http://federaltaxcrimes.blogspot.ch/2013/01/warnings-on-continued-government.html
A Tax Notes Today article reports that the Assistant Attorney General for the
Tax Division, Kathy Keneally, has warned that amnesty for offshore account
evasion will not last forever…
What disturbs me about this article is that bone fide residents abroad appear not to be addressed.
*@Pacifica, thanks so much for your kind words of encouragement! I agree that everything should be fine and also that I’ll make a point of enjoying my precious time with family over there. 🙂 It will be great to see everyone!!
*and thanks to you too, Calgary! I hope that someday maybe I could make a special trip to Canada to actually meet up with such supportive people such as yourself, Pacifica, and Bubblebustin to name a few. 🙂
@monalisa,
Wouldn’t that be wonderful — it would be an honour to meet so many, including you. You do know that AnonAnon is planting the seed of a CLN party down the line? Perhaps there will be a special posting on that subject one day soon. Safe journey, monalisa!
@monalisa1776
And you too! Have a safe and pleasant trip.
Two more Jack Townsend posts that merit Reading…
Report of Government Comments on FBAR Penalties at ABA Tax Section Meeting
Article on Taxing Administration for Offshore Accounts (2/2/13)
Pingback: The Isaac Brock Society - Should Your Decision to Renounce Your Citizenship Boil Down to a Coin Toss? A Freakonomics Experiment.
Kathryn Keneally is the Asst Attorney General, Tax Division, and is one of those leading the charge against American emigrants. Not surprisingly, she has a checkered past having switched sides. Following is an excerpt from the article, “Another Fox Guarding the Henhouse? Obama’s DOJ Tax Division Assistant Attorney General Nominee”, published at the time of her confirmation hearings. It is enlightening:
“And if the past ties of the president’s DOJ Tax Division Assistant Attorney General nominee are any indication, tax law is another area of the legal arena in which administration officials might be ready to turn a blind eye to the interests of the lower and middle classes. The nominee, Kathryn Keneally, is currently a partner at New York-based firm Fulbright and Jaworski and a decorated tax law specialist who has represented a diverse array of clients, including the estate of Bob Marley and Ferdinand Marcos. That clientele also includes well-heeled financial institutions with a less than stellar record of adhering to federal tax law. In financial disclosure forms, Keneally revealed that since January 1, 2010, she has, in separate instances, performed “legal services” worth over $5,000 for AIG, Citibank and HVB Group.
To underscore how checkered these financial institutions’ taxpaying histories are, in September 2011, AIG was described by ProPublica as a “pioneer” in using foreign tax credits to dodge taxes. In 2006, Citibank reached a $20 million tax evasion settlement with the DOJ, and has been described by Tax Justice Network (“an independent organisation launched in the British Houses of Parliament in March 2003”) as engaging in “repeated, aggressive tax evasion … [g]oing back decades.” And HVB Group was found guilty of having helped KPMG set up a tax evasion scheme throughout the last decade.
Keneally said, at her November 2011 Senate Judiciary Committee confirmation hearing, that while past clients include those in IRS amnesty programs, she has never helped a client construct a tax evasion scheme, nor has she ever helped financial firms with tax planning. She also said that she has encouraged clients to bring assets into compliance with US tax laws, and stressed her awareness of the revolving door and her experience wrestling with ethical issues as a member of the American Bar Association Ethics Committees. She also emphasized her belief that the Tax Division’s offshore tax compliance initiative is a “very important priority,” and said that the “IRS and Tax Division should be commended.”
But comments she has made in articles she has written over the past few years – before she was considered for any federal position – would cause any federal official serious about enforcing tax laws to look at her record askance.
At her confirmation hearing, Sen. Charles Grassley (R-Iowa), one of two senators present for the question and answer part of the hearing, asked how she could reconcile the subtitle of a 2007 article she co-wrote – “The War On Tax Shelters Will Give Rise to an Entrenched Enforcement Mindset” – with the responsibilities of a Tax Division chief, when, he said, “me and others believe just the opposite.” Sen. Carl Levin (D-Michigan) also submitted questions for the record probing her past criticism of IRS crackdowns.
And in a February 2010 New York Law Journal article, “The Taxman Cometh,” (p. 21 of the pdf) the very first justification Keneally offered for the maintenance of “foreign bank accounts” is that “[i]n many cases, the accounts were set up in safe havens, such as Switzerland, at a time when horrific events were occurring in other countries, such as Nazi Germany.”
