2 Britons Guilty in Scheme to Cheat IRS
The U.S. attorney’s office announced Tuesday that two British citizens had pleaded guilty to charges of participating in an elaborate scheme to defraud the Internal Revenue Service, which involved phony trades on the London Metal Exchange.
David H. Lamb pleaded guilty to two counts of wire fraud and Barry Hughes pleaded guilty to one count of conspiring to defraud the IRS. The two are to be sentenced Sept. 18 by U.S. District Judge Terry R. Hatter.
Assistant U.S. Atty. Terree A. Bowers, the prosecutor in the case, said he believes it is the first time that British brokers have pleaded guilty to assisting American citizens in defrauding the IRS.
“This is a landmark case; it shows we can go after foreign brokers,” said Bowers, who directs the major fraud unit of the U.S. attorney’s office in Los Angeles.
Harland W. Braun, a veteran criminal defense lawyer who represented Lamb, agreed that it was a case of considerable importance.
“The case established American criminal jurisdiction over British businessmen,” he said.
After Hughes and Lamb were indicted in 1985 following a lengthy joint investigation by the IRS and the FBI, Braun and other defense lawyers asserted that U.S. courts had no jurisdiction over them. But last year Judge Hatter ruled against them.
“The trend of the law is in favor of what the government is doing in this case,” said Braun. “With the growth of international business,” he added, there are likely to be more cases where foreigners are subject to U.S. criminal laws and U.S. citizens are subject to the criminal laws of other countries.
Bowers said there were two schemes in the case.
One involved the creation of false losses through trades on the commodities exchange in London on which there was no risk and the return of the money supposedly lost through corporations set up in places like the British Virgin Islands and the Bahamas. The second scheme involved the laundering of money on successful investments so that taxes would not have to be paid.
Bowers said Hughes, 37, and Lamb, 45, were caught through the use of an elaborate undercover sting involving agents from the FBI and the IRS. He said one IRS agent posed as a taxpayer who wanted to generate bogus losses on commodity trades, while an FBI agent posed as the IRS agent’s financial adviser.
Initially, the FBI agent contacted an American broker, Ronald N. Kane of Canoga Park, and told him he had a client who needed to generate losses in a specified account. Soon, he and the IRS agent were put in contact with Lamb and Hughes in London. The agents opened a trading account in London and requested the creation of a trading loss of $35,000. They were advised to send an odd sum of money to lessen the possibility that tax officials would become suspicious.