A pair of tax preparers in the US have been fined and sentenced for facilitating tax fraud via offshore accounts.

A pair of tax preparers with offices across the US have been sentenced to jail for their involvement in a tax fraud and fined a total of $296,000, the US Department of Justice has announced.

Two tax return preparers, with offices located in California, Maryland and New York, were sentenced in Los Angeles for facilitating an offshore tax fraud scheme, announced acting assistant attorney general Caroline D Ciraolo of the Justice Department’s tax division.

David Kalai was sentenced to serve 36 months in prison to be followed by three years of supervised release, with a condition of home confinement to last the entire term of release, and ordered to pay a $286,000 fine. Nadav Kalai, David Kalai’s son, was sentenced to serve 50 months in prison to be followed by three years of supervised release, and ordered to pay a $10,000 fine.

The defendants’ sentences were imposed by US district judge Terry Hatter Jr of the Central District of California, the DoJ said in a statement.

On 19 December 2014, a federal jury in Los Angeles convicted the Kalais of one count of conspiracy to defraud the Internal Revenue Service. The Kalais were also each convicted of two counts of willfully failing to file a Report of Foreign Bank and Financial Accounts.

An alleged co-conspirator, David Almog, who is charged in the second superseding indictment, remains a fugitive.

The Kalais advised and assisted their high net worth clients in concealing millions of dollars of assets and income in secret foreign bank accounts and filing false federal income tax returns. The defendants also maintained a secret offshore account of their own at Bank Leumi in Luxembourg in the name of a foreign sham corporation and failed to disclose the account to the IRS or the US Treasury.

“The sentences imposed today make it clear that the department is aggressively prosecuting financial professionals like the Kalais, who assist US taxpayers in concealing assets offshore and evading their tax and reporting obligations,” said Ciraolo.  

According to the second superseding indictment and evidence introduced at trial, the Kalais were principals of United Revenue Service Inc (URS), a tax return preparation business with 12 offices located throughout the US.

David Kalai worked primarily at URS’s former headquarters in Newport Beach, California, and later at URS’s location in Costa Mesa, California. Nadav Kalai worked out of Bethesda, Maryland, as well as the locations in Newport Beach and Costa Mesa.

Evidence introduced at trial established that the co-conspirators purposefully prepared false individual income tax returns for their clients that did not disclose the clients’ foreign financial accounts nor report the income earned from those accounts, the DoJ said.

To conceal the clients’ income, ownership and control of assets from the IRS, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret bank accounts at the Luxembourg locations of two Israeli banks, Bank Leumi and Bank B. Bank Leumi is a large financial institution headquartered in Tel-Aviv, Israel, with worldwide branches.

The sham corporations that the co-conspirators incorporated in Belize and elsewhere were used to act as named accountholders on the secret Israeli bank accounts. The co-conspirators then recommended and facilitated the transfer of client funds to the secret accounts and prepared and filed tax returns that falsely reported the money sent offshore as a false investment loss or a false business expense, or entirely omitted any income earned by a client from a foreign source. The Kalais also failed to disclose the clients’ secret accounts on tax returns that they prepared, and caused the clients to fail to file FBARs with the US Treasury as required.

The DoJ said three URS clients who testified at the Kalais’ trial have pleaded guilty to tax felonies arising from their participation in the scheme.  On 1 July 2013, Alexei Iazlovsky, a client of URS and Nadav Kalai, pleaded guilty in US District Court in Los Angeles to signing and filing a false federal income tax return for tax year 2008.  

On 17 July 2013, Moshe Handelsman pleaded guilty in US District Court in San Jose, California, to signing and filing a false income tax return for the 2007 tax year.  

On 2 February this year, Baruch Fogel pleaded guilty in US District Court in Los Angeles to failing to file an FBAR declaring his Bank Leumi account in Luxembourg.