Page 3 - Streamlined Disclosure in U.S. v. Brian Nelson Booker: A Former CPA Sets a Dubious Precedent

03-2020 TPP.qxp_zEssentials.temp 3/4/20 12:07 PM Page 56

COLUMNS I Tax Practice & Procedure

State Board of Public Accountancy from concealing their interests in foreign bank In July 2015, Booker filed delinquent
1976 until 1991. Most recently, until accounts. Through the Swiss Bank FBARs for calendar years 2008 through
December 2016, he had been living in Program, Schroder provided the DOJ with 2014 that disclosed his interest in, and sig-
Florida, where he operated a Panamanian information regarding Booker’s relation- nature authority over, 14 foreign financial
cocoa trading company from his home. ship with the bank. accounts that he previously had not dis-
The cocoa trading company also operated In addition to his failure to report the closed, including the Swiss and
in Venezuela. accounts in Switzerland and Panama on Panamanian accounts described above.
Booker filed FBARs in 2008, 2009, and FBARs, the indictment alleges that In October 2015, Booker submitted a
2010, reporting his interest in two bank Booker failed to report income earned streamlined submission, IRS Form 14654,
accounts located in Venezuela; however, from those accounts. U.S. citizens who in which he certified that he “learned
he failed to include in those FBARs his hold life insurance or annuity contracts about the FBAR filing requirements in
interest in bank accounts, valued in some with foreign insurers are required to report 2008” and that he “mistakenly believed
years in excess of $9 million, located in to the IRS any premiums paid to the for- that only personal financial accounts had
Switzerland and Panama, as well as his eign insurers during that quarter on IRS to be reported on the FBAR.” He further
interest in an “insurance wrapper” policy certified that he was eligible for treatment
held in the name of a Singaporean insur- under the streamlined procedures and that
ance company with an account in his failure to report all income, pay all tax,
Switzerland. The indictment explains that It comes as a shock to and submit all required information
the insurance wrappers enabled a policy- returns, including FBARs, was due to
holder to maintain financial assets in a for- many taxpayers when nonwillful conduct.
eign bank account, but had the effect of As a result of the conduct alleged,
concealing the policyholder’s interest by their tax advisors inform Booker has been charged with three
holding that interest in the name of the counts of filing false reports of foreign
insurance company, not the individual. them that their conduct bank and financial accounts, in violation
From 2004 until 2009, Booker had an of 31 USC 5314 and 5322(a), each count
account at Schroder & Co. Bank AG. In would be construed by carrying a maximum sentence of five
2009, Schroder notified Booker in writing years in prison. He has also been charged
that he either needed to withdraw his funds the IRS as “willful,” and with four counts of filing false statements
from the bank or provide Schroder with an that they are not in with the IRS, under 26 USC 7206(1),
IRS Form W-9, through which his interest each count carrying a maximum sentence
in the account would be reported to the fact eligible for the of three years in prison. Included in those
IRS. In apparent response to the bank’s let- false statements are those made by Booker
ter, Booker instructed Schroder to transfer lower penalty. in the streamlined submission, specifically
all assets in the accounts to an account at that his failure to report the foreign
another Swiss bank, held in the name of accounts was due to nonwillful conduct.
the Singaporean insurance company.
Booker held the interest in that account Form 720 and pay an excise tax on those Streamlined Disclosure Applies Only to
through at least February 2019. premium payments. Booker is alleged to Nonwillful Conduct
In addition, from 1999 through 2013, have been aware of, but failed to comply When the IRS announced its first
Booker held a financial interest in bank with, his obligation to file Form 720 and OVDP with the promise of a 20% civil
accounts in Banco General, SA, head- pay an excise tax on premiums he paid penalty—versus the statutory penalty of
quartered in Panama City. The Banco in conjunction with his insurance wrapper up to 50% of the aggregate high balance
General accounts were held in the name policy with the Singaporean insurance of undisclosed accounts for every year of
of the cocoa trading company operated company. In addition, although Booker nondisclosure—some taxpayers believed
by Booker. reported gross receipts and net profits for the civil penalty to be unfair, particularly
Schroder participated in the DOJ’s his cocoa trading company on IRS Form when they established the foreign account
Swiss Bank Program, through which Schedule C for at least two tax years, after suffering religious or political perse-
Swiss banks were given the opportunity 2008 and 2009, he allegedly underreport- cution. Under subsequent iterations of the
to resolve potential criminal liabilities in ed the gross receipts and net profits for OVDP, that penalty increased, first to
the United States arising from their par- the company, as well as his total income 25%, then 27.5%, and now the greater of
ticipation in assisting U.S. taxpayers in for those tax years. $129,210 or 50%. It is no surprise, then,

56 MARCH 2020 / THE CPA JOURNAL