US offshore tax crackdown reaches Israel

In a sign the U.S. government is moving beyond Switzerland in its pursuit of secret offshore accounts, the Justice Department and Internal Revenue Service announced the indictment of three Israeli-American tax preparers, who are charged with helping U.S. taxpayers hide millions of dollars in two Israeli banks.
The U.S. since 2009 has been cracking down on U.S. taxpayers hiding assets abroad. As part of an agreement to avoid criminal charges, Swiss banking giant UBS UBS -0.58% turned over the names of more than 4,000 customers and paid a $780 million fine.
Now the U.S. government is casting a wider net.
"These are the first indictments in connection with accounts at Israeli banks," said Bryan Skarlatos, an attorney with Kostelanetz & Fink in New York who has handled confessions of secret offshore accounts for hundreds of U.S. taxpayers.
According to the indictment, announced Friday, the three men set up offshore corporations in Belize and elsewhere that held secret accounts at one Israeli bank's Luxembourg branch and another Israeli bank's Switzerland-Luxembourg branch on behalf of six clients.
The defendants also prepared corporate and partnership tax returns that falsely reported money sent offshore as investment losses or business expenses. In addition, the defendants underreported clients' income and failed to report the foreign accounts, according to the indictment.
The defendants worked for United Revenue Service Inc., a tax-preparation firm with 12 offices nationwide, according to the indictment. Phone numbers for United Revenue Service offices were disconnected.
The indictment didn't disclose the total amount hidden in the accounts. For one client, known by the initials A.F., the defendants transferred $1.9 million to one of the Israeli banks, the indictment said.
Two of the defendants, David Kalai and his son Nadav Kalai, had dual citizenship in Israel and the U.S. at the time of the misdeeds, according to the charges. The third defendant, David Almog, who ran the firm's New York office, was an Israeli citizen who lived in the U.S., according to the indictment. None of the defendants could be reached for comment. A Justice Department spokesman said Friday it didn't know who their attorneys are.
The indictment didn't name the Israeli banks holding the secret accounts but said both are based in Tel-Aviv. It added that "Bank A" describes itself as having more than 336 branches in 18 countries, with "loyal and discreet" bankers and a "premier position in the world of international private banking."
The indictment said "Bank B" is a midsize institution with a "world-wide presence on four continents" that maintains "total discretion" on behalf of clients.
Kevin Packman, an attorney with Holland & Knight in Miami who has handled many taxpayer confessions, said the indictment shows how diligently the IRS is mining data collected from taxpayers who have confessed to having secret offshore accounts. In order to qualify for the agency's limited amnesty, taxpayers must answer detailed questions about how the accounts were created and maintained.
"Clearly they are working backward from the data they've collected to identify the promoters of the noncompliance," said Mr. Packman, who added that the information will be used not only to punish advisers but also to pressure banks more readily to reveal the names of U.S. taxpayers holding accounts.
Earlier this year, Swiss bank Wegelin & Co. was indicted on charges that it helped wealthy Americans hide more than $1.2 billion in secret accounts.
Experts say the timing of the arrests isn't random.
The June 30 deadline for taxpayers to file Foreign Bank Account Reports is approaching, and often the IRS announces indictments shortly before key deadlines.

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