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Government seeks to make an example of brothers for tax evasion

There is no doubt that tax evasion can be severely punished. If you are lucky, a tax evasion conviction will result in only fines and penalties. If you are unlikely, it could mean time behind bars.

In a recent tax evasion case involving two brothers, the Securities and Exchange Commission is trying to send a message by asking for more than $750 million. A jury in a civil trial found that the brothers had acted fraudulently to evade taxes; now, it is up to a federal judge to decide on the amount that will have to be paid in the penalty phase of the trial.

According to the findings of the jury, the brothers evaded taxes on more than $500 million in income over a ten year period. Much of the money was funneled into offshore accounts.

Government lawyers say that one of the brothers made deliberate decisions to break the law because he believed that even if he got caught, he would make more of a profit than if he had paid his taxes in a forthcoming manner. The only way to deter similar decisions by others in the future, argued the government, was to force the relinquishment of hundreds of millions of dollars.

On the other hand, a defense lawyer said that three quarters of a billion dollars was a vastly overblown figure. He says that only around $24 million can be ordered to be surrendered.

Whatever the outcome of the penalty phase of this case, it is a good example of how tax evasion cases are not always just about the matter at hand for the government: they are about sending a message to others. Do not let yourself become a message of warning if you are being accused of tax evasion.

Source: ABC News, "Regulator Seeks Tough Penalty for Tax Evasion Case," Larry Neumeister, Aug. 6, 2014

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