The Tax Times: 1st FATCA Indictment Against Foreign Company

The US authorities have charged six Belize business executives with organizing a scheme to help American citizens evade USD500 million of taxes and escape their reporting obligations under the Foreign Account Tax Compliance Act. The alleged conspiracy was investigated by using undercover law enforcement agents posing as dishonest clients.

A multi-count indictment was unsealed on September 09, 2014in federal court in Brooklyn, New York, against six individual defendants and six corporate defendants. The charges include conspiracy to commit securities fraud, tax fraud, and money laundering.

The Individual Defendants include :

ROBERT "BOB" BANDFIELD, Age: 70 Residence: Belize City, Belize

ANDREW GODFREY Age: 51 Residence: Belize City, Belize

KELVIN LEACH Age: 34 Residence: Belize City, Belize

ROHN KNOWLES Age: 29 Residence: Belize City, Belize

BRIAN DE WIT Age: 45 Residence: Belize City, Belize

CEM CAN, also known as “Jim Can” Age: 44 Residence: Belize City, Belize

E.D.N.Y. Docket No. 14-CR-476 (ILG)

“As alleged, Bandfield and his co-conspirators devised not only a fraudulent scheme but an elaborate corporate structure based on lies and deceit designed to enable U.S. citizens to evade and circumvent our securities and tax laws.

They set up sham companies with figureheads at the helm in an attempt to deceive U.S. law enforcement and regulators and bragged about their scheme to their clients,” stated United States Attorney Lynch.

“Today’s sweeping indictment, charging the individuals and companies responsible for this $500 million scheme, closes this fraudulent offshore safe haven and sends a strong message to those who seek to abuse the financial markets in order to enrich themselves that we will investigate and prosecute them no matter where they set up shop.”

“The investigation of offshore tax evasion and money laundering are top priorities for IRS-Criminal Investigation, and we are committed to using all of our enforcement tools to stop this abuse. The enactment of the Foreign Account Tax Compliance Act (FATCA) is yet another example of how it is becoming more and more risky for U.S. taxpayers to hide their money globally.

As alleged in the indictment, between January 2009 and September 2014, this group of conspirators, masquerading as financial professionals, concocted three interrelated schemes to:

defraud new investors in various U.S. publicly traded companies through, among other things, fraudulent concealment of the defendants’ corrupt clients’ ownership interests in the U.S. publicly traded companies and their fraudulent manipulation of artificial price movements and trading volume in the stocks of those companies;

aid the corrupt clients to circumvent the IRS’s reporting requirements under, among other statutes, the Foreign Account Tax Compliance Act (FATCA); and

launder money for the corrupt clients through financial transactions to and from the United States involving proceeds of fraud in the sale of securities. As part of this fraudulent offshore scheme, the defendants laundered approximately $500 million for the corrupt clients—who included more than 100 U.S. citizens and residents.

To facilitate these interrelated schemes, the defendants created shell companies in Belize and Nevis, West Indies, for the corrupt clients and placed nominees at the helm of these companies. This structure was designed to conceal the corrupt clients’ ownership interest in the stock of U.S. public companies, in violation of U.S. securities laws, and enable the corrupt investors to engage in trading under the nominee’s names through brokerage firms also set up in Belize.

The defendants’ scheme also enabled the U.S. corrupt clients evade reporting requirements to the IRS by concealing the proceeds generated by the manipulated stock transactions through the shell companies and their nominees.

For example, in response to a request received by a U.S. corrupt client from a U.S. transfer agent who had to determine whether the proceeds from manipulative stock trading transaction were taxable under U.S. law, the defendant Bandfield forwarded an IRS Form ( probably Form W–8 BEN) signed by co-defendant Godfrey as the nominee for the shell company which had been set up at the request of the client.

At one point during the government’s investigation, Bandfield boasted to an undercover law enforcement agent that he had specifically designed this “slick” corporate structure

to counter President Barack Obama’s new laws, a reference to FATCA.

Only one of the six accused, Bob Bandfield, is under arrest, as he happened to be in Miami at the time of the swoop. The other five are presumed to be in Belize and will be the subject of an extradition request. Law enforcement officers in Belize have already raided the offices of the companies allegedly used in the business.

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