Plea Deal Sheds Light on Tax-Evasion Tactics

     (CN) — An Iranian-born California businessman admitted Monday to stashing money in secret offshore accounts at three Israeli banks to dodge U.S. tax laws, and his plea agreement outlines the methods he used.
     Masud Sarshar said he diverted more than $21 million in untaxed business income into these accounts between 2006 and 2009, according to the $8.3 million plea deal he struck with the government.
     He also failed to report the income on his corporate and individual tax returns from 2006 to 2011.
     Sarshar, who emigrated to the U.S. in 1978, used the accounts to hide income from his U.S.-based apparel design and manufacturing business, Apparel Limited, which he started in the early 1990s.
     The plea agreement outlines the mechanics of how U.S. citizens use offshore accounts for tax evasion.
     According to the deal, managers from the banks coached Sarshar on how to keep the accounts secret. A manager from unnamed “Israeli Bank A,” as it is referred to in court papers, suggested that he open his account with a code name and opt out of receiving account statements in the mail.
     Instead, Sarshar paid a fee for a “hold-mail” service. The manager hand delivered hard copies of the statements during trips to the U.S.
     Sarshar reportedly met with the manager in his car to review the statements, which the manager did not leave behind.
     That system mirrors allegations outlined in a 2015 class action lawsuit against Israel’s largest bank, Bank Leumi. The lawsuit claimed that the bank offered 2,450 account holders a hold-mail service in a 10-year scheme to help account holders hide their assets.
     Sarshar also had hold-mail service with Bank Leumi accounts, which were not in his name, but held by entities that he created.
     The plea deal outlines how a Bank Leumi manager transported his statements.
     “RM2 brought electronic copies of Sarshar’s Bank Leumi account statements during her visits to the United States, which she kept hidden on a USB drive contained in a necklace she wore,” the document says, referencing the bank manager.
     She also promised Sarshar that Bank Leumi would never “screw” him at times when the federal government engaged in enforcement actions against U.S. taxpayers hiding money in offshore accounts.
     “Years after Sarshar closed his Bank Leumi accounts in 2011, he spoke with RM2 by phone and again voiced his concerns about his Bank Leumi accounts being revealed to government authorities. RM2 responded by saying ‘Masud who?'” indicating that she would feign ignorance if asked about his accounts, according to the 30-page plea agreement.
     Sarshar’s guilty plea marks the third time in less than two years that Bank Leumi has been named for helping U.S. taxpayers dodge taxes.
     In 2010, the bank entered into a nonprosecution agreement with the Justice Department for helping 1,500 U.S. account holders hide assets in offshore accounts. Prosecutors called the bank’s admission “unprecedented,” and Bank Leumi agreed to pay the government $270 million and provide the names of account holders.
     Sarshar’s plea deal says the banks offered him sham loans to enable him to access the offshore funds. So-called “back-to-back” loans, which were never repaid, allowed him to collateralize the loans with his secret funds, letting him fly under the radar.
     Bank Leumi issued him a $10 million sham loan in 2009 and renewed it after six months. It later gave him another $9 million loan.
     In 2010, the unnamed Israeli bank and Bank Leumi advised Sarshar to obtain Iranian and Israeli passports to avoid detection. However, by the time he got the passport it was too late – their respective banks had already flagged him as a U.S. citizen. As a last-ditch effort, he shuffled the funds to yet another secret account, this time at unnamed “Israeli Bank B.”
     According to the plea deal, he wired $5.8 million from Bank Leumi to an unnamed Hong Kong Bank under a fake company name. The Hong Kong bank then wired the funds to a U.S. account, giving the appearance of a loan from the fake company.
     The Justice Department did not immediately respond to an emailed request for comment Tuesday about the charges against Sarshar, and Bank Leumi’s involvement.
     Bank Leumi also did not immediately respond to an emailed request for comment.
     The Justice Department charged Sarshar with conspiracy to defraud the U.S. and “corruptly endeavoring to impair and impede the due administration of the internal revenue laws,” according to an 18-page information.
     He will be sentenced to 24 months in prison if the court accepts the plea agreement.

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