Case Studies

Case

A fully participating FATCA FFI in an IGA 1 country was acting as a Non Qualifed Intermediary (NQI) and offering its clients Foreign Investment opportunities through a local in country clearing custodian who was also licensed as a Qualified Intermediary (QI) with the IRS. The local custodian QI decided it could no longer offer International Investment Services to local NQIs and issued a 3 month deadline. The NQI’s could either become QIs themselves, or close the international investment accounts of their clients.

 Solution

Foodman provided a detailed training workshop to the FFI on the Requirements for becoming a QI and supported the FFI throughout its application preparation process to the IRS, and the preparation and submission of its first QI 1042/1042s QI reporting.

Outcome

The FFI is now an approved QI and this is facilitating their ability to deal directly with US Custodians and International Banks, which in turn is enhancing the investment products they can offer their clients. They were able to achieve this within a very short time frame, and without any disruption on the service provided to their clients.

Case

A financial institution in Colombia (a country in the Early Adopters Group), became nervous when realizing that as of 1/1/2016, the financial institution already had CRS responsibilities. The financial institution was overwhelmed with FATCA compliance, and had not made any provisions in terms of staff and time for CRS.

Solution

Foodman reassured the financial institution that they could implement the CRS project parallel to their FATCA initiative. Since most of the staff at the financial institution was Spanish speaking, Foodman proceeded to summarize into a 45 page presentation; the CRS Handbook in Spanish. The presentation in Spanish, including all the graphs, was easily understood, and provided the right road map for the financial institution. Foodman was able to train the staff to recycle already FATCA implemented processes to comply with CRS.

Outcome

The financial institution was able to implement the new account procedures to record tax residency as of 1/1/16, and plans to have all the due diligence done for its high value accounts by 12/31/16.

Case

A criminal tax defense attorney was attempting to defend his client on charges of failing to truthfully report the receipt of more than $2 million in income.

Solution

After an in-depth review and debriefing of the client, regarding his business, we determined that the client had in fact over-reported income in earlier years and was deducting the over-reported income for the years under investigation as allowed by the Internal Revenue Code.

Outcome

The client was acquitted of all charges.

Case

Criminal defense attorney Bruce Fleisher was attempting to defend his client John Connolly, a former FBI agent, against charges that Connolly took money in exchange for information that led to murder.

Solution

• We examined each and every one of the more than 120,000 discovery documents provided by the State. We created a financial history of John Connolly’s life from 1980 through 1991 from those 120,000 documents. We assisted the legal team with their depositions of the State’s only financial expert witness, an IRS special agent.
• We provided questions designed to leave no escape routes for her.We attended her deposition to assist them with issues not anticipated during our deposition preparation.
• We attended her direct and cross examination at trial. We were able to point out when the exhibits used by the State in support of her testimony were patently inaccurate and misleading; almost resulting in a mistrial.

Outcome

Because of what we uncovered in our examination of the 120,000 discovery documents, Stanley Foodman, as expert witness was able to provide irrefutable direct and cross examination testimony at trial; proving to the satisfaction of the jury that the Defendant John Connolly never took a bribe from the gangsters recruited by the State to testify against him in exchange for reduced sentences.

Case

A divorce attorney in the U.S. Virgin Islands was attempting to win a fair and equitable financial distribution for his client, the wife. Her husband was the principal of a paving company registered under the Economic Development Company statute in the U.S. Virgin Islands. The company was filing as an S corporation there.

Solution

Through our financial investigation, we found that the only other shareholder was a foreign individual, a violation of U.S. Virgin Islands S corporation regulations. We also found that the husband was hiding cash flow from his wife by transferring it to his foreign partner as prohibited shareholder distributions. He was hiding assets from his wife by investing corporate funds into the construction of a large home in the name of the company.

Outcome

The attorney for the wife was able to negotiate a pre-trial $2 million settlement for the wife that consisted of transferring the corporate home to the wife and the payment of $ 1 million.

Case

A divorce attorney was attempting to win a fair and equitable financial and time-sharing agreement for his client, a wife and mother of one. Her husband, a contractor, was paid large sums of money in cash, making his income difficult to quantify.

Solution

We were able to determine the husband’s income based on an in-depth investigation of his style of living. Our professionals found that the husband’s income was at least $200,000 per year.

Outcome

The attorney was able to win an equitable settlement for the wife, including the alimony, child support and time-sharing arrangement she was seeking.

Case

A major foreign embassy was concerned about financial security and potential violations of U.S. banking laws.

Solution

Our team of professionals conducted a thorough analysis of the financial systems in place, identified weaknesses.

Outcome

We developed internal controls to help prevent waste and potential fraud and ensure compliance with U.S. banking laws.

Case

Two partners owned a retail business for over 25 years. They agreed to sell their business to a third party. During the due diligence process performed by the potential buyer, the partners were notified that there was inventory missing. After an initial investigation, it was concluded that one of the partners was conducting a side business by misappropriating and selling inventory. The fraudulent activity placed the potential sale to the third party in jeopardy and litigation ensued between the partners alleging misappropriation of assets.

Solution

We were retained to assess the business damage caused by the misappropriation of assets. Our research and reports demonstrated that the partner defendant had in fact committed the misappropriation, had harmed the partner plaintiff, and caused damage to the business.

Outcome

We were able to quantify the losses and damages to the partner plaintiff, recovery was made and the business was successfully sold.

Case

A U.S. Taxpayer residing in an offshore jurisdiction was holding undisclosed foreign accounts and financial assets (personally and through undisclosed foreign entities) and willfully had not reported the accounts and the assets.

Solution

The recommendation for the U.S. Taxpayer was to enter into Offshore Voluntary Disclosure enabling him to become compliant, pay civil penalties, and eliminate the risk of criminal prosecution for all issues relating to tax noncompliance and the failure to file FBARs. The Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for Taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets. OVDP is designed to provide protection to the Taxpayer from criminal liability and terms for resolving their civil tax and penalty obligations.

Outcome

The Taxpayer was able to resolve all civil tax and penalty obligations, avoid incarceration and resume sleeping well.

Case

A U.S. person living in Costa Rica for the past 7 years had not filed U.S. Federal Tax Returns for the last five of the seven years. He was current and compliant with all his Costa Rica taxes. He owned property and had bank accounts and investments in Costa Rica. He became concerned when his banker in Costa Rica brought to his attention the fact that he could be out of US Tax compliance.

Solution

The banker in Costa Rica referred the client to us. We determined that he was out of US Tax compliance. We further determined that he qualified to make a Streamlined submission to IRS, as his non-compliance was non-willful, he was not under an IRS examination, and had a valid U.S. Tax ID number.

Outcome

The taxpayer was able to certify under penalties of perjury, that his failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on his part. All required returns were filed, and the unpaid U.S. taxes plus interest were paid. He is now current and fully tax compliant.

Case

A U.S. Expatriate living in Bogota, Colombia had filed U.S. Tax Returns on all worldwide income, but had failed to file FBARs. The explanation given by the Expatriate indicated that he was not aware of his obligation to report his bank foreign account, and as a result did not submit his FBARs.

Solution

Because the Expatriate was not under investigation by the IRS, and had not been contacted by the IRS about the delinquent FBARs, we were able to file electronically at FinCEN, and include a statement as to why the FBARs were filed late.

Outcome

The Expatriate did not have to pay a penalty. IRS will not impose a penalty for the failure to file delinquent FBARs if the Taxpayer has properly reported on their U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs.