If you have been, or currently are, a client of Sovereign Management & Legal Ltd. and you are not in full compliance with the IRS, you should be extremely nervous right now. On January 5, 2015, the U.S. District Court for the Southern District of New York authorized the IRS to issue summonses for records relating to U.S. taxpayers who used their services
The Court granted the IRS permission to serve what are known as “John Doe” summonses on FedEx Express, FedEx Ground, DHL, UPS, Western Union, the Federal Reserve Bank of New York (FRBNY), Clearing House Payments Company LLC, and HSBC Bank USA National Association. The IRS uses John Doe summonses to secure information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses will force these eight companies to hand over records that will help the IRS to identify U.S. taxpayers who, from the years 2005 through 2013, used Sovereign’s services to “establish, maintain, operate, or control any foreign financial account or other assets; any foreign corporation, company, trust, foundation or other legal entity; or any foreign or domestic financial account in the name of such foreign entity.”
The IRS has been working closely with the Drug Enforcement Administration (DEA) who has been committed to sharing information with the IRS in an effort to find international tax evaders and their accomplices.
The allegations against Sovereign state that: “Sovereign is a multi-jurisdictional offshore services provider that offers clients, among other things, the formation and administration of anonymous corporations and foundations in Panama as well as offshore entities. Related services provided by Sovereign include the maintenance and operation of offshore structures, mail forwarding, the availability of virtual offices, re-invoicing, and the provision of professional managers who appoint themselves directors of the client’s entity while the client maintains ultimate control over the assets.”
According to the DEA, their investigation of online narcotics trafficking (Operation Adam Bomb) which was shared with the IRS, led to information that Sovereign was involved in assisting U.S. clients evade taxes. One taxpayer, who was making a voluntary disclosure of tax non-compliance to avoid prosecution, revealed that Sovereign helped them form an anonymous corporation in Panama that the taxpayer used to control assets without appearing to own them.
The IRS’s investigation discovered that Sovereign uses FedEx, UPS, and DHL when corresponding with clients and uses Western Union to wire funds to and from U.S. clients. In addition, wire services operated by FRBNY and Clearing House, and the U.S. correspondent bank accounts that HSBC USA holds for Sovereign’s banks in Panama and Hong Kong, most likely have records of financial transactions between Sovereign and its U.S. clients. The IRS hopes that through the John Doe summonses, they will be able to track down the Sovereign U.S. clients who are evading taxes.
The noose continues to tighten on U.S. taxpayers who are not fully disclosing their worldwide income. You may be able to run, but you cannot hide from the IRS any more. Between FATCA, whistle blowers, and the collaboration between U.S. agencies, your days are numbered if you are one of the remaining holdouts who have failed to report foreign assets.
For over 10 years, Esquire Group has been helping clients get into compliance and stay there. We are here to help you too!