A Maryland businessman has pleaded guilty to filing a false tax return for tax year 2008 after admitting to concealing his foreign bank account at an Israel-based bank on his return.

Alexei Iazlovsky of Potomac, Md., pleaded guilty Tuesday in the U.S. District Court for the Central District of California to filing a false tax return for tax year 2008. According to court documents, Iazlovsky, a U.S. citizen, maintained an undeclared bank account held in the name of a foreign corporation at the Luxembourg branch of an unidentified Israeli bank.

Iazlovsky owned a corporation that produced documentaries for Russian television stations. A tax preparer suggested to Iazlovsky that he could reduce his taxes by keeping money out of the United States and diverting payments from his Russian clients to a foreign bank account held in the name of a foreign corporation.  Iazlovsky met with a banker from the Israeli bank at a New York hotel to open the Luxembourg account.   

According to court documents, Iazlovsky diverted a total of $2.6 million in untaxed payments from his Russian clients to his undeclared bank account in Luxembourg. From 2002 through 2009, Iazlovsky filed false individual and corporate tax returns that failed to report his authority over and ownership of the bank account in Luxembourg. He also omitted the income diverted to and generated by the undeclared account in Luxembourg. Iazlovsky has admitted that the tax loss is more than $400,000.

Iazlovsky is the latest in a series of defendants charged in the U.S. District Court for the Central District of California with failing to report income from undeclared accounts held at Israeli banks, such as Bank Leumi (see Bank Leumi Said to Help California Man Cheat IRS and Tax Preparers Charged with Hiding Funds in Israeli Banks).

U.S. citizens and residents who have an interest in, signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III, of their individual income tax returns. In additiona, U.S. citizens and residents must file a Report of Foreign Bank and Financial Reports, or FBAR, with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signature or other authority.

“Offshore tax evasion is a top priority for IRS-CI, and the facts in this case are clear,” said IRS Criminal Investigation chief Richard Weber in a statement. “Earned income was placed into foreign bank accounts for the purpose of committing offshore tax fraud. Through our efforts, we are gaining access to more and more information on institutions and individuals involved in offshore tax fraud, and you can expect us to use all of our enforcement tools to stop this abuse.”

Iazlovsky has agreed to pay a civil penalty of 50 percent of the high balance of his undeclared account to resolve his civil liability with the IRS for failing to file FBARs. Iazlovsky faces a maximum prison term of three years and a maximum fine of $250,000.

“Individuals who evade their tax obligations cheat their country and their fellow citizens,” said Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, in a statement. “The Department of Justice is committed to using all of the many available tools to find and prosecute those who hide income and assets in offshore bank accounts, and to pursue the taxes and penalties that are due.” 

She credited special agents of IRS-CI who investigated the case, and Tax Division Trial Attorneys Ellen M. Quattrucci and Christopher S. Strauss, who prosecuted the case, and Assistant U.S. Attorney Sandra R. Brown of the U.S. Attorney’s Office for the Central District of California, who assisted with the prosecution.

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