UPDATE – Nov 9, 2018 https://www.canlii.org/en/on/onlst/doc/2017/2017onlsth164/2017onlsth164.html
LAW SOCIETY TRIBUNAL
HEARING DIVISION
Citation: Law Society of Upper Canada v. Lesperance, 2017 ONLSTH 164
Date: August 3, 2017
Tribunal File No.: 17H-025
BETWEEN:
The Law Society of Upper Canada
Applicant
– and –
David Sylvio Lesperance
Respondent
Heard: May 17, 2017, in Toronto, Ontario
Summary:
LESPERANCE – lnterlocutory Suspensions – Based on the evidence: there appeared to have been a misappropriation or mishandling of a substantial amount of a client’s money; the Lawyer was not co-operating with the Society’s investigation; he was no longer in Canada, having left sometime in 2015; the Lawyer had not complied with the Society’s requirement that he disclose his current contact information; and the current location of the Lawyer’s law practice was unknown to the Society – The Lawyer’s licence was suspended on an interlocutory basis.
ON Lawyer remains in Poland as Law Society files notice of motion 4 interlocutory suspension or restriction https://t.co/1m7XIbGikk
— nobledreamer (@nobledreamer16) May 19, 2017
While this particular post is not about a tax-compliance professional per sé, it IS about a person with whom many of us have had interactions and from whom we have been assured we WILL BE CAUGHT in one way or another. Given that, I find it extremely ironic to come across what follows in this post. How many of you who have paid a retainer or left any other type of funds when using a lawyer, ever worry about that person absconding with it?
David S Lesperance used to post comments on Brock. Here is an example of the first of many on the post “Americansabroad in Canada may soon be unable to receive payments from Government by USCitizenAbroad, September 16, 2013.
First comment Continuing to ignore the issue; yell at your foreign banker for closing your account; hoping and praying that FATCA and the Qualified Intermediary Regime will be revoked; etc. are all a waste of time. It is time to either comply with the law or expatriate. Complaining is just a waste of time.
I believe my first real exchange with him occurred sometime back on a WSJ article “The Law That Makes U.S. Expats Toxic” October 10 2015 (paywalled-I can’t get around it with the Google News action). Unfortunately, while I have my own comments via my profile, I cannot access the article nor his comments. This limits what I would like to address for the most part. The first set of comments was his reaction to my referring to him as a tax-compliance professional. He did not agree with that label. It was an exchange where I felt constantly challenged at being tripped up especially because I could not (yet) refute the idea that the Qualified Intermediary program (QI) would “out” us hands-down. And I let him have the upper-hand to a certain degree, because he was a professional and I assumed he would know more than I. We seemed to develop a respectful, civil relationship. On several occasions since, I posted comments for him as he could not log on for some reason. I was aware he was in Poland visiting family as he explained it.
Later comments on Brock:
Comment on US Intention to Pursue Enforcement in Spite of Foreign Law
Comment on Do Canadian or Australian etc Tax Attorneys Advising on United States IRS Compliance Typically Comply with the Professional Code of Conduct of their Law societies?
I was very surprised to see some of the Tweets on Twitter when Keith Redmond tried to warn Accidentals not to put themselves into the US tax system. It is interesting that without any proof as to the ability of IRS able to collect via QI, he presumes it and treats Keith in a manner I found inappropriate and unprofessional. I believe the point of contention was to prove that actual Accidental Americans had been “outed” due to QI. This was not provided, nor has it been since that time. There were others that ganged up in more “attacks” that I will not put up here. Brock/Wed Rally Tweeps will remember this extremely unpleasant incident. After that, I declined to post anything further on his behalf. What is ironic, is a number of exchanges that took place privately, up to as late as March 16, with no indication of any actions such as this:
Law Society of Upper Canada Files a Notice for Interlocuatory Suspension or Restriction Against David Sylvio Lesperance Filed March 10, 2017
or this:
Wareh vs Lesperance
I still, all things considered, find this incredibly difficult to believe. And I suppose until one has had due process, all things are allegations only. I will not outline the discrepancies other than to mention the amount involved is just short of €900,000. Please read the links above for the whole story. Point Eight from the Law Society Motion states:
And then I came upon this:
This Man Can Help You Escape the IRS Forever
The Canadian-born lawyer is among the world’s leading champions of transnational exit plans for the superwealthy. Business is booming. Lesperance says he has expatriated more than 300 ultrarich Americans to date—he calls them “golden geese”—and has set up contingency plans for countless others. Thiel is not a client, but Lesperance says several household-name techies are. Mad Max scenarios aside, their goal is tax avoidance. If that means giving up an American passport, so be it.
Of course tax avoidance is completely legal. Carried interest is a share of the profits of an investment paid to the investment manager.It is treated as a return on investment (capital gains) as opposed to income as compensation for services. There have been many Recent regulatory attempts by the Democrats to tax this as regular income. Dave Camp’s 2014 Ways & Means Proposal suggested raising it from 23.8 percent to 35 percent. You can bet your booties all this is legal but it certainly does not flow with the spirit of the law. And it is clear the wealthy are quite upfront about why they are doing it.
He got into the golden-goose game as a newly minted lawyer in 1990, when he was approached by a Detroit attorney who wanted to quit the United States for tax reasons. The client had already stowed part of his $15 million net worth in an “offshore bucket” and purchased citizenship in St. Kitts and Nevis. Lesperance helped him relinquish his US passport and set up permanent residency in Canada. For three years, the client commuted daily from Windsor to Detroit to wrap up his business while still fulfilling Canada’s residency requirement. He then declared himself a nonresident citizen of Canada and moved to Australia, where a retiree incentive program permanently exempted his offshore trust from taxation. “I thought it was very cool and very cute,” Lesperance says.
I thought it was very cool and very cute,” Lesperance says.
I wonder how “very cool and very cute” FINCEN would find this.
This statement is rather disturbing. Here we have a lawyer, with whom some of us have engaged online etc, who has had one message for quite some time, that we needed to comply because of US law & he ability of the U.S. to collect levies. I presumed that Mr. Lesperance took such a position:
1) because he felt no one else had noticed and his observation was important
(though why any need for FATCA if that were so?) and
2) because he believed in tax compliance
It was probably inevitable that the lawyer would one day act upon his own counsel. When we first spoke, in 2015, Lesperance had arranged a backup citizenship for himself, but he wouldn’t say where. That goose has now flown. You can find him in sunny Portugal.
But perhaps not for the reason as stated in this article. (The author of the article has been advised of the actions of the Ontario Law Society; the article remains online).
Karen Alpert and I have been working on a paper to outline whether or not the QI program can do what Mr. Lesperance claims it can. We hope to put it up in the reasonably near future.
I have yet to thoroughly research whether or not Canada has an extradition treaty with Poland.
The following 2 items/links are courtesy of Sora Fon at American Expatriates FB
Treaty between Canada and the Republic of Poland on Mutual Legal Assistance in Criminal Matters
295 COMMENTS from The Law That Makes U.S. Expats Toxic, A measure targeting tax evasion pushes Americans out of bank accounts—and jobs—abroad.
By Colleen Graffy.
Since Mr. Lesperance appears to specialize in helping people expatriate, primarily to avoid taxes, I speculate that his goal was to scare people to either drum up business or to exhibit a veneer of civic responsibility/respectability for his prospective clients.
I am also reminded of those who yell the loudest about misdeeds of others (pedophiles, pornographers, tax evaders, etc.) often end up being convicted of the exact thing they are most vocal about. However, in this case, I assume the due process of law will eventually determine the veracity of the accusations against him. Until then, don’t be buying any bridges or derelict distilleries!
His twitter account has gone silent since I posted asking him about the ethics case against him. Or maybe he is just taking an extended vacation – he can certainly afford it!
My bad – twitter account is still active. I was looking at the date of the pinned post at the top of his timeline.
@ Tricia
I found this in my files but I can’t access the WSJ article now either. I’m sure this DSL comment kicked off a series of many comments (including yours) and sadly, needlessly caused a great deal of anxiety in many WSJ readers.
http://www.wsj.com/articles/the-law-that-makes-u-s-expats-toxic-1444330827#livefyre-comment
A blast from the past of Brock. David takes on the Brocker bunch whom he believes are in the State of Denial.
http://isaacbrocksociety.ca/2013/09/16/americansabroad-in-canada-may-soon-be-unable-to-receive-payments-from-government/
Perhaps someone can humour me: we discussed the QI thing in the past several times, but I don’t recall if we ever got actual citation to chapter & verse of what provision of a QI agreement requires a bank to freeze an account and/or remit its contents to the IRS?
Here’s the text of the current QI agreement under Rev Proc 2017-15, but it’s 112 pages long and given the timing of Lesperance’s comment I guess he’s referring to an earlier agreement
https://web.archive.org/web/20170216213604/https://www.irs.gov/pub/irs-drop/rp-17-15.pdf#page=47
This post begins with a tweet from @Homelander_Not which has a bad link. It appears that the Law Society has removed the Lesperance “Notion of Motion” from its site. You will find the Notice of Motion earlier in this post.
Those interested in this should read the Notice of Motion. The grounds for Suspending Mr. Lesperance from practice are NOT based on his treatment of a client. The grounds for suspension are that he did NOT accurately complete a Law Society information return. In other words, this is about “Form Crime”.
Every year Ontario lawyers are required to file an annual report. The report includes questions about Trust accounts and about whether one is indebted to a client. Assuming the truth of the allegations in the motion, Mr. Lesperance did NOT properly disclose information about these matters to the Law Society.
Put it another way: His problems with the Law Society are NOT based on his compliance with external laws and NOT based on his treatment of clients. His problems are based on his not having disclosed his possible improprieties on a Law Society information return.
Mr. Lesperance is a victim of an “FBAR Like” rule. What the Law Society is saying is: Do what you want. Just make sure you tell the Law Society about it.
The Law Society “claim” (identified in the post) that he is a danger to the public (which he may or may not be true) is a bit like Professor Bean saying that offshore bank accounts are proof of criminal activity.
I am not defending Mr. Lesperance. I am simply noting that his problems with the Law Society are not based on what he did. They are based on his failure to report what he did.
@USCitizenAbroad
Thanks for your comment.
It does say the Law Society received a complaint and mentions affidavits at the end to be used in the Hearing if Motion. So if these clients had not complained for whatever reason-(which could be if money laundered etc), and the lack of a form the only obvious issue, Mr. Lesperance would be facing the same result?
My reading of it is this:
The Law Society is using the affidavits from third party witnesses to support the allegation that the form (annual return) was incorrectly completed. They will use the fact of the incorrectly completed form to suspend him from practice – irrespective of how he treats his clients.
Continuing:
I suspect that the reason that the link no longer works is because Mr. Lesperance HAS been suspended from practice (at least as of today) by the Law Society of Upper Canada. See:
http://www2.lsuc.on.ca/LawyerParalegalDirectory/loadSingleResultPage.do?startPoint=0¤tPoint=0&iD=6j2GN3bMvWU%3d&iD=1495194770220
Note the definition of “suspended” (according to the Law Society site) is:
“Suspended
A lawyer who has been suspended by order of the Law Society Tribunal. A suspended lawyer is not permitted to practise law and/or provide legal services.”
Since it appears that he did not participate in the hearing, this is likely a “Form Crime” suspension.
@Eric
Karen and I both have read the new version and don’t see any indication of the power to do this. That is why we are writing the paper. The Criminal Code in Section 18 (and a later Section I forget at the moment-I want to say Sec 28) contains clauses regarding confiscation but is based upon money laundering, proceeds of crime etc and did not include tax evasion. There was no reason to take what was there and apply it to much lesser issues such as the failure to file oversights of minnows. Former Assisstant Attorney General Caroline D. Ciraolo claims sections of the IRC (7402, 6332 I believe) permit levying of correspondent banks but the wording of those sections seem to apply to domestic situations (if at all). I would have to look at draft to quote sections ( as always, getting up lazily, reading on phone- no access to this files at this moment..retirement has its benefits LOL).
Even if the regulations changed that much, Mr. Lesperance continued to make these claims until the last contact in March. He said very specialized lawyers dealt with this (which may be however, no one ever received an answer of exactly where in the Code this information was located nor any names of Accidentals being found as such). He seemed to be saying that QI was currently operating in a Fatca-like manner. Perhaps in it’s early stages it may have been perceived/functioned as such. From what I know, since 2001 due to QI, it is simply standard operating procedure to determine upon account opening, if one will be required to owe tax on the investments involved and to prepare W8 or W9 so withholding – (as in Chapter 3) should take place. The failure of the Swiss banks to perform QI requirements seems to have played a part in debacle of 2008.
Mr. Lesperance repeatedly claimed if one had a bank account and had not filed taxes, he/she would be “outed” by QI because of already being “in the system.” The phrase was being used by Keith and others to mean entering the US tax system by filing.I don’t recall ever hearing of anyone claiming they were turned over because of QI nor hearing/reading any articles claiming banks were currently actively rooting out US Persons. It would seem that kind of info is what would be turned up by applying FATCA IGA searches.
One must note when discussing the QI Agreements that it has never been conclusively determined if in fact QI is compatible with Canadian law. In fact questions were raised around the time of 2006/2007 by the Alberta Privacy Commissioner if in fact whether Canadian FI’s adherence to QI was in fact in violation of Alberta law.
@Tim
Great to know this. Thanks.However, as far as I know, QI has been adhered to here………..
@ all… Just for the record if you work for a lawyer and you are avoiding, you WILL get outed! They will have absolutely NO choice in the matter. The letters from the bank began coming exactly a month after I had renounced. Are you a US person for tax purposes? Are any partners or associates US person for Tax purposes? Is anyone in your firm able to direct funds who is a US person for tax purposes?
Thank goodness we have people like Tricia, Eric, Tim, Karen, USCA and others who CAN read IRS gobbeldygook. I peeked into Eric’s link but I drifted off after less than 2 pages. I returned later, skimmed a bit more, then drifted off again. My only conclusion is that I pity the people who have to write such stuff for a living.
@ Ann #! — Glad those bank questions came AFTER your renunciation at least.
The second wave of FATCA concerned the location of entities; all entities world-wide are receiving FATCA letters regarding their employees, shareholders, members, etc.
“My only conclusion is that I pity the people who have to write such stuff for a living.”
No need. You should have pity for people who have to READ such stuff. Those who write it don’t have to read it.
I can assure you that people who write computer programs don’t read them.
Let’s hear it for Ann #!
Ann #1 was a shiftless character.
(Except if she was using a French keyboard.)
“I don’t recall ever hearing of anyone claiming they were turned over because of QI nor hearing/reading any articles claiming banks were currently actively rooting out US Persons.”
In 2002, TD Waterhouse in Canada was actively rooting out US persons, but oddly TD Canada Trust (or was it plain TD at the time) wasn’t. Though TD Waterhouse refused to explain, the IRS was answering questions in those days, and the IRS said it was because TD Waterhouse had a US affiliate. Since TD itself also had a US affiliate, I wonder why TD didn’t do the same thing.
