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US Seeks Information On Stanford Bank Clients

by Glen Shapiro,, New York

04 December 2009

The Justice Department announced on December 2 that it has filed papers seeking a federal court order authorizing the Internal Revenue Service (IRS) to serve a "John Doe summons" on the court-appointed receiver of the Stanford Group Company (SGC) and related entities.

The John Doe summons requires the receiver to provide documents identifying those US taxpayers holding foreign accounts at or through Stanford Group Company (SGC), Stanford Trust Company Ltd. (STCL) and Stanford International Bank (SIB) during 2002-2009.

Stanford was accused by the Securities and Exchange Commission in February 2009 of operating a fraudulent USD7bn investment scheme. On June 19, 2009, a federal grand jury indicted Stanford for mail, wire and securities fraud.

According to the papers filed in court by Justice Department Tax Division attorneys, the IRS does not know the identities nor the financial investment information of US persons with such offshore accounts, and can only obtain this through the John Doe summons.

An IRS declaration filed in support of the petition suggests that the agency has evidence volunteered from a US taxpayer that Stanford-controlled entities did not declare to the US tax authority interest or income generated from SIB accounts or certificates of deposits.

The IRS is of the view that many of Stanford's investors may have been under-reporting income, evading income taxes or otherwise violating the internal revenue laws of the United States. The total amount of underpaid tax is currently unknown.

Information obtained from the summons will enable the IRS to determine if Stanford’s US taxpayer clients filed Reports of Foreign Bank and Financial Accounts (FBARs).

Any US taxpayer who has a financial interest in or signature or other authority over any foreign financial account (including bank, securities, or other types of financial accounts) must file an FBAR if the aggregate value of the financial accounts exceeds USD10,000 at any time during a calendar year.

IRS Revenue Agent Daniel Reeves, who filed the agency's declaration, confirmed that the tax authority suspected that a large number of FBARs may not have been filed by US owners of the offshore SIB CDs.

"We will work hand-in-hand with the IRS to vigorously enforce the tax laws against those taxpayers who use offshore accounts to evade taxes," concluded John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division.

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