419 Litigation
Participants Of Professional BenefitsTrust/PBT/Mavin/Acadia Likely
To Lose 50% Of Their Assets Per Year Under FBAR Reporting Rules As A Result Of
DOJ Enforcement Action Against Tracy Sunderlage, Mavin LLC
Professional Benefits Trust | 419Litigation
Potential
trouble (419 Litigation) is in store for any participants of the Professional
benefits trust (“PBT”) who chose to continue in the “welfare plan” and allow
the assets to be moved offshore and be deposited into the Mavin Assurance and
Acadia annuities are in danger of losing 50% of their assets per year in
penalty payments to the United States Treasury.
On
July 13, 2011, the Department of Justice sued Tracy Sunderlage, Mavin LLC and
others in federal court in the Northern District of Illinois claiming that the
PBT/Mavin/Aciadia scheme constitutes an offshore income tax scam. The DOJ seeks
to enjoin the activities of these parties–but it also seeks to gain information
about taxpayers who are participating in the Mavin and Acadia transations. Once
the DOJ acquires the participant list in the lawsuit the IRS will commence
enforcement activities against the participants the lists reveal.
Liquidation Comes For Lavish Insurer
January 26|By Laurie
In 1990 Chicago insurance executive Raymond Ankner flew about 100 of his top agents to Germany to celebrate Oktoberfest in Cologne. The cost of the trip was $800,000, billed to Ankner`s businesses. regulators were already beginning to question expenses of his main insurance unit, InterAmerican.
The failure of InterAmerican is a major headache for the many independent agents who represented the company. Many of them apparently believed that the insurer had virtually all its investments in government bonds and was financially sound-or ``hunky-dory,`` according to Eric Wiltshire.
``The agent`s got egg on his face,`` said Wiltshire, chairman of a Birmingham, Mich.-based pension-consulting and insurance firm that dealt with InterAmerican.
InterAmerican`s approximately 25,000 customers can`t currently cash in their insurance policies and annuity contracts or collect benefits. Most of their claims are expected to be covered in the next few months by life insurance guaranty associations in Illinois and the other 44 states in which InterAmerican did business
Though big by Illinois standards, InterAmerican`s demise is small potatoes compared with several widely publicized out-of-state failures that rocked the life insurance industry last year. Failed Executive Life Insurance Co. of Los Angeles, for example, had assets of about $10 billion;
InterAmerican`s assets totaled about $140 million as of year-end 1990.
Yet the company`s problems are typical of many ailing life insurers, regulators say. Besides a heavy dose of non-performing real estate, the troubles include rapid growth supported by a controversial financial InterAmerican`s assets totaled about $140 million as of year-end 1990.
Yet the company`s problems are typical of many ailing life insurers, regulators say. Besides a heavy dose of non-performing real estate, the troubles include rapid growth supported by a controversial capital.
InterAmerican`s collapse raises questions about the effectiveness of state insurance regulation, especially in cases involving complex financial transactions. Illinois is usually ranked among the top three states in policing insurers, along with New York and California.
But some insurance experts who have examined InterAmerican`s books say it was clear several years ago that the company was headed for a fall.
Illinois insurance director Stephen Selcke defends the department`s actions, calling them ``appropriate and timely.`` But he and other insurance department officials say the agency`s staff is overworked, particularly in the area of monitoring financially troubled life insurance companies.
Five people are assigned to spot potential problems among the nearly 900 life and health insurers operating in the state, including 160 based here for whom Illinois is the main regulator. Selcke said he hopes to get legislative approval to beef up the staff for fiscal 1993, beginning July 1, when a law takes effect that requires insurance companies to pay more of the department`s budget.
In 1990 Chicago insurance executive Raymond Ankner flew about 100 of his top agents to Germany to celebrate Oktoberfest in Cologne. The cost of the trip was $800,000, billed to Ankner`s businesses. regulators were already beginning to question expenses of his main insurance unit, InterAmerican.
The failure of InterAmerican is a major headache for the many independent agents who represented the company. Many of them apparently believed that the insurer had virtually all its investments in government bonds and was financially sound-or ``hunky-dory,`` according to Eric Wiltshire.
``The agent`s got egg on his face,`` said Wiltshire, chairman of a Birmingham, Mich.-based pension-consulting and insurance firm that dealt with InterAmerican.
