Man Pleads Guilty to Criminal Tax Fraud Relating to Failing to Disclose Foreign Bank Account

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Saratoga resident Moshe Handelsman pleaded guilty Wednesday to filing a false tax return for tax year 2007, the United States Attorney’s Office said.

According to the plea agreement, between approximately 1993 and 2000, Handelsman, a U.S. citizen, used three bank accounts held in the names of two different foreign corporations at foreign banks to falsely reduce his taxes, said Assistant Attorney General for the Tax Division Kathryn Keneally and U.S. Attorney Melinda Haag for the Northern District of California.

The last of those accounts was held at an Israeli bank located in Tel-Aviv, Israel. The foreign bank accounts and foreign corporations were set up with the assistance of his tax return preparers, according to authorities.

Court documents reveal that in approximately 2000, Handelsman traveled to Israel and met with a banker at the Israeli bank who referred him to an Israeli attorney to set up a foreign corporation, said federal prosecutors.

The foreign corporation was called Exportus Ltd. and was the named account holder of the account at the Israeli bank.

From 2003 through 2008, Handelsman sent $1,808,075 from a domestic corporation he controlled called Advanced Forecasting Corp. to the Exportus Ltd. bank account, the federal prosecutors said a news release.

With the assistance of his tax return preparers, the funds transferred offshore were then deducted as false “Information Acquisition” expenses on the Advanced Forecasting Corp.’s tax returns, they added.

The false business expenses on the corporate tax returns resulted in an under-reporting of Handelsman’s income on his individual income tax returns for 2003 through 2008, they noted.

Handelsman also failed to disclose the existence of his foreign bank account on his individual income tax returns, they indicated.

According to the plea agreement, in 2009, Handelsman closed his account at the Israeli bank and repatriated the money by transferring the funds into a second Israeli bank account and then to a U.S.-based Charles Schwab account in the name of a relative.

The funds were then transferred from the Charles Schwab account to Handelsman to make it appear that the funds were a non-taxable gift from the relative, the prosecutors said.

U.S. citizens and residents who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III, of their individual income tax returns, they said.

Additionally, U.S. citizens and residents must file a Report of Foreign Bank and Financial Reports (FBAR) with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signature or other authority, they added.

Handelsman faces a potential maximum prison term of three years and a maximum fine of $250,000. In addition, Handelsman has agreed to pay a civil penalty to the Internal Revenue Service (IRS) in the amount of 50 percent of the high balance of his undeclared accounts for failing to file FBARs.  His sentencing is scheduled for Nov. 6, 2013.

Keneally and Haag thanked special agents of IRS-Criminal Investigation, who investigated the case, and Tax Division Trial Attorneys Ellen M. Quattrucci and Christopher S. Strauss, who prosecuted the case, and Assistant U.S. Attorneys Thomas Moore and Thomas Newman of the U.S. Attorney’s Office for the Northern District of California, who assisted with the prosecution.

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