UPDATE: DOJ Investigates HSBC Offshore Accounts - Tax Lawyers

7th Jul 2010 15:56

(Updating to add HSBC reaction and further commentary by lawyers at end of story.) By Arden Dale Of DOW JONES NEWSWIRES The Justice Department has begun a criminal investigation into U.S. taxpayers who may have evaded taxes through HSBC Holdings PLC (HBC) accounts in India and Singapore, according to tax attorneys close to the matter. The agency is looking into whether taxpayers may have violated federal criminal laws by failing to report that they had a financial interest in, or signature authority over, a financial account located in a foreign country, according to a DOJ letter obtained by Dow Jones Newswires. The letter doesn't mention the bank by name, but the attorney who provided it confirmed that the recipient is an HSBC offshore account holder. The DOJ said in the letter that the person had an interest in a foreign account that wasn't reported to the Internal Revenue Service on either a tax return or a special tax return used to report foreign accounts. "You are further advised," the letter concludes, "that you are the subject of a criminal investigation being conducted by the Tax Division." It is signed by Kevin M. Downing, DOJ senior litigation counsel. Robert E. McKenzie, a partner at Arnstein & Lehr LLP in Chicago, said he has had calls from two prospective clients with HSBC accounts in India. Anyone with one of these offshore accounts who hasn't yet received a letter from the DOJ should consider stepping forward to the IRS under a voluntary disclosure program that can offer amnesty. The DOJ and HSBC declined to comment. The development didn't come as a surprise to tax lawyers who have worked closely on the UBS AG (UBS) tax evasion case over the past year. The IRS and DOJ have been saying for months that their efforts to target Americans with undeclared accounts is "not just about UBS," said Scott D. Michel, an attorney at Caplin & Drysdale in Washington. Given the information the agency has obtained from 15,000 or so voluntary disclosures, potential whistleblowers and informants, and from active investigations involving HSBC account holders, it is "utterly unsurprising" that the probe appears to have expanded to another world-wide institution, Michel added. It is unclear where the information on the HSBC accounts came from, and whether the bank itself is under investigation, according to Michel. Bryan C. Skarlatos, a partner at law firm Kostelanetz & Fink LLP in New York, said he had spoken to several people who were approached by the IRS or DOJ about their accounts at HSBC. These people had HSBC accounts in several countries around the world, he said. It is very likely, Skarlatos added, that "inquiries regarding other banks and other countries will follow." -By Arden Dale, Dow Jones Newswires; 212-416-2234; [email protected] (END) Dow Jones Newswires July 07, 2010 10:56 ET (14:56 GMT)