Hid Account Containing $200 Million Also Paying $100 Million Civil FBAR Penalty
A Rochester, New York emeritus professor of business administration pleaded guilty today to conspiring with others to defraud the United States and to submitting a false expatriation statement to the Internal Revenue Service (IRS), announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, and U.S. Attorney Dana J. Boente of the Eastern District of Virginia, after the plea was accepted by U.S. District Judge T.S. Ellis III.
According to documents filed with the court and statements made during the plea hearing, Dan Horsky, 71, is a citizen of the United States, the United Kingdom and Israel and was employed for more than 30 years as a professor of business administration at a university located in New York. Beginning in approximately 1995, Horsky began investing in numerous start-up businesses through financial accounts at various offshore banks, including one bank in Zurich, Switzerland. Horsky created “Horsky Holdings,” a nominee entity, to hold some of the investments and he used the Horsky Holdings account, and later, other accounts at the Zurich-based bank, to conceal his financial transactions and financial accounts from the IRS and the U.S. Treasury Department.
Horsky made investments in Company A through the Horsky Holdings account using his own money, money provided by his father and sister, and margin loans from the Zurich-based bank. Eventually, Horsky amassed a four percent interest in Company A’s stock. In 2008, Company A was purchased by Company B for $1.8 billion in an all cash transaction. Horsky received approximately $80 million in net proceeds from the sale of Company A’s stock, but disclosed to the IRS only approximately $7 million of his gain from that sale and paid taxes on just that fraction of his share of the proceeds. In 2008, and in subsequent years, Horsky invested in Company B’s stock using funds from his accounts at the Zurich-based bank and by 2013, his investments in Company B, combined with other unreported offshore assets, reached approximately $200 million.
“Despite his extraordinary wealth, Mr. Horsky concealed funds offshore, failed to report substantial income, conspired to submit false expatriation documents to cover up his fraudulent scheme, and evaded paying his fair share of tax,” said Principal Deputy Assistant Attorney General Ciraolo. “The Department and its partners within the IRS are receiving a tremendous amount of information from a wide variety of sources, and we are using that information to pursue and prosecute individuals like Mr. Horsky, who violate our nation’s tax laws. Today’s guilty plea proves, once again, that taxpayers will pay a heavy price when they choose to secrete funds in foreign bank accounts and evade tax and reporting obligations.”
“You can’t hide from the IRS,” said U.S. Attorney Boente. “Horsky went to great lengths to hide assets in secret accounts overseas in order to avoid paying his share of taxes to the IRS. Today’s plea shows that we will continue to prosecute those who engage in this criminal activity. I want to thank IRS-Criminal Investigation and our prosecutors for their work on this important case.”
Horsky directed the activities in his Horsky Holdings and other accounts maintained at the Zurich-based bank, despite the fact that it was readily apparent, in communications with employees of the bank, that Horsky was a resident of the United States. Bank representatives routinely sent emails to Horsky recognizing that he was residing in the United States. Beginning in at least 2011, Horsky caused another individual to have signature authority over his Zurich-based bank accounts, and this individual assumed the responsibility of providing instructions as to the management of the accounts at Horsky’s direction. This arrangement was intended to conceal Horsky’s interest in and control over these accounts from the IRS.
In 2013, the individual who had nominal control over Horsky’s accounts at the Zurich-based bank conspired with Horsky to relinquish the individual’s U.S. citizenship, in part to ensure that Horsky’s control of the offshore accounts would not be reported to the IRS. In 2014, this individual filed with the IRS a false Form 8854 (Initial Annual Expatriation Statement) that failed to disclose his net worth on the date of expatriation, failed to disclose his ownership of foreign assets, and falsely certified under penalties of perjury that he was in compliance with his tax obligations for the five preceding tax years.
Horsky also willfully filed false 2008 through 2014 individual income tax returns which failed to disclose his income from, and beneficial interest in and control over, his Zurich-based bank accounts. Horsky agreed that for purposes of sentencing, his criminal conduct resulted in a tax loss of at least $10 million. In addition, Horsky failed to file Reports of Foreign Bank and Financial Accounts (FBARs) up and through 2011, and also filed false FBARs for 2012 and 2013.
“Federal income tax compliance should be equally shared among all Americans,” said Special Agent-in-Charge Thomas Jankowski of IRS Criminal Investigation (CI), Washington D.C. Field Office. “Conspiring to defraud the government with an elaborate scheme to underreport taxable income is unlawful. Mr. Horsky’s plea today serves as an important reminder that IRS-CI is committed to bringing to justice those who shirk their federal income tax responsibilities.”
Sentencing is scheduled for Feb. 10, 2017. Horsky faces a statutory maximum sentence of five years in prison, as well as a period of supervised release and monetary penalties. As part of his plea agreement, Horsky paid a penalty of $100 million dollars to the U.S. Treasury for failing to file and filing false FBARs, which is separate from any restitution that the court may order.
Principal Deputy Assistant Attorney General Ciraolo and U.S. Attorney Boente commended special agents of IRS-CI, who conducted the investigation, and Senior Litigation Counsel Mark F. Daly and Trial Attorney Robert J. Boudreau of the Tax Division and Assistant U.S. Attorney Mark Lytle of the Eastern District of Virginia, who are prosecuting this case.