Keneally also said in “Eager For the Battle,” a 2009 Careers in Tax Law article (p. 45 of the pdf), that she “most enjoyed disputes with the government,” and that “[m]any of my favorite matters are those that will never become tax controversies if I can help it…. In these cases … There may be, to use the vernacular, ‘accounting irregularities'”; statements, perhaps, that are music to the ears of any banking executive who wants intimate knowledge of the Tax Division’s decision-making process in a few years time
Also of note, Keneally did not disclose in either article that she worked for the IRS at the time, as liaison to the director of the Office of Professional Responsibility.
At her confirmation hearing, Keneally defended her criticism of IRS crackdowns, telling Senator Grassley that they represented a belief that IRS initiatives “were maybe a bit much in the average examination of the ordinary taxpayer,” and that “the IRS has made some changes along the lines that were suggested in that [2007] article.” And in “Eager For the Battle,” Keneally said that, as a defense attorney, she viewed the IRS and the federal government as “fair,” and “noble adversaries.” She also said that she is “happiest,” as a lawyer, “when I can vindicate someone’s rights.”
Nonetheless, Keneally’s comments, especially considering her relationship to those who have made hiring decision for tax-dodging financial behemoths, could reasonably concern those anxious about Republicans (and Democrats) chomping at the bit to use federal fiscal woes as an excuse to drown social safety nets and regulatory organizations in a bath tub. The Tax Division is tasked with overseeing civil and criminal tax-related prosecutions in concert with the IRS and US attorneys’ offices, as well as defending the federal government in tax-related lawsuits. In 2008, the Tax Division defended the federal government in cases worth $9.5 billion. And every year, the division recoups its budget many times over by bringing in around $1 billion annually in penalties and settlements.
The amount the division brings in might constitute a drop in the ocean, but without a division committed to credible deterrence, the amount lost to offshore havens and other forms of tax evasion, and the amount lost by the government in lawsuits could all increase, putting additional pressure on the federal budget. Earlier this year, the IRS estimated that 15 percent of all federal taxes went unpaid in 2006. That figure – $385 billion – exceeded the federal deficit that year by about $137 billion. And the Senate Permanent Subcommittee on Investigations estimated in 2008 that US tax revenue lost to offshore havens was $100 billion.
Thus, Keneally’s past is a matter of intrigue – evidenced by senators’ line of questioning (although none publicly mentioned clients she disclosed). At the very least, if her appointment is confirmed by the Senate, Keneally will have to make a number of recusals during her tenure – she also disclosed that she has been paid over $5,000 each by 28 different individuals/married couples, two partnerships and two corporations for “legal services” involving “grand jury or other non-public matters and the client name was not made public.” At the worst, she could end up swaying – even if only implicitly – the Tax Division’s decision-making process.
When asked to comment on behalf of Keneally, Adora Andy, a spokesperson for the DOJ, said in an email that the nominee “is on the record before the Judiciary Committee in which she said that her work has been to keep her clients in compliance with tax law and also that she has committed to adhere strictly to the applicable conflict of interest standards.” ”
http://truth-out.org/news/item/8155-another-fox-guarding-the-henhouse-obamas-doj-tax-division-assistant-attorney-general-nominee
In an interview with the SonntagsZeitung in November, Kathryn Keneally reacted evasively when asked about the 750’000 offshore companies that are based in Delaware:
SZ Journalist: “When I traveled to Washington, the train rolled through Delaware …”
Keneally: “(laughs) I also know it because I live in New York.”
SZ Journalist: “. . . the US State where 750 000 offshore companies are located there to avoid the tax obligations of their countries of origin. The US does not clean it up, because it’s not about their own tax dollars.”
Keneally: “We sweep before our own door! Recently we went to court to enforce a John Doe request for information from Norway. We do that when it is appropriate.”
