FROM: U.S. JUSTICE DEPARTMENT
Wednesday, September 28, 2016
New York City Resident Pleads Guilty to Using Sham Foreign Entity and Secret Foreign Accounts in Switzerland and Israel to Evade Taxes
Used Secret Foreign Accounts to Hide over $7 Million in Funds and Evade Taxes
A New York City man pleaded guilty today to a criminal information charging him with tax evasion for tax years 2003 through 2005 and 2007 through 2010, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, and U.S. Attorney Robert L. Capers of the Eastern District of New York.
“Mr. Hager concealed over $7.3 million in undeclared foreign accounts in Switzerland and Israel and used a sham British Virgin Island entity in order to evade over $650,000 in U.S. taxes,” said Principal Deputy Assistant Attorney General Ciraolo. “As this case demonstrates, the Department and the Internal Revenue Service (IRS), together with our global partners, are successfully working on a daily basis to locate such undeclared accounts, identify those responsible and hold them accountable.”
According to information presented in court, between 1987 through 2011, Markus Hager, 68, utilized a series of undeclared foreign financial accounts to evade his individual income taxes by concealing assets and income from the IRS in those accounts. Between 1987 and 2008, Hager maintained several undeclared accounts at UBS, including two numbered accounts and an account held in the name of Contactus Partnership Associated S.A. (Contactus), a sham British Virgin Islands entity. By the close of 2004, the value of Hager’s undeclared accounts at UBS exceeded $7.3 million.
Hager closed the UBS accounts in 2008 and transferred the assets to a newly opened account at Clariden Leu, which he controlled and held in the name of Contactus. Shortly thereafter, Hager closed the Contactus account at Clariden Leu and transferred the assets to a newly opened account held in the name of the same sham entity at a different Swiss bank. Hager caused that Swiss bank to falsely record Hager’s Belgian cousin as the owner of the assets in the Contactus account. Approximately six months later, Hager closed the Contactus account at the Swiss bank and transferred the assets to an account at a bank in Israel that Hager caused to be opened in the name of a different Belgian cousin.
From 2005 to 2011, Hager also controlled an undeclared account at Bank Leumi in Israel, which he falsely held under the name of a relative who was not a U.S. person and who resided outside the United States. In February 2010, after obtaining an Israeli Identity Card, Hager opened an account in his own name at Bank Leumi in Israel but falsely reported that he lived in the United Kingdom and signed a document, under the penalties of perjury, on which he falsely claimed that he was not a U.S. citizen.
According to the information filed, Hager repatriated funds from his undeclared foreign financial accounts by having an attorney draft a sham loan agreement between himself and Contactus and wiring funds from some of his undeclared foreign financial accounts into his attorney’s escrow account.
According to the information filed, Hager filed false federal and New York State income tax returns on which he failed to report the income from his foreign financial accounts and failed to pay tax on that income. According to the information, Hager evaded approximately $652,580 in federal taxes for tax years 2003 through 2005 and 2007 through 2010. Hager also failed to report his ownership and control of his foreign financial accounts to the Department of the Treasury on a Report of Foreign Bank and Financial Account even though an accounting firm had informed Hager of his obligation to do so and advised him of the civil and criminal penalties he could suffer for the failure to do so.
“In pleading guilty today, Markus Hager became another example of an individual who attempted to conceal the true source of his money and was caught,” said Chief Richard Weber of IRS-Criminal Investigation (IRS-CI). “IRS-CI will continue to take every step necessary to ferret out those who attempt to avoid their reporting obligations under the law.”
Sentencing has been set for Jan. 4, 2017. Hager faces a statutory maximum sentence of five years in prison, as well as a term of supervised release and monetary penalties. According to the plea agreement, Hager agreed to pay restitution to the IRS.
Principal Deputy Assistant Attorney General Ciraolo and U.S. Attorney Capers commended special agents of IRS-Criminal Investigation, who conducted the investigation, and Senior Litigation Counsel Mark F. Daly and Assistant Chief Andrew Kameros of the Tax Division and Assistant U.S. Attorney Erik Paulsen of the Eastern District of New York, who are prosecuting this case.