Caribbean Medical School Directors Convicted

Another UBS U.S. Depositor Convicted (10/25/13)

DOJ announces, here, that Dr. Patricia Lynn Hough has been convicted
convicted today by a jury in Fort Myers, Fla., of conspiring to defraud the Internal Revenue Service (IRS) by concealing millions of dollars in assets and income in offshore bank accounts at UBS and other foreign banks, and of filing false individual income tax returns which failed to report the existence of those foreign accounts or the income earned in those accounts."  
Key Facts:

Defendant:  Dr. Patricia Lynn Hough
Counts of Conviction:  Conspiracy (1); Tax Perjury (4)
Maximum Sentence on Counts of Conviction:  204 months
Bank:  UBS
Entities:  Yes
Court:  MD FL
Judge:  John E. Steele (Wikipedia entry here)

Key excerpts from the press release are:
According to court documents and court proceedings, Hough owned two Caribbean-based medical schools – The Saba University School of Medicine located in Saba, Netherlands Antilles, and The Medical University of the Americas located in Nevis, West Indies. Hough conspired to defraud the IRS with her husband, Dr. David Fredrick, who is awaiting trial.  They carried out the conspiracy by creating and using nominee entities, including a foundation, and undeclared accounts in their names and the names of nominee entities at UBS and other foreign banks to conceal assets and income from the IRS.  Both schools and associated real estate were sold on April 3, 2007, for more than $35 million, all of which was deposited into undeclared accounts in the name of the nominee entities.  The majority of the sale proceeds were not reported to the IRS on their tax returns and no tax was paid.  
The evidence at trial further proved that Hough and her co-conspirator used emails, telephone calls and in-person meetings to instruct Swiss bankers and asset managers to make investments and transfer funds from their undeclared accounts at UBS. The evidence established that Hough and her co-conspirator caused funds from the undeclared accounts in the names of the medical schools to be transferred to undeclared accounts in their individual names or in the names of nominee entities.  Hough and her husband then used the funds in their undeclared accounts to purchase an airplane, two homes in North Carolina and a condominium in Sarasota, Fla.
Hough was also convicted of four counts of filing false tax returns for 2005, 2006, 2007 and 2008.  The evidence at trial established that Hough filed false tax returns that substantially understated her total income because she failed to report substantial interest and investment income and in 2007  because she failed to report her half of the proceeds from the sale of the medical schools.  In addition, Hough failed to report on Schedule B of the tax returns that she had an interest in or signature or other authority over bank, securities or other financial accounts located in foreign countries.  
For the prior blog on this defendant and her husband who has not yet been tried:  Two More UBS Depositors Indicted; Big Numbers Involved (5/17/13), here.

Some very large numbers appear to be involved at least for some of the years.  Hence, as with the Ty Warner aka Mr. Beanie Baby conviction by plea, this conviction will test whether courts are really more lenient with offshore tax cheats than onshore tax cheats.  Dr. Hough's case has the added negative factor that she went to trial rather than plead.  According to my statistics, the average incarceration for taxpayers who went to trial is 60.6 months and the median is 72.0 months.  According to those statistics, the average incarceration for guilty pleas is 6.2 months and the median is 0 months.  Quite a difference.



Two More UBS Depositors Indicted; Big Numbers Involved (5/17/13)


Two Florida Doctors have been indicted "for conspiring to defraud the Internal Revenue Service (IRS) by concealing millions of dollars in assets and income in offshore bank accounts at UBS and other foreign banks."  The DOJ Tax Press release is here; the indictment is here.  They were enabled by Beda Singenberger, a person who has figured prominently in my blogs and a previously indicted enabler, see blogs on Singenberger, here.  The key information is below::

Defendants:  Drs. David Leon Fredrick and Patricia Lynn Hough, husband and wife.
Charges:  Conspiracy (1); Tax Perjury (4)
Maximum Incarceration:  Conspiracy - 5 years; Tax Perjury 12 years (4 counts times 3 years each), but actual sentence will be determined by the Sentencing Guidelines subject to departures or Bookervariances which are common.
Enablers:  Beda Singenberger an unnamed UBS banker ("UBS Banker D.L.")
Banks:  UBS, "Swiss Bank No. 1" (Geneva Private Bank), "Swiss-Liechtenstein Bank No. 1" (Swiss subsidiary of Liechtenstein Bank 1), "Liechtenstein Bank No. 1" (a Private Bank and parent of SLB #1), Swiss Cantonal Bank No. 1 (providing banking services), UK Private Bank No. 1.
Entities/Nominees:  Yes.  A number were involved, both real entities and "Nominee Entities" (these were incorporated in various jurisdictions).

The key portions of the press release:
According to the indictment, Fredrick and Hough, married doctors, served on the Board of Directors of two Caribbean-based medical schools – one located on Saba, Netherlands Antilles, and one located on Nevis, West Indies. Fredrick had an ownership interest in the medical school on Nevis until 2007, when both medical schools were sold.  
The indictment alleges that Fredrick and Hough conspired with each other and with Beda Singenberger, a citizen and resident of Switzerland who is under indictment in the Southern District of New York, and a UBS banker to defraud the IRS. They carried out the conspiracy by creating and using nominee entities and undeclared bank accounts in their names and the names of the nominee entities at UBS and other foreign banks to conceal assets and income from the IRS, including the sale of real estate associated with the medical school on Saba and shares they owned in the medical school on Nevis. The real estate was sold for more than $33 million, all of which was deposited into one of their undeclared accounts in the name of a nominee entity.
It is further alleged in the indictment that Fredrick and Hough used emails, telephone and in-person meetings to instruct Swiss bankers and asset managers to make investments and transfer funds from their undeclared accounts at UBS. It is alleged that Fredrick and Hough caused funds from the medical schools’ undeclared accounts to be transferred to undeclared accounts in their individual names or in the names of nominee entities. Fredrick and Hough then used the funds in their undeclared accounts to purchase an airplane, two homes in North Carolina and a condominium in Sarasota, Fla. Fredrick also transferred more than $1 million to his relatives.
Fredrick and Hough were also charged with four counts of filing false tax returns for 2005, 2006, 2007 and 2008. The indictment alleges that Fredrick and Hough filed false tax returns which substantially understated their total income and failed, on Schedule B, Parts I and III, to report that they had an interest in or signature or other authority over bank, securities or other financial accounts located in foreign countries. U. S. citizens, resident aliens and legal permanent residents of the United States have an obligation to report to the IRS on the Schedule B of a U.S. Individual Income Tax Return, Form 1040, whether they had a financial interest in, or signature authority over, a financial account in a foreign country in a particular year by checking “Yes” or “No” in the appropriate box and identifying the country where the account was maintained. U. S. citizens and residents also have an obligation to report all income earned from foreign bank accounts on their tax returns. 
The indictment itself alleges much of the gory detail.  I don't have the time to do a detailed analysis, nor do I think it would be helpful except perhaps to a few readers.  My other priorities thus require that I focus my attention elsewhere.  The numbers are big, though.  The pattern I see should put the defendants very high up and even possibly at the top of the Sentencing Guidelines.  Accordingly, it would require an incredibly huge downward variance to get to no or minimum incarceration.

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