Kathryn Keneally is a hypocrite who has plenty of dirt on her. She should be viewed as an enemy of American emigrants.
http://www.sonntagszeitung.ch/wirtschaft/artikel-detailseite/?newsid=267260
Before Kathryn Keneally, Asst Attorney General, Tax Division, switched from defending tax evaders (and possibly setting up tax dodging structures), she co-wrote an article on the IRS use of taxpayer audits, specifically focusing on their use for the OVDP. Among other things, she recommends that taxpayers avoid them. Article is downloadable at this link:
“Basic IRS Audit Techniques: Taxpayer Interviews”
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1877303
Thanks Innocente! Great info on evasiveness re Delaware, and background of Keneally. Bet the estate of Marcos wasn’t just a ‘simple’ tax case of ‘paying [his ] fair share’. And now she wants our legal local post-tax bank accounts and savings? How do they live with themselves?
Badger: I imagine what motivates someone like Kathryn Keneally is similar to what motivates a mercenary: money, power and adventure (and certainly not loyalty).
The average equity partner at her former law firm earned $740,000 in 2012 but becoming Asst Attorney General, Tax Division, gave her power and prestige, with interviews even in the non-US press.
For her sparsely attended confirmation hearings, she prepared a lengthy background document, including her publications. I have had poor success finding the controversial articles mentioned in the “TruthOut.com” article, which would reveal more about her thoughts while in private practice vs. what she is doing today.
http://www.judiciary.senate.gov/nominations/112thCongressExecutiveNominations/upload/KathrynKeneally-PublicQuestionnaire.pdf
If I find something derogatory that I consider relevant, e.g., DWI conviction, assault & battery arrest, fraud charges, etc., I won’t hesitate to publish it. I consider to her to be the enemy of American emigrants as well as a hypocrite.
Recent Kathryn Keneally quotes…
“This ruling advances the Department of Justice’s and Internal Revenue Service’s continuing efforts to pursue taxpayers trying to evade taxes through offshore accounts,” said Assistant Attorney General Kathryn Keneally of the Tax Division. “The court’s opinion today represents an important step in our commitment to work with our treaty partners to eliminate cross-border tax evasion.”
http://www.fsitaxposts.com/2014/01/14/doj-court-rejects-banking-associations-challenge-regulations-addressing-offshore-tax-avoidance/
Wonder if Keneally would characterize the Marcos estate as ‘tax compliant’ – in origin and in holdings? http://truth-out.org/news/item/8155-another-fox-guarding-the-henhouse-obamas-doj-tax-division-assistant-attorney-general-nominee
I don’t remember Ferdinand Marcos as being characterized as particularly concerned in the area of transparency and ‘fair’ shares of taxes. http://caselaw.findlaw.com/us-9th-circuit/1120999.html
http://online.wsj.com/news/articles/SB10001424127887323494504578343254294114668
According to the TruthOut article, Kathryn Keneally, as a partner at Fulbright & Jaworski, defended the Ferdinand Marcos estate. This defense would have been against the Philippines government’s actions to seize an estimated $5 billion that Marcos embezzled while serving as president of the Philippines. In addition to embezzling government funds, Marcos is thought to have had 10,000 Filipinos murdered.
Perhaps Kathryn Keneally just saw the Marcos work as billable time to help keep her in a Fifth Avenue residence. This writer thinks she has blood on her hands and is unsuited for government service.
According to the TruthOut article, Kathryn Keneally is “a decorated tax law specialist who has represented a diverse array of clients, including the estate of … Ferdinand Marcos.” In her confirmation hearing before the Senate Judiciary Committee she said “that while past clients include those in IRS amnesty programs, she has never helped a client construct a tax evasion scheme, nor has she ever helped financial firms with tax planning.”
The Offshore Leaks project revealed details of an offshore trust held by Ferdinand Marcos’ ruthless daughter, Maria Marcos Manotoc, who is strongly suspected of having been involved in the murder of a student activist who questioned her qualifications to hold a Philippines government office.
A question for Kathryn Keneally: did you or your law firm, Fulbright & Jaworski (now NortonRose), assist Maria Marcos Manotoc to set up this trust in the British Virgin Islands or any other offshore trust? As the below article states, hiding wealth in this or other trusts was to protect Maria Marcos Manotoc from the judgement against her for her involvement in student activist’s death and for other reasons.
http://www.icij.org/offshore/ferdinand-marcos-daughter-tied-offshore-trust-caribbean
Kathryn Keneally’s testimony at her confirmation hearing rings as hollow as Silvio Berlasconi’s, who of course maintains he is innocent:
In the past several years at least four German ministers and politicians have been forced to resign due to plagiarized doctoral dissertations:
http://www.dw.de/tempting-phds-lead-politicians-into-plagiarism/a-16595782
Kathryn Keneally, Asst Attorney General, has published numerous articles and Mark Mazur, Asst Treasury Secretary, apparently wrote a dissertation for his PhD and also has published at least several articles.
Would a Brocker be interested to review whether there is evidence of plagiarism in their published articles and in his dissertation?
A list of Keneally’s publications is at this link:
http://www.judiciary.senate.gov/nominations/112thCongressExecutiveNominations/upload/KathrynKeneally-PublicQuestionnaire.pdf
An article by Mark Mazur (on the “tax gap”):
http://ntj.tax.org/wwtax%5Cntjrec.nsf/391859AD7A7A697B8525738E007AF4DF/$FILE/Article%2014-Mazur.pdf
Yesterday the DOJ announced a settlement with the first Swiss bank, BSI, under the Swiss-US Tax Programme. It will pay a fine of $211 million to the US government. The highest balance of US-related assets was $2.8 billion in 2008. The fine is calculated on when the account was opened and the highest balance of undeclared assets, ranging from 20% for pre-2009 accounts to 50% for recent accounts. This would mean that the undeclared assets for US purposes would be between $400 million and $1 billion (see calculations below).
BSI is a private bank based in Lugano and is reported to be the ninth-largest bank in Switzerland by assets with assets under management of $93 billion (2013). It was previously owned by the Italian insurance company, Generali. It appears to have actively engaged in cross-border banking with Americans in the USA. BSI also reportedly paid compliance costs of $36 million to settle.
According to news media, the next banks that are expected to settle are two retail banks, Migros Bank, owned by a cooperative supermarket chain, and Sparhafen, a small cooperative bank with 18 employees. I checked their websites and both are in the national languages where they operate (not English). I doubt that these banks knowingly engaged in cross-border transactions with Americans but undoubtedly opened ordinary bank accounts for Americans residing in Switzerland.
The WSJ wrote in today’s edition: “The program has been controversial in Switzerland because of the way it asks banks to expose themselves to potential penalties for even passively taking in undeclared funds. Lenders can be required to pay the equivalent to half of the amount of undeclared money that they have harbored, depending on when the account was opened.”
As a result of this poorly thought-out program, it will be a long time before anyone with a US taint residing in Switzerland will be able to bank with ordinary banks in this country. A special thanks to Kathryn Keneally, the former Asst Attorney General, Tax for this work of art. As she is now a partner at DLA Piper in New York, which is likely working with Swiss banks to comply with the programme, it can be expected that she is benefiting monetarily from this program.
Calculation of Undeclared Assets:
50% x $400 million undeclared assets, if accounts were opened pre-2009 = $200 million fine
20% x $1 billion undeclared assets, if accounts were opened post-2009 = $200 million fine
Range: $400 million to $1 billion of $2.8 billion at BSI.
@Innocente
Yes, US citizenship has become toxic.
I can’t remember where you put your article on Geraldine Chaplin so I can’t accurately refer to it but I have had some thoughts.
I believe there are 8 Chaplin children still alive, 4 with an American taint and 4 without.
The Chaplin family are in the process of renovating the Chaplin mansion in Vevey to form the Chaplin museum. It has taken years to sort out the finances. Geraldine mentions that the ‘inheritance’ was a problem and she has divorced herself from it. I am wondering if the American ‘tainted’ children have been bought out or excluded from the venture? The Chaplin family certainly wouldn’t want the museum finances/accounts subject to fbar reporting and banking would be pretty near impossible with Americans on board. It would certainly be ironic if Charlie’s legacy was subject to US control after he was expelled from the US.
@Innocente, or someone: I was under the illusion that only banks with US business could be pressured by the US. What is this prosecution they mention? Is Switzerland going to enforce US rulings against a bank?
@Fred
The Swiss are a special case because of UBS actively courting and hiding US money
Banks have been placed in 3 categories.
Category 1 is for those who have admitted to actively hiding US money and are not part of the agreement.
Category 2 Is for those banks who may have inadvertently ‘hidden’ undeclared US money.
Category 3 Is for banks with only a local client base who deny hiding US money.
There are many links on the net to the non prosecution agreement.
http://www.antimoneylaunderinglaw.com/2013/09/swiss-and-u-s-enter-into-anti-tax-evasion-agreement-with-wide-reaching-implications-for-americans-and-foreigners-and-entities-with-which-they-are-affiliated.html
Many swiss bank now are regretting signing the agreement, and many are backing out, they are not guilty of knowingly hiding US ‘recalcitrant’ accounts and compliance costs have been too high .
@Heidi:
Geraldine Chaplin apparently has British citizenship from her father but, unless she renounced her US citizenship, gained by being born in California, she would still be considered a US citizen. The US could be making a second go at her family, 60 years after persecuting going after her father. This is the earlier post:
http://isaacbrocksociety.ca/2013/07/09/why-did-charlie-chaplin-renounce-the-america-which-nurtured-him-and-made-of-him-a-world-famous-person/#comments
At the end of World War II, US GIs raped an estimated 190,000 women in Germany, with one in 100 rapes resulting in the birth of a child. These children, who would now be in their late 60s, would be Americans as would be their offspring, as I understand it. Fortunately, FATCA, as applied in Germany, is probably a weak tool to identify Americans born abroad. Mark Mazur and Bob Stack might wish to review how to identify US citizens born of American citizen rapes of German women and their offspring to make the persecution more complete:
http://www.spiegel.de/spiegel/print/d-132040368.html
@Innocente
There is no record of her renunciation but it sure sounds like she is considering it.
NOTHING would surprise me about US persecution. What a sad end to a country with such impressive original principles.
@Innocente: At the end of World War II, US GIs raped an estimated 190,000 women in Germany, with one in 100 rapes resulting in the birth of a child. These children, who would now be in their late 60s, would be Americans — Nationality Act of 1940 § 205 required legitimation in case of children born abroad to an unmarried US citizen father.
Prior to that, I believe the law in effect was Rev. Stat § 1993. which granted citizenship to any child of American fathers regardless of marriage. But the DC establishment tightened up the nationality law in preparation for war (despite pretending that Pearl Harbor was a complete and utter surprise the following year) — knowing that with war came prostitution & rape, they wanted to make sure to limit access to US citizenship for any kids that might result.
@Innocente
My (german) mother was almost raped by a GI. She might have been around 17. He offered her a ride in his truck and then turned onto a path into the woods. She jumped out and ran.
@Fred:
This Handelszeitung interview from December 2013 with the head of Corner Bank explains the US-Swiss Tax Programme. It was previously posted on IBS. See also the final question and answer about the Holocaust unidentified accounts – Corner Bank was only founded in 1952, i.e., after World War II, but was still forced to pay into the solidarity fund:
“The print-edition of the Handelszeitung (HZ) has an interview with the Paolo Cornaro (PC), CEO of Corner Bank, a credit-card bank in Switzerland. He seems to indicate that the tax deal between the Swiss and the US governments is more about extortion than about an agreement (translated):
“HZ: The US tax dispute is further along. How do you judge the agreement?
PC: This program, which I cannot characterize as an agreement with good conscience, strikes all banks as a block. It does not make a distinction between banks which consciously went on American soil to acquire customers and those banks, to name an extreme example, that opened accounts for two Swiss who were also coincidentally in possession of US citizenship. We know today which banks are Category 1. Since we never actively pursued American customers, we should be in Category 3. With this view, however, we are exposed to the risk in the event that documentation is not water-tight that we would have to accept additional liability.
HZ: You must decide no later than December 9.
PC: It certainly could happen that there are banks which will not be so far. We will classify ourselves in Category 2 in order to avoid further discussions and risk a penalty. We have American customers who are properly declared. The program’s concept is however that all are tax evaders. Then we must prove that this is not the case.
HZ: What kind of penalty are you looking at?
PC: I cannot and do not want to mention a number. We want to close a chapter by paying a penalty and then can we look forward again.
HZ: You will pay in order to have peace and quiet.
PC: Yes. We found ourselves in a similar situation in connection with the “unidentified accounts” matter. Our bank was founded in 1952 so there was certainly no unidentified accounts coming out of the war. We decided to pay anyway. Towards the end of the matter the actions were directed at all Swiss banks. If we wanted to continue with a US dollar clearing account, we had to pay. It didn’t matter whether we were guilty or not. We booked the payment as a solidarity contribution. Also at that time we wanted to simply conclude the matter.”