4th person charged in UBS tax-evasion case
— -- A California businessman Friday became the fourth person charged with using an offshore account at Swiss banking giant UBS to hide funds from the IRS as federal prosecutors kept up pressure on other wealthy Americans with secret foreign accounts to come clean.
Malibu resident John McCarthy agreed to plead guilty to failing to disclose a UBS account that investigators charged he used to transfer more than $1 million in business income out of the country tax-free.
LEGAL DOCUMENTS:Criminal information | Plea agreement
McCarthy, whose business was not identified by prosecutors, admitted he deliberately ducked payment of at least $200,000 in federal income taxes on the money he sent to the UBS account he secretly controlled under the name COGS Enterprises, a Hong Kong entity.
By agreeing to plead guilty at a federal court hearing set for Sept. 14, he will face a maximum five-year prison term and $250,000 in fines, plus payment of five years of back taxes and penalties.
"Mr. McCarthy has accepted responsibility for his conduct," said defense attorney Steven Toscher. "He, like many other U.S. taxpayers, has made serious mistakes regarding the use of foreign bank accounts."
McCarthy opened his UBS account in 2003 and subsequently used it to transfer more than $1 million from his Los Angeles firm, according to the federal plea agreement filed Friday. He transferred additional funds to other UBS accounts from yet another UBS account he controlled in the Cayman Islands.
UBS actively helped him hide the funds, as bank representatives told him "a lot of United States' clients don't report their (business) income and just take it off the top," the agreement stated.
McCarthy was among roughly 250 UBS clients whose name was provided to federal authorities earlier this year as part of a federal court settlement in which the bank agreed to provide financial data for clients whose accounts bore earmarks of tax evasion.
Three other UBS customers from Florida were also part of that group, and pleaded guilty earlier this year to filing false tax returns.
For its acknowledged involvement, UBS also agreed to pay $780 million to defer prosecution of criminal charges that it repeatedly sent its bankers on clandestine trips to the U.S. to help American customers like McCarthy place assets in offshore accounts that would not be reported to the IRS.
However, until a tentative agreement was reached on Wednesday, UBS had rejected IRS demands in a federal civil lawsuit for account data on as many as 52,000 other wealthy American clients suspected of using offshore accounts to evade millions of dollars in taxes.
The number of accounts to be disclosed and the timing of the new handover are expected to be made public as early as next week after both sides and the Swiss government formally approve a legal stipulation.
Eileen Mayer, chief of the IRS Criminal Investigation Division, called the McCarthy case "the tip of the iceberg" in an ongoing effort to prosecute Americans who use offshore accounts to evade taxes.
"The fact that this case was handled out of California and the earlier cases were in Florida shows this is a serious investigation that extends across the country," said Assistant U.S. Attorney Sandra Brown in Los Angeles.
Acting Assistant Attorney General John DiCicco, head of the Justice Department tax division, cited the charges against McCarthy as a warning that other tax evaders should take advantage of an IRS voluntary disclosure program. The program, which offers leniency for those who come forward, is set to expire Sept. 23.
"Many taxpayers are wondering whether to come into compliance with respect to their prior tax indiscretions," said Toscher, whose Beverly Hills law firm represents other UBS clients. "Now is the time. Tomorrow may be too late."