order to conceal the clients’ ownership and control of assets and conceal the clients’ income from the IRS, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, Bank A and Bank B. Bank A is a large financial institution headquartered in Tel-Aviv, Israel, with more than 300 branches across 18 countries worldwide. Bank B is a mid-size financial institution also headquartered in Tel-Aviv, with a worldwide presence on four continents.
As further alleged in the superseding indictment, the co-conspirators incorporated offshore companies in Belize and elsewhere to act as named account holders on the secret accounts at the Israeli banks. The co-conspirators then facilitated the transfer of client funds to the secret accounts and prepared and filed tax returns that falsely reported the money sent offshore as a false investment loss or a false business expense. The co-conspirators also failed to disclose the existence of, and the clients’ financial interest in, and authority over, the clients’ secret accounts and caused the clients to fail to file FBARs with the Department of the Treasury.
If convicted, each defendant faces a maximum of five years in prison and a maximum fine of $250,000. The charges contained in the indictment are only allegations. The defendants are presumed innocent and it is the government’s burden to prove guilt beyond a reasonable doubt.
Kathryn Keneally, Assistant Attorney General of the Justice Department’s Tax Division, thanked Tax Division Trial Attorneys Christopher S. Strauss and Ellen M. Quattrucci, who prosecuted the case, and Assistant U.S. Attorney Sandra A. Brown of the U.S. Attorney’s Office for the Central District of California, who assisted with the prosecution. The case was investigated by special agents of IRS – Criminal Investigation.
