The federal government is seeking information from payment-card processor First Data on merchants who may be using offshore accounts to hide income and avoid paying U.S. income taxes.
The Justice Department said Wednesday it asked a federal judge in Denver to authorize a "John Doe" summons for information as part of an IRS investigation into taxpayers whose businesses directly deposit income from credit, debit and other payment cards into foreign accounts.
The agency alleges that merchants opened bank accounts in offshore jurisdictions, then directed First Data to deposit proceeds from their debit or credit card transactions directly into those accounts.
A "John Doe" summons enables the IRS to get information about U.S. taxpayers whose identities are not yet known.
First Data spokeswoman Christa Goeson said Wednesday that she hadn't seen the summons yet. "We have an excellent track record of cooperating with all government agencies and expect to continue our practice of complying with all lawful requests for information with due regard for the confidentiality of our customers' data," she said.
Spokesmen for the Internal Revenue Service and the Justice Department declined to comment on whether First Data faces action beyond a summons.
First Data was acquired by an affiliate of the buyout firm Kohlberg Kravis Roberts & Co. in 2007, a year after First Data spun off Western Union into an independent publicly traded company.
In court documents, IRS revenue agent Daniel Reeves wrote that First Data subsidiary Cardservice International, based in Moorpark, Calif., and First Atlantic Commerce, based in Bermuda, had teamed up on an effort to reach international merchants.
In a 2001 news release, the companies touted the benefits of "split jurisdictional settlement," where a merchant's sales income from universally accepted credit cards like MasterCard and Visa could be deposited in foreign merchant accounts, Reeves wrote.
He wrote that offshore merchant account services were clearly marketed as a means of avoiding taxes.
Cardservice International is doing business as First Data Independent Sales.
Prosecutors said they are seeking names, addresses, annual statements and other information from the John Doe clients.
IRS Commissioner Doug Shulman in March encouraged taxpayers hiding assets offshore to voluntarily disclose it to avoid criminal prosecution, though they still would have to pay back taxes, interest and penalties.
The Swiss banking giant UBS AG in February turned over dozens of names of account holders suspected of concealing income from the IRS in a deferred prosecution agreement. It is contesting a lawsuit by the IRS seeking identities of thousands more.