Government Charges Former CPA with Filing False Streamlined Offshore Submission

Eli Noff, Esq., Partner
Mary F. Lundstedt, Esq., Associate

On August 26, 2019 the United States Department of Justice (DOJ) issued a press release reporting that a federal grand jury returned a superseding indictment charging Taxpayer with: (1) failing to file Reports of Foreign Bank and Financial Accounts (FBARs); (2) filing false individual income tax returns with the Internal Revenue Service (IRS); and (3) filing a false Streamlined submission in conjunction with the Streamlined Domestic Offshore Procedures (SDOP).1 The SDOP provides taxpayers with foreign bank account and asset non-compliance a means to come into compliance while at the same time mitigating their statutory penalty exposure. Taxpayers utilizing this procedure must certify that their non-compliance was non-willful, a key criteria for eligibility. This seems to be one of the first instances of the government charging a taxpayer with filing a false Streamlined submission. It should serve as a strong warning to individuals with offshore non-compliance issues-seek advice from an experienced tax professional to find applicable resolution procedures for which you actually qualify.

The United States District Court for the Southern District of Florida filed the superseding indictment on August 22, 2019.2 The indictment describes Taxpayer as a former Certified Public Accountant who owned a cocoa trading company that was organized under the law of the Republic of Panama. Per the indictment, Taxpayer operated the cocoa trading company from Venezuela, Panama, and his former residence in Fort Lauderdale, Florida.

Allegedly, for calendar years 2011 through 2013, Taxpayer failed to report his financial accounts in multiple countries on FBARs. Additionally, for tax years 2010 through 2012, Taxpayer is charged with filing false individual income tax returns which omitted all of Taxpayer's foreign bank accounts.

Again, the charge for filing a false Streamlined submission is particularly interesting. As explained in the indictment:

The Streamlined Domestic Offshore Procedures (the "Streamlined procedures'') allowed eligible taxpayers residing within the United States who failed to report gross income from foreign financial accounts on prior tax returns, failed to pay taxes on that gross income, or who failed to submit an FBAR disclosing foreign financial accounts, to voluntarily disclose their conduct to the IRS. Taxpayers who were eligible under the Streamlined procedures were subject to substantially lower penalties than those provided by other IRS programs.3

Importantly, in order to qualify for the Streamlined procedures, taxpayers are required to certify under penalties of perjury that their non-compliance was due to non-willful conduct. The indictment clarifies that "non-willful conduct" in this context is "conduct that was due to negligence, inadvertence, or mistake, or conduct that was the result of a misunderstanding of the law."4

The indictment alleges that in the fall of tax year 2015, Taxpayer filed his Streamlined submission and certified under penalties of perjury that he learned about the FBAR requirements in 2008, but mistakenly believed it only applied to personal financial accounts.

Taxpayer may indeed have a difficult time convincing a court that his conduct was non-willful. He was a former CPA with significant foreign business activities. Additionally, he is alleged to have failed to report his interest in his foreign bank accounts on the 1040, Schedule B. The DOJ press release notes that, if convicted, Taxpayer faces a maximum prison sentence of five years for each count relating to his failure to file an FBAR and a maximum prison sentence of three years for each of the counts related to filing false tax documents.

If you have undisclosed foreign bank accounts or business interests call Frost & Associates, LLC today at 410-497-5947 to discuss the appropriate options available to come into compliance.


1 You can read the Department of Justice news release at: https://www.justice.gov/opa/pr/former-cpa-indicted-failing-report-foreign-bank-accounts-and-filing-false-documents-irs. The release was updated on August 27, 2019.

2 United States v. Booker, No. 19-60152-CR-SCOLA(s) (S.D. Fla. Aug. 22, 2019).

3 Id. at 11.

4 Id.

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