Flatotel Dad & Son Team Busted by IRS
Mauricio Cohen Assor and his son, Leon Cohen Levy, who developed and owned several residential hotels under the trade name Flatotel, are charged by the U.S. Justice Department with illegally hiding about $45 million in offshore accounts and using corporate money to support their lavish lifestyle. They were arrested in New York on Thursday and denied bail. The judge ordered that they be detained and sent to Miami.The story starts with a sale of one of their New York hotels, which generated $33 million. The income from this sale was never reported on U.S. tax returns. Instead the two used tax havens, including the Bahamas, the British Virgina Islands, Panama, Liechtenstein and Switzerland to defraud the U.S., according to a complaint filed with the U.S. District Court for the Southern District of Florida.
In 1981 they purchased a building in New York that they renovated and developed into the New York Flatotel. In February 2000, they received about $33 million in proceeds from that sale. Based on the complaint, Assor did not file tax returns for the tax years 2000 through 2006. Levy reported only nominal amounts of income ranging from $22,500 to $46,100 for tax years 2001, 2002, 2003 and 2005. Both foreign nationals claim U.S. residency but also have Spanish passports.
They allegedly hid their profits in offshore banks using entities they owned and controlled under names such as Blue Ocean Finance, Caribbean Business Fund Corporation, and Compania Europamerica Hoteleria.
Throughout the complaint a major "International Bank" was named as the bank with which they did business, as well as private banks located in New York and Geneva, Switzerland. No bank was named in the complaint. But at the same time the two hoteliers were charged, seven former clients of UBS were also charged with tax crimes. UBS turned over the names of 250 people to the IRS in February 2009 and may have to turn over 4,450 more.
As the UBS case heated up, many Swiss banks started to get more strict in their record-keeping for American clients. In April 2007, the "International Bank" insisted the ownership of some of Assor's accounts, including one registered in the name of Whitebury Shipping Time-Sharing, had to be clarified. Assor refused to have them listed in his name. The conversations about ownership of the money were recorded.
In May 2007, Assor transferred $22 million from the Whitebury account to an attorney escrow account in Miami. The funds were then used to pay off mortgages secured by residential properties owned by Assor, and where he, Levy and other family members lived.
In addition to the Whitebury account, other corporate accounts were used to fund the family members' lifestyle, according to the complaint, including mortgage payments on lavish personal residences, living expenses and car expenses including purchase of a $67,000 Dodge Viper, a $118,000 Bentley and $700,000 in other vehicles.
Perhaps Assor and Levy should have taken up residence in one of their Flatotel properties. They could have saved a bundle on mortgage payments, and maybe even claimed the rentals as a legitimate business expense.
Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies and Trading for Dummies.