The Tax Times: A Former Credit Suisse Client Gets 7 Month Jail Sentence!

We previously posted on November 7, 2016 we posted Swiss Bank Rats Out NYU Business Professor - Results in Fine of $100M & Up To 5 Yrs in Prison - What Are You Waiting For? where we discussed that a former client of Credit Suisse Group AG who pleaded guilty to hiding $200 million from U.S. tax authorities was sentenced to seven months in prison after a judge granted him leniency for cooperating with prosecutors, a Justice Department official said.

Dan Horsky, a retired business professor from Rochester, New York, pleaded guilty on November 4, 2016 to using secret Swiss bank accounts to hide assets and income from the Internal Revenue Service and New York tax authorities. Prosecutors urged a judge to send him to prison for 20 months. Horsky’s lawyers said he deserves probation because he helped with a criminal investigation of the bank and will pay at least $124 million in penalties.

Now according to TaxProToday citing Bloomberg, U.S. District Judge T.S. Ellis III is set to impose a sentence on Friday in federal court in Alexandria, Virginia. Dozens of wealthy U.S. tax defendants who used offshore accounts have avoided prison or received terms far below those recommended by advisory guidelines, as judges have consistently ruled against Justice Department prosecutors.

What sets apart tax cheats who use offshore accounts from other felons is often the large checks they write in back taxes, fines and penalties. In Horsky’s case, he’s paying at least $124 million, and could pay more. Prosecutors don’t want that to be a get-out-of-jail-free card.

“While the numbers are quite large, they reflect the enormous scope of the crime Horsky committed,” prosecutors wrote in a Feb. 6 memo to the judge. “By any terms, even after making those payments, the defendant possesses extraordinary wealth.

A sentence of incarceration is necessary in order to dispel any indication that one’s freedom can be purchased by paying the government the money it was owed.”

Horsky began cooperating in an investigation on three continents in which he provided “voluminous historical, financial, and communications records and his contacts within the financial community,” his lawyers said in a Feb. 4 court filing. The precise nature of his cooperation is described in sealed memos.

Prosecutors are examining how Credit Suisse hid Horsky’s accounts from the Justice Department even as a subsidiary pleaded guilty in May 2014, paying $2.6 billion and admitting it helped thousands of Americans evade taxes, according to people familiar with the matter who weren’t authorized to discuss it publicly. A monitor appointed by New York’s banking regulator continues to review Credit Suisse’s operations after his initial two-year appointment was extended.

Horsky spent almost four decades at the University of Rochester’s Simon Business School, where he became a renowned scholar in quantitative marketing. He researched Internet startup companies, particularly in Israel, where he once lived. He lost money in 17 companies he invested in, running up credit-card debt and taking a second mortgage, according to the memo from his lawyers. In 2000, he invested in a British company through a Swiss account, sticking with the firm even as he ran up $350,000 in debts, often using margin loans.

In 2005, shares in the company began to take off, and by 2008, his holdings were worth $80 million after a second firm bought the company. He then reinvested in the second company, and his assets grew to $200 million by 2014. Even as he hid those assets, “he lived his modest life as a university professor,” according to his attorneys.

The case is U.S. v. Horsky, 16-cr-224, U.S. District Court, Eastern District of Virginia (Alexandria). Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:16-cr-224.

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