Canadian Court Rules Against IRS In Probe Of Offshore Author

by Leroy Baker, Tax-News.com, New York

12 July 2002

A British Columbia Supreme Court judge on Tuesday ruled against the US Internal Revenue Service, ordering it to return evidence seized during a tax investigation into offshore author, Jerome Schneider.

Mr Schneider, the author of such tomes as 'How to Hide Your Money and Enjoy Complete Privacy and Protection', advocates the establishment of private banks in offshore jurisdictions in order to shelter income from tax. However, the IRS - along with the majority of offshore commentators - argue that such banks are shams, and last year requested permission from the Canadian authorities to search Mr Schneider's Vancouver offices.

Although IRS agents were permitted to accompany the Royal Canadian Mounted Police 'for the purpose of observation only at the time of the execution of the search warrant', according to Reuters coverage of the case, the author's lawyer claims that they were 'active participants' in the search, and one of the agents later admitted that they had searched through and copied documents after the raid, without the permission of the Canadian police.

However, for Judge Bruce Cohen, it was the US government's refusal to allow the IRS agents to testify regarding their actions that was the last straw.

'While the court obviously lacks jurisdiction to enforce attendance of the IRS agents, the court can, and I think should, deny the requesting state its sending request,' he announced Tuesday, ordering the US tax authority to return the seized evidence to Mr Schneider.

Although the British Columbia-based author has not been charged with any criminal offense, the US legal assistance request alleged that he and his companies had committed fraud and wire fraud, and had conspired to defraud the US government, according to the Reuters report.

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