InterAmerican`s approximately 25,000 customers can`t currently cash in their insurance policies and annuity contracts or collect benefits. Most of their claims are expected to be covered in the next few months by life insurance guaranty associations in Illinois and the other 44 states in which InterAmerican did business
Though big by Illinois standards, InterAmerican`s demise is small potatoes compared with several widely publicized out-of-state failures that rocked the life insurance industry last year. Failed Executive Life Insurance Co. of Los Angeles, for example, had assets of about $10 billion;
InterAmerican`s assets totaled about $140 million as of year-end 1990.
Yet the company`s problems are typical of many ailing life insurers, regulators say. Besides a heavy dose of non-performing real estate, the troubles include rapid growth supported by a controversial financial InterAmerican`s assets totaled about $140 million as of year-end 1990.
Yet the company`s problems are typical of many ailing life insurers, regulators say. Besides a heavy dose of non-performing real estate, the troubles include rapid growth supported by a controversial capital.
InterAmerican`s collapse raises questions about the effectiveness of state insurance regulation, especially in cases involving complex financial transactions. Illinois is usually ranked among the top three states in policing insurers, along with New York and California.
But some insurance experts who have examined InterAmerican`s books say it was clear several years ago that the company was headed for a fall.
Illinois insurance director Stephen Selcke defends the department`s actions, calling them ``appropriate and timely.`` But he and other insurance department officials say the agency`s staff is overworked, particularly in the area of monitoring financially troubled life insurance companies.
Five people are assigned to spot potential problems among the nearly 900 life and health insurers operating in the state, including 160 based here for whom Illinois is the main regulator. Selcke said he hopes to get legislative approval to beef up the staff for fiscal 1993, beginning July 1, when a law takes effect that requires insurance companies to pay more of the department`s budget.
Nikolai S. Battoo, The Fund Manager Chased By Two Regulators
Two federal regulatory agencies are in hot pursuit of a shadowy hedge fund
figure and various companies associated with him, claiming they pumped millions
into Bernard Madoff feeder funds and other unsuccessful investments, and then
lied about the losses.
On Sept. 7, both the Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission filed actions in the federal Northern District of Illinois against Nikolai S. Battoo, 41, who apparently has most recently operated in Florida.
In announcing its action, the SEC said Battoo has run numerous hedge funds and claims to manage $1.5 billion for investors worldwide, including at least $100 million in the United States.
Battoo has gathered “tens of millions of dollars” in investments since 2009, all the while losing millions more, the SEC also said in a detailed, 32-page complaint.
He has managed money through a series of companies including BC Capital Group, of Panama, and BC Capital Group Limited, which is believed to be run from Hong Kong. He also manages several hedge funds and is “senior advisor” for an outfit called Private International Wealth Management, and is thought to be affiliated with FuturesOne LLC, a commodities pool located in Lincoln, Neb.
Battoo has been trying to cover up his failures and overstate the value his investments “in a number of ways,” the SEC said. When soliciting investors, Battoo has claimed an outstanding track record and “exceptional risk-adjusted returns,” according to the SEC. The agency calls Battoo’s financial empire “an amorphous syndicate of far-flung funds, entities and affiliates.”
Battoo investors suffered serious losses in 2008. He was also terminated as investment adviser for a large international bank, which included $138 million worth of hedge funds Battoo had managed. After his firing, the value of the hedge funds plummeted by almost 50 percent, the SEC said.
“Battoo attracted quire a following of investors by proclaiming his investments withstood the test of the financial crisis, but reality seems to have finally caught up with him,” said Robert Khuzami, the SEC’s director of enforcement. “Now, Battoo is offering investors one excuse after another for holding their money hostage.”
Aside from putting tens of millions of dollars into Madoff feeder funds, Battoo also lost millions through a failed derivatives investment scheme, regulators said.
Battoo apparently is now blaming the wreckage of MF Global for his inability to repay investors: “The jig appears to be up,” the SEC court complaint said. “Clients are now clamoring for redemptions, so Battoo has doubled down on his deception.”
The SEC is also going after Tracy Lee Sunderlage, 65, a Battoo colleague who had already been banned from the securities industry after a previous enforcement action. Regulators charge that Sunderlage, who now lives in Florida, poured about $95 million in assets from variable annuities and self-directed Individual Retirement Accounts into Battoo investments.
The SEC is asking a federal court for findings of fact that Battoo and Sunderlage have violated federal laws, and for injunctions to put them out of business. The agency also wants disgorgement of ill-gotten gains and unspecified civil penalties.
