A former UBS client who claimed he hid his money in a Swiss bank account because of his parents experiences fleeing the Nazis was sentenced to 10 months in prison.
Jack Barouh, 65, of Golden Beach, Fla., was sentenced on Friday by U.S. District Court Judge Adalberto Jordan in Miami for hiding more than $10 million in secret bank accounts at UBS. He was ordered to surrender to the custody of U.S. Marshals by June 25. Barouh pleaded guilty in February to filing a false tax return. Despite his cooperation with prosecutors, Jordan imposed the heaviest sentence to date for a former UBS client. However, the 10-month sentence was less than the 20 months requested by prosecutors, in part because of Barouh's Holocaust defense and assistance to prosecutors.
Barouh admitted to filing a false 2007 tax return in which he failed to report that he had an interest in or signature authority over financial accounts at UBS. He also failed to report income earned on his UBS Swiss bank accounts.
The UBS accounts were opened in the names of Domilou S.A., a nominee Panamanian corporation, and Similen Investments Limited, a nominee British Virgin Island corporation. From 2002 through 2007, the tax loss associated with the Domilou and Similen accounts at UBS was approximately $736,269, according to prosecutors.
In addition to the Domilou and Similen accounts, Barouh owned and controlled several other offshore bank accounts located at banks other than UBS, including accounts in Switzerland and Hong Kong.
Barouh also owned and operated several businesses that manufactured and sold watches. Beginning in 1976, he allegedly skimmed income from his watch businesses and deposited the proceeds into his undeclared UBS bank accounts. He also deposited unreported sales commissions into the accounts. Barouh sold one of his watch businesses, Michele Watches, to Fossil in 2004 for $50 million.
Beginning in 2007, Barouh attempted to withdraw his funds from Switzerland and repatriate all of the money into the United States. However, a Swiss attorney persuaded him to transfer the money from Switzerland to a newly created bank account in Hong Kong in the name of a nominee Hong Kong corporation. The Swiss attorney then told Barouh to pay himself an annual consulting fee until all of the funds were brought into the United States, even though Barouh was not performing any consulting work.
Barouhs family fled Austria during World War II and settled in Bogota, Colombia, where he was born. He claimed to have sought psychiatric help for a compulsion to hide and hoard assets in case of a repeat attempt to exterminate the Jews. I have lived under the weight of the Holocaust, Barouh told the judge, according to the Associated Press. Those fears are finally starting to subside.
Prosecutors, however, said those fears were merely an excuse for hiding his money from the IRS. It does not give this defendant a license to break the law, said Assistant U.S. Attorney Jeffrey Neiman. Tax fraud is tax fraud. Neiman acknowledged, though, that Barouh had provided prosecutors with extensive and ongoing information about two Swiss money managers and one Swiss attorney involved in the UBS tax evasion scheme.
As part of his plea agreement, Barouh agreed to pay a 50 percent penalty for the one year with the highest balance in his offshore accounts in order to resolve his civil liability for failing to file Reports of Foreign Bank and Financial Accounts, Forms TD F 90-22.1. The highest balance of all of the assets he owned and controlled offshore was approximately $10,017,613. He also must pay any additional taxes, interest and penalties he may owe.
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