Here’s a link to the last tweet in one of the twitter conversations on this topic: https://twitter.com/El_Baum/status/837524902622081025
The QI agreement linked in the tweet is the first QI agreement from 2000 – not the most recent one linked in Eric’s comment above. The tweet references section 6.04 of the agreement, a section that does not exist in the current QI agreement. That section applied only when the QI was unable to get a suspected US-person client to waive their rights and/or provide a W9. If the client did not cooperate, the QI was required to either sell the assets that generated US-reportable income (if they could legally do so) or apply backup withholding and issue a 1099. I see nothing in this section that required the QI to turn over the proceeds of any sale of assets to the IRS. Backup withholding was the worst consequence
“either sell the assets that generated US-reportable income (if they could legally do so) or apply backup withholding and issue a 1099”
That would be nearly all assets, because if the person is a US person then all of the income would be US-reportable. Furthermore the sale itself would be US-reportable, where the amount of income might be positive or negative (capital gain or loss) but the withholding would be 30% of the gross sales proceeds.
I think Monica Hernandez wasn’t working in the IRS at that time but her cohorts already were. Also I think IRS employees embezzled withholding from 1042-S as well as 1099. Also I think the word “embezzled” maybe shouldn’t be in past tense.
@Norman Diamond – My reading of the agreement is that foreign branches/subsidiaries of US banks may be required to provide 1099s or backup withhold on foreign source income, but not foreign banks. If your bank is not affiliated with a US bank, then only US-source income is reportable by the bank. (A US Person, however, is required to report all worldwide income, whether or not reported to the IRS by the bank). This is the hole that FATCA was meant to plug – QIs could not be forced to report foreign-source income.
“My reading of the agreement is that foreign branches/subsidiaries of US banks may be required to provide 1099s or backup withhold on foreign source income”
A Canadian PARENT of a US financial institution performed both a 1099 and backup withholding, and they refused to say why but the IRS said it was because the Canadian company had a US AFFILIATE. The IRS also said that if my employer had a US affiliate then my employer would have to withhold 30% of my salary. At that time I still believed the Social Security Administration’s letter saying I was eligible for a replacement number, and I was still experimenting how to get them to deliver a number.
So if we set aside Norman Diamond’s experience 15 years ago – quite possibly an edge case – then is there any record of anyone ever having Canadian funds seized via the QI route? (That does not include withholding from US investment income etc.) Not to my knowledge.
I don’t know of this particular lawyer that many of you seem familiar with.
There are several ways a lawyer can can be called to task by the law society and they vary in range from: temporary or permanent suspension, discipline, oversight of their trust accounts, sanctions failure to pay dues in a timely manner all the way to disbarment.
In this case, the lawyer is suspended due to an administrative matter ( generally considered very minor and usually easily corrected, or as referred to above a form crime). I would not use the word crime as it may conjure a different interpretation.
We have many reporting requirements and if for example we pay late or not at all, we can be suspended. Reinstatement is as simple as paying ( interest and possible fine). And I wouldn’t incur the costs of attending a hearing either if all it meant was coughing up my cheque.
Bottom line: this is a very minor matter and has ziltch to do with professional conduct or his less than accurate comments about our compliance issues.
http://isaacbrocksociety.ca/wp-content/uploads/2017/05/Lesperance17H-025NMTF.pdf
That interlocutory thing is actually easier to read than IRSpeak. I won’t judge DSL on that but it makes me wonder how he would judge a man in this hypothetical scenario.
A Polish/American man living in Poland is asked by his Polish granny who is in rapidly failing health to find her a good, caring, private nursing home as quickly as possible. She gives him a large sum of money which he puts into a new chequing account and then he sets off to find the best possible place for his granny. A couple weeks later he empties the account to pay for a high quality facility he has found but he doesn’t report this account on FBAR/8938 forms. This is form crime according to the IRS and we know the possible consequences to the bank which opened that account for him and the possible personal consequences.
Would DSL shrug and say, “He should have renounced and he must always comply with IRS regulations?” … or words to that effect? Would DSL want to help this man who was only a golden goose for a few weeks while his granny’s money was in that account but now he’s just another poor robin?