In its separate complaint filed in the same court, the CFTC is seeking an order prompted by Battoo and four of his companies in connection with Private International Wealth Management, a series of commodities pools. The CFTC accuses Battoo and the companies of fraud, and is asking that a receiver be appointed and that assets of the companies be frozen.
LANCEWALLACHEXPERTWITNESS.INFO
On Sept. 7, both the Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission filed actions in the federal Northern District of Illinois against Nikolai S. Battoo, 41, who apparently has most recently operated in Florida.
In announcing its action, the SEC said Battoo has run numerous hedge funds and claims to manage $1.5 billion for investors worldwide, including at least $100 million in the United States.
Battoo has gathered “tens of millions of dollars” in investments since 2009, all the while losing millions more, the SEC also said in a detailed, 32-page complaint.
He has managed money through a series of companies including BC Capital Group, of Panama, and BC Capital Group Limited, which is believed to be run from Hong Kong. He also manages several hedge funds and is “senior advisor” for an outfit called Private International Wealth Management, and is thought to be affiliated with FuturesOne LLC, a commodities pool located in Lincoln, Neb.
Battoo has been trying to cover up his failures and overstate the value his investments “in a number of ways,” the SEC said. When soliciting investors, Battoo has claimed an outstanding track record and “exceptional risk-adjusted returns,” according to the SEC. The agency calls Battoo’s financial empire “an amorphous syndicate of far-flung funds, entities and affiliates.”
Battoo investors suffered serious losses in 2008. He was also terminated as investment adviser for a large international bank, which included $138 million worth of hedge funds Battoo had managed. After his firing, the value of the hedge funds plummeted by almost 50 percent, the SEC said.
“Battoo attracted quire a following of investors by proclaiming his investments withstood the test of the financial crisis, but reality seems to have finally caught up with him,” said Robert Khuzami, the SEC’s director of enforcement. “Now, Battoo is offering investors one excuse after another for holding their money hostage.”
Aside from putting tens of millions of dollars into Madoff feeder funds, Battoo also lost millions through a failed derivatives investment scheme, regulators said.
Battoo apparently is now blaming the wreckage of MF Global for his inability to repay investors: “The jig appears to be up,” the SEC court complaint said. “Clients are now clamoring for redemptions, so Battoo has doubled down on his deception.”
The SEC is also going after Tracy Lee Sunderlage, 65, a Battoo colleague who had already been banned from the securities industry after a previous enforcement action. Regulators charge that Sunderlage, who now lives in Florida, poured about $95 million in assets from variable annuities and self-directed Individual Retirement Accounts into Battoo investments.
The SEC is asking a federal court for findings of fact that Battoo and Sunderlage have violated federal laws, and for injunctions to put them out of business. The agency also wants disgorgement of ill-gotten gains and unspecified civil penalties.
In its separate complaint filed in the same court, the CFTC is seeking an order prompted by Battoo and four of his companies in connection with Private International Wealth Management, a series of commodities pools. The CFTC accuses Battoo and the companies of fraud, and is asking that a receiver be appointed and that assets of the companies be frozen.
LANCEWALLACHEXPERTWITNESS.INFO
IRS’s will get 419 412i and others twice under 6707A
How the IRS is taking a “formalistic approach” in
interpreting its own section 6011 regulations on disclosing reportable
transactions and not following its own rules on which tax years to assess the
Section 6707A penalty.
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The IRS is still assessing penalties under Code Section 6707A, the penalty provision applicable to failure to disclose Congress-enacted
reportable transactions taken since tax year 2004. Congress amended Section
6707A in 2010 to help alleviate its draconian consequences. They were fining
people $100,000 per year on the personal level, and then fining the same
parties $200,000 per year on the corporate level. I received phone calls from
people who had put under $100,000 into 419, 412i or other plans. Some of them
were being fined $600,000 or more under 6707A for failure to properly disclose
using form 8886. Under newly amended Section 6707A, applicable to all penalties
assessed after December 31, 2006, the penalty, subject to certain maximum and
minimum amounts, is equal to 75% of the decrease in reported tax as a result of
the reportable transaction. How the IRS is applying the Section 6707A penalty
can be described as “troubling.”
Accountants would call me when their clients got audited for
being in a 419, 412i, or other type of listed transaction. The client got
audited and settled. The accountant thought they were finished with the IRS.
When I told them that they were not they did not believe me. I have received
hundreds of these types of phone calls. When I would speak at national
accounting conventions, or legal conventions the people did not believe me.
When I would write articles for national accounting or other publications
people would call me and say it was not true. As an expert witness my side has
never lost a case. Enough of this and on to the story.
The following case shows how troubling the IRS position is.
In 2004 and 2005, a taxpayer took deductions for life
insurance premiums paid to a Code Section 419(e) plan (419(e) plan).
Transactions similar to the 419(e) plan were declared “listed transactions” in
Notice 2007-83 on October 17, 2007. Under the applicable version of Treasury
Regulation § 1.6011-4(e)(2)(i), the taxpayer was required to file Form 8886
with its “next filed tax return” after the transaction became a listed
transaction. Accordingly, the taxpayer was required to file Form 8886 with its
2007 tax return, which it filed on October 14, 2008. The taxpayer did not file
Form 8886 with its 2007 tax return. On October 14, 2008, the taxpayer was under
audit for its participation in the 419(e) plan.
An IRS letter dated January 15, 2008 informed the taxpayer
that it was under examination because of its participation in a widely marketed
419(e) plan. The taxpayer gave the IRS agent (the agent) all of the information
requested by the agent. On September 8, 2008, the agent asked the taxpayer to
extend until June 30, 2009 the statute of limitations regarding any deficiency
related to the 419(e) plan for the 2004 taxable year. The taxpayer agreed to
the extension. The agent issued Form 4549 showing the final deficiencies owed
by the taxpayer relating to the 419(e) plan on November 7, 2008. The agent
didn't include any penalties on the Form 4549 issued — neither a Section 6662
penalty nor a Section 6707A penalty. The taxpayer paid the deficiencies shown
on Form 4549 for its 2004 and 2005 tax years. On December 29, 2008, the group
manager informed the taxpayer that the examination report was accepted for 2004
and 2005.
On February 22, 2012, the taxpayer received notification
that the IRS was proposing to assess a Section 6707A penalty against the
taxpayer for the year 2007 because of the taxpayer’s failure to include Form
8886 with its 2007 income tax return. The IRS had requested that the taxpayer
extend the statute of limitations for the 2007 tax year until December 31,
2013, which the taxpayer did.
The first question is whether the IRS has asserted the
Section 6707A penalty for the correct taxable year. If a taxpayer fails to
include the information required under Section 6011 for a listed transaction,
Section 6501(c)(10), enacted in 2004 at the same time as Code Section 6707A,
operates to extend the statute of limitations by one year after the earlier of
(A) the date the Secretary is furnished the information, or (B) the date a
material advisor meets a Section 6112(b) request. However, Section 6501(c)(10)
cannot extend the statute of limitations if the tax years of participation in
the transaction are closed prior to the transaction becoming a listed
transaction. Proposed treasury regulation section 301.6501(c)-1(g)(3)(iii)
states that “if the taxable year in which the taxpayer participated in the
listed transaction is different from the taxable year in which the taxpayer is
required to disclose the listed transaction under section 6011, the taxable
year(s) to which the failure to disclose relates are each taxable year that the
taxpayer participated in the transaction.” The Preamble to the proposed
treasury regulation provides that “the taxable year(s) to which the failure to
disclose relates is not the taxable year in which the disclosure is required to
be filed, but each taxable year that the taxpayer participated in the listed
transaction.” Based upon proposed treasury regulation section 301.6501(c)-1(g),
the correct taxable years to assess the taxpayer a Section 6707A penalty are
2004 and 2005, the years the taxpayer participated in the listed transaction,
not in 2007, the year the taxpayer failed to report the listed transaction.
Under a formalistic interpretation of the Section 6011
treasury regulations, the IRS could assert that the taxpayer is subject to a
Code Section 6707A penalty in 2004 and 2005 because the taxpayer has never
filed Form 8886. Its argument would be that Section 6505(c)(10) operates to
keep the Statute open for those two years because those years were open when
the 419(e) plan became a listed transaction on October 17, 2007. If the IRS
were to assess the Section 6707A penalty in 2004 and 2005, its assessment in
this situation would ignore the purpose of enacting Section 6707A in 2004. That
legislative history clearly shows that Congress enacted the provision so that
taxpayers would face a severe penalty if they did not give information to the
IRS so that the IRS could effectively combat tax shelters. The point of the
penalty is to require taxpayers to divulge information. Through treasury
regulations issued under Code Section 6011, the IRS requires that the taxpayers
divulge information regarding tax shelter investments by filing Form
8886. Because the IRS has information about the listed transaction from
auditing the taxpayer, what does the IRS accomplish by penalizing the taxpayer
for failing to file Form 8886? If the IRS wanted to punish the taxpayer for
failing to file Form 8886, why didn’t the agent assess the section 6707A
penalty before she closed her examination on November 7, 2008? Why didn’t her
manager send the case back to the agent to assess the section 6707A penalty
after reviewing the case?
The facts of the this case are analogous to one issue
considered by the United States District Court for the Eastern District of
Texas in Bemont Investments, LLC v. United States decided on August 2,
2010, which is on appeal by the government to the Fifth Circuit. The Bemont
case involved a Son-of-Boss tax shelter, a listed transaction. In one part of
the case, the Court had to decide whether the extended statute of limitations
for listed transactions set forth in Code Section 6501(c)(10) had run. The
question depended upon whether the IRS had been supplied the required
information, which would cause the statute of limitations to commence running.
The government maintained that it had not received the relevant information
because it had not received a “list” under Section 6212 of the relevant
information; that is, it was not required to take into account the information
supplied to it because it was not in the proper form. The District Court held
against the government on this issue because the government, in fact, had the
information it needed to be aware that the plaintiffs had participated in a
Son-of-Boss tax shelter.
The IRS decision to assert a Section 6707A penalty against
the taxpayer is very troubling. Not only is the IRS taking a “formalistic approach”
in interpreting its own section 6011 regulations on disclosing reportable
transactions, it is not following its own rules on which tax years to assess
the Section 6707A penalty.
I continue to advise people in 419, 412i, captive insurance
or section 79 plans to file properly under IRS 6707A. Most still either do not
file, or use someone without the proper experience to file. Most get the fine
for either not filing or for filing wrong. I do know of two accountants who
have been successful in filing properly after the fact. That is hard to do as
the instructions for filing after the fact are very hard to follow. I also
think that they left out some information. I continue to get calls from people
who filed and still got the fines. In fact a 412i promoter helped his apx. 200
clients file 8886 forms. I then learned that they all get the fines for not
filing.
When I spoke at the AAACPA convention, lawyers who are CPAs
most did not respond to my speech. Within a few days many called me with these
8886 problems. Many do not want to admit that they got their clients in bad
trouble with the IRS. When that happens the result is usually a lawsuit.
It is not hard to currently file under IRS 6707A, although
most salespeople tell their clients that they don’t have to. Most of those
salespeople later get sued by their clients. To file at a later date is very
hard. The two people that do this properly tell me it sometimes takes over 20
hours to get the forms right. The accountants and lawyers without experience
usually tell me it did not take them long to do the forms. That is too bad for
their clients.
Accountants and salesmen also get fined under IRS 6707A.
Their fine is a minimum of $100,000 for being what the IRS calls a material
advisor. There forms are easy to do, and can be done in about two hours. They
are also telling on their clients. When a lawsuit starts this is a very
interesting matter. I will write another article on point, or just Google me
for more.
The fine under 6707A is for every year the business owner is
in the plan. Even if the person did not contribute in some years they still get
the fine for those years. Even if the business owner got out of the plan they
still get the fine. In addition if they do not properly file under 6707A there
is no statute of limitations. I have received phone calls in 2013 from people
being just fined under 6707A that went into the plans in 2006, for example.
Many of these people were already audited and fined for their contributions to
the 419, 412i, etc. plans.
This is a bad situation that most accountants, tax lawyers
etc. have no knowledge about. I have authored two bestselling AICPA books with
Sid Kess which has chapters on this. I have authored books for Bisk education
which has chapters on this. I have authored a book published by John Wiley and
sons with chapters on this. I have authored many articles for accounting and
other publications on point. I am not bragging. My point is people either do
not believe what is going on, or maybe they simply do not think the IRS could
be doing this. Believe it because the IRS is doing this to a lot of honest
people. Worst of all the IRS says that the fine cannot be appealed.
Tracy Sunderlage
All you wanted was a comfortable retirement. What you got was fraud, incompetence, and scams. Fortunately, Lance Wallach and his team are
here to help you protect your assets and keep the IRS out of your pockets!
here to help you protect your assets and keep the IRS out of your pockets!
Call 516-938-5007
The SEC alleges that Sunderlage – who was charged and banned
from the industry by the SEC for participating in an offering fraud in 1986 (SEC
v. Sunderlage, et al., 86 C 6101 (N.D. Ill.)) – received commissions from
the sale of investments and also received management fees for acting as the
designated investment adviser to numerous client trusts that invested with
Battoo. Sunderlage thus acted as an unregistered broker-dealer and investment
adviser in violation of his industry bar.
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SEC Charges Asset Manager
Lied to Investors, Hid Major Losses While Boasting Remarkable Performance
During Financial Crisis
FOR IMMEDIATE
RELEASE2012-185 Washington, D.C., Sept. 7, 2012 – The Securities and Exchange Commission today announced an emergency enforcement action against an asset manager who has boasted remarkable investment success throughout the global financial crisis while allegedly exaggerating the value of the assets he manages and concealing major losses from investors. The SEC alleges that Nikolai Battoo claims to manage $1.5 billion on behalf of investors around the world, including at least $100 million for U.S.-based investors. But contrary to Battoo’s proclaimed track record of exceptional risk-adjusted returns for his investors, he actually suffered major losses in 2008 due to his investments in the Bernard Madoff Ponzi scheme and a failed derivative investment program. Rather than admit the losses to investors, Battoo has been overstating the value of his investments in a variety of ways. By boasting benchmark-beating returns, he has continued to attract new investors. However, during the past several months, investors have requested redemptions on their investments with Battoo. Instead of paying them, Battoo has provided a series of excuses ranging from the MF Global collapse to others placing a hold on investors’ money due to government investigations.
Additional Materials
“Battoo attracted quite a following of investors by proclaiming his investments withstood the test of the financial crisis, but reality seems to have finally caught up with him,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Now, Battoo is offering investors one excuse after another for holding their money hostage.” According to the SEC's complaint, Battoo's financial empire is an amorphous syndicate of funds, entities, and affiliates. Battoo manages significant assets for companies that sell investment products to U.S. investors, and has investment proceeds channeled to him by a network of U.S.-based investment advisers. Battoo has created for clients individualized "portfolios" that he manages under a brand name Private International Wealth Management (PIWM). These portfolios consist of holdings in several hedge funds he manages, holdings in other hedge funds, and other investments. The SEC’s complaint alleges that Battoo pitches himself as a highly successful alternative asset manager with a track record unblemished by the global financial crisis of 2008. Battoo hyped his purported success at a “due diligence conference” that he and Sunderlage sponsored for existing and prospective investors at the Four Seasons Hotel in Las Vegas in January 2009. A promotional material for that conference boasted, “How is it that PIWM-I can produce positive results or significantly reduce market losses when nearly everyone else is losing 35 to 50%?” According to the SEC’s complaint, Battoo arranged for “asset verifications” in 2009 to reassure clients that their money was safe and secure following the market collapse. The asset verifications, however, contained false and backdated information. For example, they identify investments in at least seven hedge funds that Battoo did not manage. Battoo’s actual investments in these hedge funds amounted to about $9 million while his asset verifications falsely stated the investments to be worth approximately $33 million. Moreover, these asset verifications improperly included backdated investments that also inflated the value of the PIWM portfolios. The SEC’s complaint alleges that while Battoo claimed success, he actually sustained particularly heavy losses in 2008. First, he was terminated as an investment adviser to the master fund of a large international bank, which terminated him from a “fund linked certificate” program through which Battoo-managed hedge funds collectively invested about $138 million. After Battoo’s termination, the net asset value of the hedge fund managed for the bank plummeted by nearly 50 percent, and Battoo’s losses on the fund-linked certificates exceeded $100 million. The other major loss suffered by Battoo’s asset management business later that year flowed from Bernie Madoff’s Ponzi scheme, in which several Battoo-managed hedge funds were heavily invested. However, following Madoff’s arrest, Battoo assured his investors that the Madoff fraud had only a nominal or minimal impact on the portfolios. However, several Battoo-managed portfolios held substantial investments in hedge funds that fed into the Madoff scheme. In fact, Battoo had borrowed money to amplify the size of his Madoff investments. Battoo similarly concealed from investors the losses stemming from the fund linked certificates. Without knowledge of these substantial losses, investors have collectively invested tens of millions of dollars with Battoo since 2009. According to the SEC’s complaint, once investors increasingly began seeking redemptions late last year, Battoo offered several false explanations for not paying them. Originally, Battoo claimed that the significant exposure of some of his investment portfolios to the MF Global liquidation prevented him from redeeming investments. However, Battoo’s actual exposure to MF Global is only a small fraction of what he has claimed. More recently, Battoo has said that certain counter parties had frozen the assets he manages based on investigations by U.S. government agencies, and that his attorneys were negotiating a “release” with the SEC. Prior to filing this complaint, Battoo’s assets were not frozen and he was not negotiating any release with the SEC. The SEC alleges that Sunderlage – who was charged and banned from the industry by the SEC for participating in an offering fraud in 1986 (SEC v. Sunderlage, et al., 86 C 6101 (N.D. Ill.)) – received commissions from the sale of investments and also received management fees for acting as the designated investment adviser to numerous client trusts that invested with Battoo. Sunderlage thus acted as an unregistered broker-dealer and investment adviser in violation of his industry bar. The SEC alleges that Battoo and his companies violated Section 17(a) of the Securities Act of 1933, Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 and Rule 10b-5, and Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. The SEC alleges that Sunderlage violated Section 15(a)(1) and 15(b)(6)(B)(i) of the Exchange Act and Section 203(f) of the Advisers Act. The SEC’s investigation, which is ongoing, has been conducted in the Chicago Regional Office by John D. Mitchell, Brian D. Fagel, Pesach Glaser and John T. Brodersen under the leadership of John J. Sikora, Jr. The SEC's litigation will be led by Jonathan S. Polish, Daniel J. Hayes, and Eric M. Phillips. The SEC acknowledges the cooperation and assistance of the U.S. Commodity Futures Trading Commission (CFTC), which has filed charges against Battoo in a parallel action. LANCEWALLACHEXPERTWITNESS.INFO |
Federal Court in Illinois Shuts Down Nationwide “Employee Benefit Plan” Tax Scheme
Department of Justice
LANCEWALLACHEXPERTWITNESS.INFO
Office
of Public Affairs
FOR
IMMEDIATE RELEASE
Tuesday,
March 6, 2012
A federal court has permanently
barred Tracy L. Sunderlage, Linda Sunderlage and four companies from operating
an alleged scheme to help high-income individuals attempt to avoid income taxes
by funneling money through purported employee benefit plans, the Justice
Department announced today. Judge John W. Darrah of the U.S. District Court for
the Northern District of Illinois entered the permanent injunction orders, to
which the defendants consented, against the Sunderlages, SRG International
Ltd., of Nevis, West Indies, and three Illinois companies - SRG International
U.S. LLC, Maven U.S. LLC and Randall Administration LLC.
According to the government complaint, the defendants claimed to promote and operate plans that
provide insurance benefits to participating companies’ employees, when in fact
the scheme is simply a mechanism for the companies’ owners to receive
purportedly tax-free or tax-deferred income for their personal use. Tracy
Sunderlage and the two SRG International companies allegedly marketed the
scheme to high-income professionals who own small, closely held companies. In
the most recent version of the alleged scheme, each participant’s company made
supposedly tax deductible payments to a purported benefit plan operated by
Maven U.S. and Randall Administration. The company’s contributions were then
allegedly transferred to an account within a company based in the Caribbean
island of Anguilla, in which they were allegedly invested until the owner
terminated from the program and received the assets for his or her personal
use. The complaint alleged that many participants owned these accounts through
offshore trusts, which Tracy Sunderlage and SRG International Ltd. often helped
to establish. The complaint alleged that participants from across the country
have transferred at least $239 million as part of the scheme and that total
contributions may exceed $300 million.
The injunction orders bar the
defendants from operating or promoting any purported “welfare benefit plans.”
The court also ordered the defendants to provide the government with a list of
their customers and to send copies of the injunction orders to their customers.
In the past decade, the Justice
Department’s Tax Division has obtained hundreds of injunctions against
promoters of tax schemes and preparers of fraudulent tax returns. Information
about these cases is available on the Justice Department website.
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LANCEWALLACHEXPERTWITNESS.INFO
Get Tracy Sunderlage Help: Don't Become A "Material Advisor"
Get Tracy Sunderlage Help: Don't Become A "Material Advisor": Don't Become A "Material Advisor"
Corporate Owned (or Foundation/Trust) Accounts vs. Personal. Lance Wallach, expert witness.
