A California man has agreed to plead guilty to a scheme to move over $1 million into secret Swiss bank accounts at UBS via a fake business the bank helped him set up in Hong Kong.
John McCarthy of Malibu is the first person to be charged after the Swiss government agreed to a deal last week with the U.S. Justice Department to reveal the identities of some U.S. taxpayers behind 52,000 accounts sought by the IRS (see Swiss and U.S. Governments Make a Deal on UBS). Details of the deal have not yet been publicly announced, but the bank has reportedly agreed to turn over the details of between 5,000 and 10,000 bank accounts.
In February, the bank agreed to pay $780 million to the Justice Department and turn over the names of about 300 clients. McCarthys account appears to be among those original 300 accounts.
According to court documents, UBS turned over records showing that McCarthy was the beneficial owner and, therefore, had a direct financial interest in a UBS bank account opened in Switzerland in 2003 in the name of COGS Enterprises, Ltd., a Hong Kong entity. In court documents, McCarthy admitted he skimmed money from his domestic business and, after funneling the money through a U.S. account, wire-transferred the skimmed funds into his COGS Enterprises account in Switzerland. UBS representatives worked closely with his Swiss lawyer to keep McCarthys funds from leaving Switzerland and helped McCarthy move additional funds out of the U.S. undetected by the federal government, according to the plea agreement.
McCarthy has agreed to plead guilty to one count of willfully failing to file a Foreign Bank and Financial Accounts report, or FBAR, and he admitted that he failed to pay at least $200,000 in federal income taxes. He now owes the government interest and penalties, and is expected to make his initial appearance in federal court on Sept. 14. Once he pleads guilty, McCarthy faces up to five years in federal prison and fines totaling $250,000.
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