UBS tax cases expose Hong Kong connection and second Swiss bank

Updated

Two U.S. tax cheats who were aided by UBS (UBS) pleaded guilty last week, one in California and one in Florida. The investigations into their cases opened some new avenues for the IRS to pursue other tax cheats. Both used Hong Kong corporations to help hide their funds. One of them moved his accounts to another small Swiss bank, so far unidentified, in hopes of avoiding detection.

In today's Wall Street Journal, details of a court filing in California show how John McCarthy, a UBS client who pleaded guilty to one count of failing to file an annual report to the Treasury Department, channeled funds to a Swiss UBS account held in the name of a corporation he formed in Hong Kong. Hoping to gain some leniency and avoid the maximum penalty of five years in jail and fines totaling $250,000, McCarthy agreed to the filing, which details his tax scheme. He also must settle with the IRS to pay penalties, taxes and interest on the money he hid from the government.

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