Survey Finds International Tax Cheats Receiving Cushy Sentences

According to a recent investigation by the Wall Street Journal, U.S. courts are handing down far more lenient punishments to those hiding money overseas than to the run of the mill tax evaders here at home.

According to reports, despite lots of talk of efforts to crack down on those squirreling money away in hidden international bank accounts, the reality is that federal prosecutors rarely throw the book at such tax evaders. Since 2009, the average sentence in such cases has been about half as long as other varieties of tax evasion cases. In fact, the sentences are so short in many cases that judges are actually choosing to award shorter sentences than are recommended in federal sentencing guidelines.

The statistics were gathered by former Department of Justice attorney Jack Townsend. According to Townsend, in the last four years the IRS has charged 71 people with international tax fraud. The sentences given to these criminals have averaged a bit less than 15 months. By comparison, the average sentence in a tax-shelter scheme case is more than 30 months behind bars.

Townsend and others say the situation is a worrisome one. Rather than follow through with tough action against international tax cheats, the IRS is soft-pedaling one category of crime for seemingly no reason. Townsend says the discrepancy in punishment between the different varieties of tax evasion is "troubling" because, in his mind, cheating is cheating and deserves the same punishment across the board.

Experts say there are several reasons for the leniency. For one thing, the IRS tried an amnesty program which brought the average sentence down some. That amnesty program also set a tone of fairly lax punishment which judges have continued to follow. For another reason, taxpayers have been more cooperative in such cases and prosecutors feel like many have not been the kind of slam-dunk cases needed to go for truly punitive sentences.

In one recent case, an older widow from Palm Beach pleaded guilty to possessing $40 million in undeclared foreign accounts. Though the woman agreed to pay the government $22 million in fines, she was not required to serve a day behind bars despite facing 37 months in prison given the nature of her crime. In fact, when the prosecution asked that she be put on probation, the judge scolded prosecutors for pursing the case in the first place and set the woman free.

Though the IRS says the case was an outlier, many others have also ended in sentences well below the guidelines. Legal experts say the reason is that many judges appear to be uncomfortable handing down harsh sentences in criminal cases when many other similar cases are being resolved in civil cases that end only in fines. By starting the process with amnesty and below-guidelines sentences, the IRS sets a weak tone for future cases.


Leniency for Offshore Cheats, by Laura Saunders, published at on May 5, 2013.

US, Swiss Struggle Over Hidden Wealth Surfaces Again (Update), by Ellen Wallace, published at on May 6, 2013.

See Our Related Blog Posts:
The DOJ's Bad Deal with a Tax-Evading Swiss Bank - Part I
The DOJ's Bad Deal with a Tax-Evading Swiss Bank - Part II

Categories: IRS Whistleblower