If your primary reason for going offshore is for more secure, more private, safer and more varied banking and investment options then you may want to think again.
Invest & Bank Offshore
If your primary reason for going offshore is for more secure, more private, safer and more varied banking and investment options the first thing you need to consider is the forming of one or more offshore structures. Without thinking many people assume they can simply open a personal account in their name and because that account exists in a country and bank that still observes strict banking secrecy, their identity will be protected by the bank and that nation’s privacy law.
The problem here is that every time you want to make a payment into the account or out of it, your name will be in effect broadcast to the world as the owner of that account. This is because the so called numbered accounts of the past are no longer available anywhere. Any incoming or outgoing payment from the account will always have your name associated with it on the bank-to-bank routing instructions. Therefore, it is imperative that the account be opened in the name of a company, foundation or possibly a trust rather than your personal name. Yes, as signatory on the account you will be still known to your bank, but your account will be anonymous to the world, so long as you bank in a country that still does not routinely share information with foreign governments and private investigators.
That way any payment into and out of the account is not automatically linked to yourself personally because the name of the company, foundation or trust will now only be on the inter-bank payment instructions and nothing else about the account will be visible. This concept of the “corporate shield” is one of the most important aspects of forming a foreign company even if you do not plan to conduct any business other than banking and investments. The company (or foundation) becomes a separate legal entity with its own life and rights under law. It is the whole basis behind the asset protection features of a foreign company formed in a country like Panama with favorable corporate laws that favor the ordinary person that merely wishes to shield their assets from predators.
The problem with all this is that you run into FBAR and OVDI IRS problems.
As an expert witness Lance Wallach's side has never lost a case. People need to be careful of 419 Welfare Benefit Plans, 412i plans, Section 79 plans and Captive Insurance Plans. Most of these plans are sold by insurance agents. If you are in an abusive, listed or similar transaction plan you need to file under IRS 6707a. The participant files form 8886, and the salesmen or accountant who signs the tax returns files form 8918 if they got paid over $10,000. They are called Material Advisors and face a minimum $100,000 fine. Some plans are offshore which could involve FBAR or OVDI filings. If you have money overseas you probably need to file for IRS tax amnesty. If you want to reduce the tax we suggest that you first file and then opt out. For more information Google Lance Wallach.
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
Invest & Bank Offshore
If your primary reason for going offshore is for more secure, more private, safer and more varied banking and investment options the first thing you need to consider is the forming of one or more offshore structures. Without thinking many people assume they can simply open a personal account in their name and because that account exists in a country and bank that still observes strict banking secrecy, their identity will be protected by the bank and that nation’s privacy law.
The problem here is that every time you want to make a payment into the account or out of it, your name will be in effect broadcast to the world as the owner of that account. This is because the so called numbered accounts of the past are no longer available anywhere. Any incoming or outgoing payment from the account will always have your name associated with it on the bank-to-bank routing instructions. Therefore, it is imperative that the account be opened in the name of a company, foundation or possibly a trust rather than your personal name. Yes, as signatory on the account you will be still known to your bank, but your account will be anonymous to the world, so long as you bank in a country that still does not routinely share information with foreign governments and private investigators.
That way any payment into and out of the account is not automatically linked to yourself personally because the name of the company, foundation or trust will now only be on the inter-bank payment instructions and nothing else about the account will be visible. This concept of the “corporate shield” is one of the most important aspects of forming a foreign company even if you do not plan to conduct any business other than banking and investments. The company (or foundation) becomes a separate legal entity with its own life and rights under law. It is the whole basis behind the asset protection features of a foreign company formed in a country like Panama with favorable corporate laws that favor the ordinary person that merely wishes to shield their assets from predators.
The problem with all this is that you run into FBAR and OVDI IRS problems.
As an expert witness Lance Wallach's side has never lost a case. People need to be careful of 419 Welfare Benefit Plans, 412i plans, Section 79 plans and Captive Insurance Plans. Most of these plans are sold by insurance agents. If you are in an abusive, listed or similar transaction plan you need to file under IRS 6707a. The participant files form 8886, and the salesmen or accountant who signs the tax returns files form 8918 if they got paid over $10,000. They are called Material Advisors and face a minimum $100,000 fine. Some plans are offshore which could involve FBAR or OVDI filings. If you have money overseas you probably need to file for IRS tax amnesty. If you want to reduce the tax we suggest that you first file and then opt out. For more information Google Lance Wallach.
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.