Malibu man to plead guilty to using Swiss bank to avoid U.S. taxes
A nationwide crackdown on federal income tax evasion using secret Swiss bank accounts yielded an agreement from a Malibu businessman to plead guilty to hiding at least $1 million abroad.
John McCarthy is the first tax dodger in California -- and the fourth nationwide -- to be prosecuted after Switzerland’s largest bank, UBS, agreed to reveal the identities of U.S. customers.
The Internal Revenue Service is seeking the names of more than 52,000 U.S. residents who deposited money into secret accounts through agreements with both UBS and the Swiss government. The charge against McCarthy was based on information provided by UBS in February, officials said.
McCarthy funneled the money to a UBS account with the help of a Swiss lawyer and bank officials between 2003 and 2008, court documents said.
McCarthy could not be reached for comment.
“Mr. McCarthy has accepted responsibility for his conduct,” said his lawyer Steven Toscher of Beverly Hills in a statement. “He, like many other U.S. taxpayers, has made serious mistakes regarding the use of foreign bank accounts.
“Mr. McCarthy has decided to get right with his tax obligations, and his case should serve as a strong signal to other taxpayers to get right with their tax obligations before they find themselves under criminal investigation.”
The lawyer declined to provide any other information about his client or his financial interests.
McCarthy is expected to appear in court Sept. 14 and faces up to five years in prison and fines totaling up to $250,000 -- if the plea agreement is approved by a judge. The Justice Department said it would recommend that he get credit for admitting guilt, which could result in a lesser sentence.
He will plead guilty to one count of failing to file a “foreign bank and financial accounts” report, court documents said. By secretly transferring at least $1 million to his Swiss bank account, McCarthy failed to pay at least $200,000 in federal income taxes, the documents said. Together, McCarthy and his Swiss attorney opened a UBS bank account in 2003 in the name of COGS Enterprises, Ltd., a Hong Kong entity created for the purpose of hiding money to avoid paying taxes, the plea agreement said.
UBS employees worked closely with McCarthy’s Swiss lawyer to prevent his money from leaving Switzerland and helped him move additional funds out of the United States undetected by the federal government, the agreement said.
McCarthy skimmed money from multiple U.S. businesses to place into his UBS account, and he also transferred funds to other UBS accounts from accounts he controlled in the Cayman Islands, the document said.
UBS gave the Department of Justice more than 250 names in a February federal court settlement in which the bank agreed to divulge information on customers whose accounts were set up to avoid paying stateside taxes. The settlement between the U.S. and UBS also resulted in the bank paying a $780-million fine.
Three UBS clients from Florida pleaded guilty this year to filing false tax returns and hiding money in their Swiss accounts after the bank gave the U.S. their information.